TEST BANK Financial Accounting Fundamentals, 8th Edition By John Wild, Chapter 1 - 13 DR ERIC

TEST BANK DR ERIC DR ERIC DR ERIC Chapter 1: Accounting in Business Chapter 2: Accounting for Business Transactions Chapter 3: Adjusting Accounts for Financial Statements Chapter 4: Accounting for Merchandising Operations Chapter 5: Inventories and Cost of Sales Chapter 6: Cash, Fraud, and Internal Control Chapter 7: Accounting for Receivables Chapter 8: Accounting for Long-Term Assets Chapter 9: Accounting for Current Liabilities Chapter 10: Accounting for Long-Term Liabilities Chapter 11: Corporate Reporting and Analysis Chapter 12: Reporting Cash Flows Chapter 13: Analysis of Financial Statements DR ERIC DR ERIC Answers are at the End of Each Chapter Chapter 1: Accounting in Business Student name: TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 1) Accounting is an information and measurement system that identifies, records, andcommunicates an organization's business activities. ⊚ true ⊚ false 2) Accounting includes the analysis and interpretation of information. ⊚ true ⊚ false 3) Financial accounting focuses on the needs of external users, who get accounting informationfrom general-purpose financial statements. ⊚ true ⊚ false 4) Internal users of accounting information do not directly manage the organization and havelimited access to its accounting information. ⊚ true ⊚ false 5) Auditors verify the effectiveness of internal controls. ⊚ true ⊚ false 6) External auditors examine financial statements to verify that they are prepared according togenerally accepted accounting principles. ⊚ true ⊚ false 7) External users include lenders, shareholders, customers, and regulators. ⊚ true ⊚ false DR ERIC DR ERIC 8) Internal users include lenders, shareholders, brokers and nonexecutive employees. ⊚ true ⊚ false 9) Opportunities in accounting include auditing, consulting, market research, and tax planning. ⊚ true ⊚ false 10) The fraud triangle shows that three factors that push a person to commit fraud areopportunity, pressure, and rationalization. ⊚ true ⊚ false 11) Internal controls are procedures to protect assets, ensure reliable accounting, promoteefficiency, and uphold company policies. ⊚ true ⊚ false 12) A partnership is a business owned by two or more people. ⊚ true ⊚ false 13) Owners of a corporation are called shareholders or stockholders. ⊚ true ⊚ false 14) In a partnership, the owners are called stockholders. ⊚ true ⊚ false 15) The balance sheet shows a company's net income or loss over a period of time. ⊚ true ⊚ false 16) The Financial Accounting Standards Board (FASB) is given the task of setting generally accepted accounting principles (GAAP) from the Securities and Exchange Commission. ⊚ true ⊚ false DR ERIC DR ERIC 17) The business entity assumption means that accounting information presumes that thebusiness will continue operating instead of being closed or sold. ⊚ true ⊚ false 18) GAAP wants information to have relevance and faithful representation. ⊚ true ⊚ false otherbusiness entities and its owner(s). ⊚ true 19) The business entity assumption means that a business is accounted for separately from ⊚ false 20) Revenues should not be recognized in the accounting records when earned, but rather whencash is received. ⊚ true ⊚ false 21) Specific accounting principles are basic assumptions, concepts, and guidelines for preparingfinancial statements and arise out of long-used accounting practice. ⊚ true ⊚ false 22) A sole proprietorship is a business with multiple owners. ⊚ true ⊚ false 23) Unlimited liability and separate taxation of the business are advantages of a soleproprietorship. ⊚ true ⊚ false 24) Objectives, qualitative characteristics, elements, and recognition and measurement arecomponents of the FASB conceptual framework. ⊚ true ⊚ false DR ERIC DR ERIC 25) Objectivity means that information is supported by independent, unbiased evidence. ⊚ true ⊚ false 26) The going-concern assumption presumes that a business will continue operating instead ofbeing closed or sold. ⊚ true ⊚ false 27) The measurement principle prescribes that accounting information is based on subjectiveopinion rather than cost. ⊚ true ⊚ false 28) The monetary unit assumption means that companies should express transactions and eventsin terms such as “a lot” or “very little”. ⊚ true ⊚ false 29) The International Accounting Standards Board (IASB) issues International Financial Reporting Standards (IFRS) that identify preferred accounting practices. ⊚ true ⊚ false 30) A limited liability company (LLC) offers the limited liability of a partnership or proprietorship and the tax treatment of a corporation. ⊚ true ⊚ false 31) A limited liability company (LLC) offers the limited liability of a corporation and the tax treatment of a partnership or proprietorship. ⊚ true ⊚ false 32) The Securities and Exchange Commission (SEC) is a U.S. government agency that oversees proper use of GAAP by companies that sell stock and debt to the public. ⊚ true ⊚ false DR ERIC DR ERIC 33) The four common forms of business ownership include sole proprietorship, partnership, I-corporation, and non-profit. ⊚ true ⊚ false 34) The statement of cash flows reports cash flows from operating activities, investing activities,and financing activities. ⊚ true ⊚ false 35) Materiality is the ability of information to influence decisions. ⊚ true ⊚ false 36) Financing activities on the statement of cash flows include long-term borrowing and repayingof cash from lenders. ⊚ true ⊚ false 37) Investing activities on the statement of cash flows include long-term borrowing and repayingof cash from lenders. ⊚ true ⊚ false 38) Investing activities on the statement of cash flows include buying equipment that is held forlong-term use. ⊚ true ⊚ false 39) Return on assets equals total revenues divided by average total assets. ⊚ true ⊚ false 40) Revenues are increases in equity (via net income) from sales of products and services tocustomers. ⊚ true ⊚ false DR ERIC DR ERIC 41) A net loss occurs when revenues exceed expenses. ⊚ true ⊚ false 42) Net income occurs when revenues exceed expenses. ⊚ true ⊚ false 43) Liabilities are the owner's claim on assets. ⊚ true ⊚ false 44) Assets are the resources a company owns or controls and are expected to yield futurebenefits. ⊚ true ⊚ false 45) Maintenance expenses incurred increase equity. ⊚ true ⊚ false 46) The accounting equation can be restated as: Assets − Equity = Liabilities. ⊚ true ⊚ false 47) The accounting equation can be restated as: Assets + Liabilities = Equity. ⊚ true ⊚ false 48) Total assets of Morris Company equal $7,000,000 and its equity is $4,200,000. MorrisCompany has total liabilities of $11,200,000. ⊚ true ⊚ false 49) After each transaction and event, assets always equal liabilities plus equity. ⊚ true ⊚ false