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MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.1)The continuity assumption is inappropriate when A)the business is organized as a proprietorship.B)the business is just starting up.C)liquidation appears likely.D)fair values are higher than costs.
Answer:C
2)Shareholders' equity A)is equal to liabilities and retained earnings.B)is shown on the income statement.C)is usually equal to cash on hand.D)includes retained earnings and contributed capital.
Answer:D
3)It is assumed that the activities of Petro Canada Corporation can be distinguished from those of Imperial Oil Limited because of the A)unit-of-measure assumption.B)periodicity assumption.C)separate-entity assumption.D)continuity assumption.
Answer:C
4)Abe Cox is the sole owner and manager of Cox Auto Repair Shop. In 20X1, Cox purchased a new automobile for personal use and continued to use an old truck in the business. Which of the following fundamentals prevents Cox from recording the cost of the new automobile as an asset to the business?A)Historical cost principleB)Separate-entity assumption C)Full disclosureD)Revenue principle
Answer:B
5)The main objective of financial reporting is to:
A)meet the needs of all potential users.B)provide information that is useful to individuals making investment and credit decisions.C)provide information that will be used by a company's managers for product pricing decisions.D)compare a company's performance with its competitors.
Answer:B
6)Which one of the following is not a qualitative characteristic of useful accounting information?A)Faithful representationB)Relevance C)MaterialityD)Comparability
Answer:C
1 Financial Accounting Canadian 6th Edition Libby Test Bank Visit TestBankDeal.com to get complete for all chapters
7)The adoption of International Financial Reporting Standards can be viewed as an application of which of the following quality enhancing characteristics?A)VerifiabilityB)Representational faithfulness C)ComparabilityD)Timeliness
Answer:C
8)The dominating criteria by which accounting information can be judged is that of A)freedom from bias.B)usefulness for decision making.C)timeliness.D)comparability.
Answer:B
9)The assumption that a business enterprise will not be liquidated or sold in the near future is known as the A)going concern assumption.B)monetary unit assumption.C)conservatism assumption.D)economic entity assumption.
Answer:A
10)Accounting information is considered to be relevant when it A)is verifiable and neutral.B)can be depended on to represent the economic conditions and events that it is intended to represent.C)is understandable by reasonably informed users of accounting information.D)is capable of making a difference in a decision.
Answer:D
11)During the lifetime of an entity, accountants produce financial statements at arbitrary points in time in accordance with which accounting concept?A)PeriodicityB)Cost/benefit relationship C)Monetary unit assumptionD)Comparability
Answer:A
12)If Golden Company owed Eye Company $500, where would Golden Company reflect this?A)Statement of cash flowsB)Statement of financial position.C)Income statement.D)Statement of changes in equity.
Answer:B
13)Which of the following defines assets?A)Probable future economic benefits owned by an entity as a result of past transactions.B)Probable future economic benefits owned by an entity as a result of future transactions.C)Possible future economic benefits owed by an entity as a result of future transactions.D)Possible future economic benefits owed by an entity as a result of past transactions.
Answer:A
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14)Which of the following defines liabilities?A)Probable debts or obligations of an entity as a result of past transactions which will be paid with assets or services.B)Possible debts or obligations of an entity as a result of future transactions which will be paid with assets or services.C)Possible debts or obligations of an entity as a result of past transactions which will be paid with assets or services.D)Probable debts or obligations of an entity as a result of future transactions which will be paid with assets or services.
Answer:A
15)Which of the following defines shareholders' equity?A)Probable debts or obligations of an entity as a result of past transactions which will be paid with assets or services.B)The financing provided by the owners and the operations of a business.C)Probable future economic benefits owned by an entity as a result of past transactions.D)Assets plus liabilities.
Answer:B
16)Liabilities are generally classified on a statement of financial position as A)current liabilities and non-current liabilities.B)small liabilities and large liabilities.C)tangible liabilities and intangible liabilities.D)present liabilities and future liabilities.
Answer:A
17)The asset that results when a customer buys goods or services on credit is A)notes receivable.B)accounts receivable.C)Cash.D)accounts payable.
Answer:B
18)The asset that results from the payment of expenses in advance is A)accounts receivable.B)short term investments.C)inventory.D)prepaid expenses.
Answer:D
19)Where would we report changes in shareholders' equity caused by operating activities?A)In a contributed capital account. B)In the retained earnings account.C)In an asset account.D)In a liability account.
Answer:B
20)How are goods, which are purchased for sale later, recorded in the financial statements A)as operating expenses.B)as prepaid expenses.C)as cost of goods sold.D)as inventory.
Answer:D
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21)On a classified balance sheet, prepaid expenses are classified as A)a current liability.B)a current asset.C)a long-term investment.D)property, plant, and equipment.
Answer:B
22)Which of the following is not considered an asset?A)EquipmentB)Accounts receivable C)DividendsD)Inventory
Answer:C
23)Which of the following liability accounts is usually not satisfied by payment of cash?A)Trade payables.B)Taxes payable.C)Unearned revenues.D)Short-term borrowings.
Answer:C
24)Accounting systems should record A)only events that involve cash.B)items of interest to the shareholders.C)all economic events.D)events that result in a change in assets, liabilities, or shareholders' equity items.
Answer:B
25)Which of the following is least likely to have a liability called Deferred Revenue?A)A magazine subscription company B)A retailer C)A university or collegeD)An insurance company
Answer:B
26)When a new business is just starting up, which of the following must be done first?A)Acquire the assets both long-lived and short-lived so they can operate.B)Acquire financing from issuance of shares and borrowing from creditors.C)These activities all occur simultaneously not sequentially.D)Generate positive cash flow through successful operations.
Answer:B
27)An account is a part of the financial information system and is described by all except which one of the following?A)An account consists of three parts B)An account has a title C)An account is a source document D)An account has a debit and credit side
Answer:C
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