Test Bank for Survey of Accounting, 7th Edition

Test Bank for Survey of Accounting, 7th Edition ISBN10: | ISBN13: 9781264442973 By Christopher Edmonds and Philip Olds 2024 Chap 01 7e Edmonds 1) Which of the following groups has the primary responsibility for establishing generally accepted accounting principles for business entities in the United States? A) Securities and Exchange Commission B) U.S. Congress C) International Accounting Standards Board D) Financial Accounting Standards Board 2) The Heritage Company is a manufacturer of office furniture. Which term best describes Heritage's role in society? A) Business B) Regulatory agency C) Consumer D) Resource owner 3) Which resource providers lend financial resources to a business with the expectation of repayment with interest? A) Consumers B) Creditors C) Investors D) Owners 4) Which type of accounting information is intended to satisfy the needs of external users of accounting information? A) Cost accounting B) Managerial accounting C) Tax accounting D) Financial accounting 5) Which of the following is false regarding managerial accounting information? A) It is often used by investors. B) It is more detailed than financial accounting information. C) It can include nonfinancial information. D) It focuses on divisional rather than overall profitability. 1 6) Financial accounting standards are known collectively as GAAP. What does that acronym stand for? A) Generally Accepted Accounting Principles B) Generally Applied Accounting Procedures C) Governmentally Approved Accounting Practices D) Generally Authorized Auditing Principles 7) International accounting standards are formulated by the IASB. What does that acronym stand for? A) Internationally Accepted Standards Board B) International Accounting Standards Board C) International Accountability Standards Bureau D) International Accounting and Sustainability Board 8) Jack Henry borrowed $800,000 from Walt Bank to open a new bike store called Wooden Wheels. Jack transferred $650,000 of the cash that he borrowed to the store on the first day of the year. How many reporting entities exist in this scenario? A) One reporting entity B) Two reporting entities C) Three reporting entities D) Four reporting entities 2 9) Jack Henry borrowed $800,000 from Walt Bank to open a new bike store called Wooden Wheels. Jack transferred $650,000 of the cash he borrowed to Wooden Wheels on the first day of the year. Which of the following appropriately reflects the cash transactions between these reporting entities? Option Jack Henry Wooden Wheels Walt Bank A. $ 150,000 increase $ 650,000 increase $ 800,000 decrease B. $ 800,000 increase $ 650,000 $ 150,000 increase decrease C. $ 800,000 decrease $ 800,000 $ 650,000 increase decrease D. $ 650,000 increase $ 150,000 increase $ 800,000 decrease A) Option A B) Option B C) Option C D) Option D 10) Ellen Gatsby and her siblings, Ben and Sarah, started Gatsby Company when they each invested $100,000 in the company. After the investments there will be A) one reporting entity. B) two reporting entities. C) three reporting entities. D) four reporting entities. 11) John Hamilton borrowed $528,000 from Stone Creek Bank to open a new restaurant called Sauce-It-Up. John transferred $475,200 of the cash he borrowed to the restaurant on the first day of the year. How many reporting entities exist in this scenario? A) Two reporting entities B) Three reporting entities C) One reporting entity D) Four reporting entities 3 12) John Hamilton borrowed $540,000 from Stone Creek Bank to open a new restaurant called Sauce-It-Up. John transferred $486,000 of the cash he borrowed to the Company on the first day of the year. Which of the following appropriately reflects the cash transactions between these reporting entities? John Hamilton Sauce-It-Up Stone Creek Bank A. $ 54,000 increase $ 486,000 increase $ 540,000 decrease B. $ 540,000 increase $ 486,000 increase $ 540,000 decrease C. $ 540,000 decrease $ 540,000 increase $ 540,000 decrease D. $ 486,000 increase $ 54,000 increase $ 540,000 decrease A) Option A B) Option B C) Option C D) Option D 13) Which of the following is an accurate definition of the term “asset?” A) An obligation to creditors B) A resource that will be used to produce revenue C) A transfer of wealth from the business to its stockholders D) A sacrifice incurred from operating the business 14) Which of the following is (are) source(s) of assets to a business? A) Creditors B) Investors C) Operations D) All the answers represent sources of assets. 15) If total assets decrease, then which of the following statements is true? A) Liabilities must increase and retained earnings must decrease. B) Common stock must decrease and retained earnings must increase. C) Liabilities, common stock, or retained earnings must decrease. D) Liabilities, common stock, or retained earnings must increase. 4 16) Which of the following statements about liabilities is true? A) They represent obligations to repay debts. B) They may increase when assets increase. C) They are found on the claims side of the accounting equation. D) All of the answers are characteristics of liabilities. 17) Which term describes assets generated through operations that have been reinvested into the business? A) Liability B) Dividend C) Common stock D) Retained earnings 18) Which of the following is an accurate depiction of the accounting equation? A) Assets = Liabilities + Common Stock + Retained Earnings B) Assets = Liabilities + Common Stock − Expenses C) Assets = Liabilities + Retained Earnings − Dividends D) Assets = Liabilities + Common Stock + Dividends 19) Which term describes a distribution of the business’s assets back to the owners of the business? A) Liability B) Dividend C) Retained earnings D) Common stock 20) Finn Company reported assets of $1,000 and stockholders’ equity of $600. What amount will Finn report for liabilities? A) $400 B) $600 C) $1,600 D) Cannot be determined 5 21) Which of the following items is an example of revenue? A) Cash received from a bank loan B) Cash received from investors from the sale of common stock C) Cash received from customers at the time services were provided D) Cash received from the sale of land for its original selling price 22) Which of the following is not an element of the accounting equation? A) Stockholders’ Equity B) Liabilities C) Assets D) Net income 23) The balance sheet of the Algonquin Company reported assets of $50,000, liabilities of $22,000 and common stock of $15,000. Based on this information only, what is the amount of retained earnings? A) $7,000. B) $57,000. C) $13,000. D) $87,000. 24) Stosch Company's balance sheet reported assets of $87,000, liabilities of $24,000 and common stock of $21,000 as of December 31, Year 1. If Retained Earnings on the balance sheet as of December 31, Year 2, amount to $54,000 and Stosch paid a $23,000 dividend during Year 2, then the amount of net income for Year 2 was which of the following? A) $42,000 B) $35,000 C) $12,000 D) $23,000 6 25) Stosch Company's balance sheet reported assets of $40,000, liabilities of $15,000 and common stock of $12,000 as of December 31, Year 1. If Retained Earnings on the balance sheet as of December 31, Year 2, amount to $18,000 and Stosch paid a $14,000 dividend during Year 2, then the amount of net income for Year 2 was which of the following? A) $17,000 B) $19,000 C) $13,000 D) $21,000 26) Hazeltine Company issued common stock for $200,000 cash. As a result of this event, which of the following statements is true? A) Assets increased. B) Stockholders’ equity increased. C) Claims increased. D) Assets, claims, and stockholders’ equity all increased. 27) If Ballard Company reported assets of $500 and liabilities of $200, Ballard's stockholders' equity equals: A) $300. B) $500. C) $700. D) Cannot be determined.