Accounting , 29th Edition Carl Warren TEST BANK | 978-0357899649 test Bank

Chapter 1 - Introduction to Accounting and Business
1. A corporation is a business that is legally separate and distinct from its owners.
a. True
b. False
ANSWER: True

2. The role of accounting is to provide many different users with financial information to make economic decisions.
a. True
b. False
ANSWER: True

3. Investing activities are those activities by which the company obtains funds to start and operate the business.
a. True
b. False
ANSWER: False

4. Managerial accounting information is used by external and internal users equally.
a. True
b. False
ANSWER: False

5. Senior executives cannot be criminally prosecuted for the wrongdoings they commit on behalf of the companies where
they work.
a. True
b. False
ANSWER: False

6. Financial accounting provides information to all users, while the main focus for managerial accounting is to provide
information to management.
a. True
b. False
ANSWER: True

7. Proper ethical conduct implies that you only consider what's in your best interest.
a. True
b. False
ANSWER: False

8. Some major fraudulent acts committed by senior executives started as what they considered to be small ethical lapses
that grew out of control.
a. True
b. False
ANSWER: True

9. A business is an organization in which basic resources or inputs, like materials and labor, are assembled and processed
to provide outputs in the form of goods or services to customers.

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a. True
b. False ANSWER: True

10. Operating activities are those activities by which a company generates revenues from customers.
a. True
b. False ANSWER: True

11. An example of a general-purpose financial statement would be a report about projected price increases related
to transportation costs.
a. True
b. False ANSWER: False

12. The Sarbanes-Oxley Act established standards for corporate responsibility and disclosure.
a. True
b. False ANSWER: True

13. The main objective for all businesses is to maximize unrealized profits.
a. True
b. False ANSWER: False

14. The primary role of accounting is to determine the amount of taxes a business will be required to pay to
taxing entities.
a. True
b. False ANSWER: False

15. The basic difference between manufacturing and retail companies is the completion level of the products
they purchase for resale to customers.
a. True
b. False ANSWER: True

16. Proprietorships have one owner and provide only services to their customers.
a. True
b. False ANSWER: False

17. About 90% of the businesses in the United States are organized as corporations.
a. True
b. False
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,Chapter 1 - Introduction to Accounting and Business

ANSWER: False

18. An example of an external user of accounting information is the federal government.
a. True
b. False
ANSWER: True

19. The Financial Accounting Standards Board (FASB) is the authoritative body that has primary responsibility for
developing accounting principles.
a. True
b. False
ANSWER: True

20. The cost principle is the basis for entering the purchase price into the accounting records.
a. True
b. False
ANSWER: True

21. The monetary unit assumption requires that economic data be recorded in dollars for companies in the United States.
a. True
b. False
ANSWER: True

22. If a building is appraised for $85,000, offered for sale at $90,000, and the buyer pays $80,000 cash for it, the buyer
would record the building at $85,000.
a. True
b. False
ANSWER: False

23. The financial statements of a proprietorship should include the owner's personal assets and liabilities.
a. True
b. False
ANSWER: False

24. No significant differences exist between the accounting standards issued by the FASB and the IASB.
a. True
b. False
ANSWER: False

25. Generally accepted accounting principles regulate how and what financial information is reported by businesses.
a. True
b. False
ANSWER: True

26. The accounting equation can be expressed as Assets – Liabilities = Owner's Equity.
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, Chapter 1 - Introduction to Accounting and Business

a. True
b. False
ANSWER: True

27. The rights or claims to the assets of a business may be subdivided into rights of creditors and rights of owners.
a. True
b. False
ANSWER: True

28. The owner’s rights to the assets rank ahead of the creditors' rights to the assets.
a. True
b. False
ANSWER: False

29. If the liabilities owed by a business total $300,000 and owner's equity is equal to $300,000, then the assets also total
$300,000.
a. True
b. False
ANSWER: False

30. If total assets decreased by $30,000 during a specific period and owner's equity decreased by $35,000 during the same
period, the period's change in total liabilities was a $65,000 increase.
a. True
b. False
ANSWER: False

31. If total assets increased by $190,000 during a specific period and liabilities decreased by $10,000 during the same
period, the period's change in total owner's equity was a $200,000 increase.
a. True
b. False
ANSWER: True

32. If net income for a company was $50,000, $20,000 in owner withdrawals were made, and the owners invested an
additional $10,000 in cash, the owners' equity increased by $40,000.
a. True
b. False
ANSWER: True

33. An account receivable is typically classified as a revenue.
a. True
b. False
ANSWER: False

34. An account receivable is a claim against a customer resulting from a sale on account.
a. True

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