Accounting  Multiple Choice Questions

Accounting Multiple Choice Questions

Multiple
Choice Questions

1. Which
of the following is not a transaction to be recorded in the
accounting records of an entity?
A. Investment of cash by the owners.
B. Sale of product to customers.
C. Receipt of a plaque recognizing the firm’s encouragement of employee
participation in the United Way fund drive.
D. Receipt of services from a “quick-print” shop in exchange for
the promise to provide advertising design services of equivalent value.

2. The
balance sheet might also be called:
A. Statement of Financial Position.
B. Statement of Assets.
C. Statement of Change in Financial Position.
D. None of the above.

3. Transactions
are summarized in:
A. Financial statement footnotes.
B. The independent auditor’s opinion letter.
C. The entity’s accounts.
D. None of the above.

4. A
fiscal year:
A. is always the same as the calendar year.
B. is frequently selected based on the firm’s operating cycle.
C. must always end on the same date each year.
D. must end on the last day of a month.

5. Which
of the following is not a principal form of business organization?
A. Partnership.
B. Sole proprietorship.
C. Limited unregistered business.
D. Corporation.
E. None of the above.

6. The
time frame associated with a balance sheet is:
A. a point in time in the past.
B. a one-year past period of time.
C. a single date in the future.
D. a function of the information included in it.

7. Current
Generally Accepted Accounting Principles and auditing standards require the
financial statements of an entity for the reporting period to include:
A. Earnings and gross receipts of cash for the period.
B. Projected earnings for the subsequent period.
C. Financial position at the end of the period.
D. Current market values of all assets at the end of the period.

8. The
balance sheet equation can be represented by:
A. A = L + OE
B. Assets – Liabilities = Owners’ Equity
C. Net Assets = Owners’ Equity
D. All of the above.

9. Owners’
equity refers to which of the following?
A. A listing of the organization’s assets and liabilities.
B. The ownership right of the owner(s) of the entity.
C. Probable future sacrifices of economic benefits.
D. All of the above.
E. None of the above.

10. Accumulated
depreciation on a balance sheet:
A. Is part of owners’ equity.
B. Represents the portion of the cost of an asset that is assumed to have
been “used up” in the process of operating the business.
C. Represents cash that will be used to replace worn out equipment.
D. Recognizes the economic loss in value of an asset because of its age or
use.

11. The
distinction between a current asset and other assets:
A. is based on how long the asset has been owned.
B. is based on amounts that will be paid to other entities within a year.
C. is based on the ability to determine the current fair market value of
the asset.
D. is based on when the asset is expected to be converted to cash, or used
to benefit the entity.

12. The
income statement shows amounts for:
A. revenues, expenses, losses, and liabilities.
B. revenues, expenses, gains, and market value per share.
C. revenues, assets, gains, and losses.
D. revenues, gains, expenses and losses.

13. The
time frame associated with an income statement is:
A. a point in time in the past.
B. a past period of time.
C. a future period of time.
D. a function of the information included in it.

14. Revenues
are:
A. cash receipts.
B. increases in net assets from selling a product.
C. increases in net assets from occasional sales of equipment.
D. increases in net assets from selling common stock.

15. Expenses
are:
A. cash disbursements.
B. decreases in net assets from uninsured accidents.
C. decreases in net assets from dividends to stockholders.
D. decreases in net assets resulting from usual operating activities.

16. The
purpose of the income statement is to show the:
A. change in the fair market value of the assets from the prior income
statement.
B. market value per share of stock at the date of the statement.
C. revenues collected during the period covered by the statement.
D. net income or net loss for the period covered by the statement.

17. The
Statement of Changes in Owners’ Equity shows:
A. the change in cash during a year.
B. revenues, expenses, and liabilities for the period.
C. net income and dividends for the period.
D. paid-in capital and long-term debt at the end of the period.

18. Paid-in
Capital represents:
A. Earnings retained for use in the business.
B. The amount invested in the entity by the owners.
C. Market value of the entity’s common stock.
D. Net assets of the entity at the date of the statement.

19. Retained
Earnings represents:
A. the amount invested in the entity by the owners.
B. cash that is available for dividends.
C. cumulative net income that has not been distributed to owners as
dividends.
D. par value of common stock outstanding.

20. Additional
paid-in-capital represents:
A. The difference between the total amounts invested by the owners and the
par or stated value of the stock.
B. Distributions of earnings that have been made to the owners.
C. Distributions of earnings that have not been made to the owners.
D. The summation of the total amount invested by the owners and the par or
stated value of the stock.

21. The
Statement of Cash Flows:
A. Shows how cash changed during the period.
B. Is an optional financial statement.
C. Shows the change in the market value of the entity’s common stock
during the period.
D. Shows the dividends that will be paid in the future.

22. On
January 31, an entity’s balance sheet showed total assets of $750 and
liabilities of $250. Owners’ equity at January 31 was:
A. $500
B. $1,000
C. $750
D. $250

23. On
January 31, an entity’s balance sheet showed net assets
of $1,025 and liabilities of $225. Owners’ equity on January 31 was:
A. $800
B. $1,025
C. $1,250
D. $225

24. At
the end of the year, retained earnings totaled $1,700. During the year, net
income was $250, and dividends of $120 were declared and paid. Retained
earnings at the beginning of the year totaled:
A. $2,070
B. $1,330
C. $1,230
D. $1,570

At
the beginning of the fiscal year, the balance sheet showed assets of $1,364 and
owners’ equity of $836. During the year, assets increased $74 and liabilities
decreased $38.

