Multiple Choice Questions

2-1 © 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.Chapter 02 Financial Statements and Accounting Concepts/Principles

Multiple Choice Questions

• Which of the following is not a transaction to be recorded in the accounting records of an entity?

• Investment of cash by the owners.

• Sale of product to customers.

• Receipt of a plaque recognizing the firm's encouragement of employee participation in the

United Way fund drive.

• 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:

• Statement of Financial Position.

• Statement of Assets.

• Statement of Changes in Financial Position.

• None of these.

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3. Transactions are summarized in:

• The notes for the financial statements.

• The independent auditor's opinion letter.

• The entity's accounts.

• None of these.

4. A fiscal year:

• is always the same as the calendar year.

• is frequently selected based on the firm's operating cycle.

• must always end on the same date each year.

• must end on the last day of a month.

• Which of the following is not a principal form of business organization?

• Partnership.

• Sole proprietorship.

• Limited unregistered business.

• Corporation.

• None of these.

6. The time frame associated with a balance sheet is:

• a point in time in the past.

• a one-year past period of time.

• a single date in the future.

• a function of the information included in it.

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• Current U.S. Generally Accepted Accounting Principles and auditing standards require the financial

statements of an entity for the reporting period to include:

• Earnings and gross receipts of cash for the period.

• Projected earnings for the subsequent period.

• Financial position at the end of the period.

• Current fair values of all assets at the end of the period.

8. The balance sheet equation can be represented by:

• Assets = Liabilities + Stockholders' Equity.

• Assets - Liabilities = Stockholders' Equity.

• Net Assets = Stockholders' Equity.

• All of these.

• Stockholders' equity refers to which to the following?

• A listing of the organization's assets and liabilities.

• The ownership right of the stockholder(s) of the entity.

• Probable future sacrifices of economic benefits.

• All of these.

• None of these.

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10. Accumulated depreciation on a balance sheet:

• is part of stockholders' equity.

• represents the portion of the cost of an asset that is assumed to have been "used up" in the

process of operating the business.

• represents cash that will be used to replace worn out equipment.

• 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:

• is based on how long the asset has been owned.

• is based on amounts that will be paid to other entities within a year.

• is based on the ability to determine the current fair value of the asset.

• 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:

• revenues, expenses, losses, and liabilities.

• revenues, expenses, gains, and fair value per share.

• revenues, assets, gains, and losses.

• revenues, gains, expenses and losses.

13. The time frame associated with an income statement is:

• a point in time in the past.

• a past period of time.

• a future period of time.

• a function of the information included in it.