ANS: D PTS: 1 DIF: 2 OBJ: 1-1 NAT:

Chapter 1—Financial accounting Multiple choice 1.Which of the following statements is true regarding economic events?a.The signing of a service contract is an example of an external event that is recorded in the accounting records b.Every event which affects an entity can be identified from a source document c.All internal and external events must be measured with sufficient reliability.d.External events involve exchanges between an entity and another entity outside the company

ANS: D PTS: 1 DIF: 2 OBJ: 1-1 NAT: |

AACSB Communication | APO-06-Recording Transactions 2.Which of the following underlying assumptions of the conceptual framework is the reason the dollar is used in the preparation of financial statements?a.Economic entity b.Continuity c.Time-period d.Monetary unit

ANS: D PTS: 1 DIF: 1 OBJ: 1-1 NAT: | AACSB

Communication | APO-02-GAAP 3.Which of the following is an assumption made in the preparation of financial statements?a.Financial statements are prepared for a specific entity that is distinct from the entity's owners b.The current market value is assumed to be less relevant than the original cost paid c.The preparation of financial statements for a specific time period assumes that the balance sheet covers a designated period of time d.Financial statements are prepared assuming that inflation has a distinct effect on the monetary unit

ANS: A PTS: 1 DIF: 2 OBJ: 1-1 NAT: | AACSB

Communication | APO-02-GAAP

4.The time period assumption is necessary because:

a.inflation exists and causes confusing swings in financial statement amounts over time b.business owners and interested parties want periodic measurements of the business’ success or failure c.business owners and interested parties expect full disclosure of all ACCT2 Financial, Asia-Pacific 2e Jonathan Tyler (Test Bank All Chapters, 100% Original Verified, A+ Grade) 1 / 4

economic events throughout the entire time period d.it is required by the federal government

ANS: B PTS: 1 DIF: 1 OBJ: 1-1 NAT: | AACSB

Communication | APO-02-GAAP

5.The going concern assumption is concerned with:

a.the company's ability to continue operations long enough to carry out its existing obligations b.any information that is capable of influencing the decisions of anyone using the financial statements c.measuring ongoing business activities at their exchange price at the time of the initial external transaction d.offsetting management's natural optimism by providing a prudent approach to uncertainty in financial statement items

ANS: A PTS: 1 DIF: 2 OBJ: 1-1 NAT: | AACSB

Communication | APO-02-GAAP

6.‘Revenues’ are best described as:

a.a decrease in resources resulting from the sale of goods or the provision of services b.an increase in resources resulting from the sale of goods or the provision of services c.assets used or consumed in the sale of products or services d.an increase in the financing activities ANS: B PTS: 1 DIF: 2 OBJ: 1-2 NAT: | AACSB Analytic |

APO-02-GAAP

7.‘Expenses’ are best described as:

a.an increase in resources resulting from the sale of goods or the provision of services b.the amount of interest or claim that the owners have in the business c.the future economic resources of a business entity d.a decrease in resources resulting from the sale of goods or provision of services

ANS: D PTS: 1 DIF: 1 OBJ: 1-2 NAT: | AACSB

Communication | APO-02-GAAP 8.Which statement demonstrates the financial success or failure of the company over that specific period of time?a.The statement of cash flows b.The statement of changes in equity c.The balance sheet 2 / 4

• The income statement

ANS: D PTS: 1 DIF: 1 OBJ: 1-2 N NAT:

| AACSB Communication | APO-09-Financial statements

9. The resources used to generate revenues during a period are called:

• Profit
• Expenses
• Revenues
• Dividends

ANS: B PTS: 1 DIF: 1 OBJ: 1-2 NAT: |

AACSB Communication | APO-09-Financial statements

• Which of the following is the correct date format for the financial statement

heading?

• Balance sheet for the Year Ended 30 June 2016
• Income statement at 30 June 2016
• Income statement for the Year Ended 30 June 2016
• Statement of changes in equity at 30 June 2016

ANS: C PTS: 1 DIF: 3 OBJ: 1-2 NAT: |

AACSB Communication | APO-09-Financial statements

• Which of the following terms best describes a distribution of the profit of a

company to its owners?

• Retained earnings
• Dividends
• Liquidation of assets
• Monetary unit

ANS: B PTS: 1 DIF: 1 OBJ: 1-3 NAT: |

AACSB Communication | APO-09-Financial statements

• IPOD Corporations' end of year balance sheet consisted of the following

amounts.

Cash $ 150 000 Accounts receivable $500 000 Property, plant and equipment 700 000 Long-term debt 400 000 Ordinary share 1 000 000 Accounts payable 200 000 Retained earnings ? Inventory 350 000

What amount should IPOD report on its balance sheet for total assets?

• $1 100 000
• $1 550 000 3 / 4

• $1 700 000
• $1 900 000

ANS: C PTS: 1 DIF: 2 OBJ: 1-3 NAT: |

AACSB Analytic | APO-09-Financial statements

• IPOD Corporations' end of year balance sheet consisted of the following

amounts.

Cash $150 000 Accounts receivable $500 000 Property, plant and equipment 700 000 Long-term debt 400 000 Ordinary share 1 000 000 Accounts payable 200 000 Retained earnings ? Inventory 350 000

What is IPOD’s retained earnings balance at the end of the current year?

• $100 000
• $1 100 000
• $1 600 000
• $1 700 000

ANS: A PTS: 1 DIF: 3 OBJ: 1-4 NAT: |

AACSB Analytic | APO-09-Financial statements

• The Peck Company reported the following items on its financial statements for

the year ending 30 June 2016.

Sales $1 560 000 Cost of sales $1 400 000 Selling, general and Other expense 30 000 administrative expense 40 000 Dividends 10 000 Income tax expense 25 000

The income statement for Peck will report profit for the current year in the amount

of:

• $ 45 000
• $ 65 000
• $ 85 000
• $465 000

ANS: B PTS: 1 DIF: 2 OBJ: 1-2 NAT: |

AACSB Analytic | APO-09-Financial statements

• The Peck Company reported the following items on its financial statements for

the year ending 30 June 2016.

Sales $1 560 000 Cost of sales $1 400 000

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