25. Owners’
equity at the end of the year totaled:
A. $836
B. $872
C. $948
D. $1,438

26. Liabilities
at the end of the year totaled:
A. $490
B. $528
C. $836
D. $910

At
the beginning of the year, paid-in capital was $82 and retained earnings was
$47. During the year, the owners invested $24 and dividends of $6 were declared
and paid. Retained earnings at the end of the year were $52.

27. Total
owners’ equity at the end of the year was:
A. $82
B. $94
C. $106
D. $158

28. Net
income for the year was:
A. $10
B. $11
C. $15
D. $20

29. The
going concern concept refers to a presumption that:
A. the entity will be profitable in the coming year.
B. the entity will not be involved in a merger within a year.
C. the entity will continue to operate in the foreseeable future.
D. top management of the entity will not change in the coming year.

30. Consolidated
financial statements report financial position, results of operations, and cash
flows for:
A. a parent corporation and its subsidiaries.
B. a parent corporation alone.
C. two corporations that are owned by the same individual.
D. a parent corporation and its 100% owned subsidiaries only.

31. A
concept or principle that relates to transactions is:
A. materiality
B. full disclosure
C. original cost
D. consistency

32. Matching
revenues and expenses refers to:
A. having revenues equal expenses.
B. recording revenues when cash is received.
C. accurately reflecting the results of operations for a fiscal period.
D. recording revenues when a product is sold or a service is rendered.

33. Accrual
accounting:
A. is designed to match revenues and expenses.
B. results in the balance sheet showing the fair market value of the
entity’s assets.
C. means that expenses are recorded when they are paid.
D. cannot result in the entity having net income unless cash is received
from customers.

34. Which
of the following accounting methods accomplishes much of the matching of
revenues and expenses?
A. Match accounting.
B. Cash accounting.
C. Accrual accounting.
D. None of the above.

35. The
principle of consistency means that:
A. the accounting methods used by an entity never change.
B. the same accounting methods are used by all firms in an industry.
C. the effect of any change in an accounting method will be disclosed in
the financial statements or notes thereto.
D. there are no alternative methods of accounting for the same
transaction.

36. The
principle of full disclosure pertains to:
A. The entity fully discloses all client data.
B. The entity fully discloses all proprietary information.
C. The entity fully discloses all necessary information to prevent a
reasonably astute user of financial statements from being misled.
D. The entity fully discloses all necessary information to prevent all
users of financial statements from being misled.
E. All of the above.

37. The
balance sheet of an entity:
A. shows the fair market value of the assets at the date of the balance
sheet.
B. reflects the impact of inflation on the replacement cost of the assets.
C. reports plant and equipment at its opportunity cost.
D. shows amounts that are not adjusted for changes in the purchasing power
of the dollar.

Essay Questions

38. Listed
below are a number of financial statement captions. Indicate in the spaces to
the right of each caption (1) the category of each item, and (2) the financial
statement(s) on which the item can usually be found.
Accounting Ch 2 Multiple Choice Questions.png”>

39. Listed
below are a number of financial statement captions. Indicate in the spaces to
the right of each caption (1) the category of each item, and (2) the financial
statement(s) on which the item can usually be found.
Accounting Ch 2 Multiple Choice Questions.png”>
Accounting Ch 2 Multiple Choice Questions.png”>

40. From
the data given below, calculate the Retained Earnings balance of December 31,
2010.

Accounting Ch 2 Multiple Choice Questions.png”>
Prepare the retained earning portion of a statement of change in owners’ equity
for the year ended December 31, 2011.

41. From
the data given below, calculate the Retained Earnings balance as of December
31, 2011.

Accounting Ch 2 Multiple Choice Questions.png”>
Prepare the retained earnings portion of a statement of change in owners’ equity
for the year ended December 31, 2011:

42. Volunteer,
Inc. is in the process of liquidating and going out of business. The firm has
$34,910 in cash, inventory totaling $107,000, accounts receivable of $72,000,
plant & equipment with a $192,000 book value, and total liabilities of
$307,000. It is estimated that the inventory can be disposed of in a
liquidation sale for 75% of its cost, all but 15% of the accounts receivable
can be collected, and plant & equipment can be sold for $210,000.

(a.) Calculate the amount of cash that would be available to the owners if the
accounts receivable are collected, the other assets are sold as described, and
the liabilities are paid off in full.
(b.) Describe how the difference between book value and liquidation value would
be treated on the final income statement for Volunteer, Inc. with respect to
the following assets: inventory, accounts receivable, and plant &
equipment. What income statement accounts would be affected when these assets
are sold or collected as described above?

43. Ann
Kimber is thinking about going out of business and retiring. Her firm has
$25,000 in cash, other assets totaling $35,700, and total liabilities of
$25,500. The other assets can be sold for an estimated $34,000 cash in a
liquidation sale. Calculate the amount of cash that would be available upon
Ann’s retirement if the other assets were sold and the liabilities were paid
off.

44. Presented
below is a statement of cash flows for Peach, Inc., for the year ended December
31, 2011. Also shown is a partially completed comparative balance sheet as of
December 31, 2011 and 2010.

Accounting Ch 2 Multiple Choice Questions.png”> 

Required:
(a.) Complete the December 31, 2011 and 2010 balance sheets.
(b.) Prepare a Statement of Changes in Retained Earnings for the year ended
December 31, 2011.


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