Final Study Guide

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PRATICE FINAL EXAM

Chapter 1
1. Which of the following is a specialized field of accounting? a.social accounting
b.tax accounting
c.environmental accounting
d.all are correct

ANS:D

2. Select the type of business that is most likely to obtain large amounts of resources by issuing stock. a.Partnership
b.Corporation
c.Proprietorship
d.None are correct.

ANS:B

3. The following are examples of internal stakeholders except: a.Managers
b.Owners
c.Employees
d.all of the above

ANS:B

4. Managerial accountants would be responsible for providing the following information: a.Tax reports to government agencies.
b.Profit reports to owners and management.
c.Expansion of a product line report to management.
d.Consumer reports to customers.

ANS:C

5. Which of the following is not a role of accounting in business? a.To provide reports to stakeholders about the economic activities and conditions of a business. b.To personally guarantee loans of the business.

c.To provide information for managers to use in operating the business. d.To assess the various informational needs of stakeholders and design its accounting system to meet those needs. e.To provide information to other stakeholders to use in assessing the economic performance and condition of the business.

ANS:B

6. The business entity concept means that
a.the owner is part of the business entity
b.an entity is organized according to state or federal statutes c.an entity is organized according to the rules set by the FASB d.the entity is an individual economic unit for which data are recorded, analyzed, and reported

ANS:D

7. The Reynolds Company estimated that the value of its land had increased from $10,000 to $16,000 and therefore wrote up the land account to $16,000. Which accounting concept(s) was (were) violated? a.cost concept

b.objectivity concept
c.unit of measure concept
d.cost and objectivity concepts

ANS:C

8. Aztec Company is selling a piece of land adjacent to their business. An appraisal reported the market value of the land to be $100,000. The Majestic Company initially offered to buy the land for $87,000. The companies settled on a purchase price of $95,000. On the same day, another piece of land on the same block sold for $102,000. Under the cost concept, what is the amount that will be used to record this transaction in the accounting records? a.$100,000

b.$87,000
c.$102,000
d.$95,000

ANS:D

9. If total liabilities decreased by $25,000 during a period of time and owner's equity increased by $30,000 during the same period, the amount and direction (increase or decrease) of the period's change in total assets is a.$65,000 increase

b.$5,000 decrease
c.$5,000 increase
d.$65,000 decrease

ANS:C

10. Expenses are recorded when
a.cash is paid for services rendered
b.a bill is received in advance of services rendered
c.services are rendered
d.none are correct

ANS:C

11. If total assets decreased by $47,000 during a period of time and owner's equity increased by $24,000 during the same period, then the amount and direction (increase or decrease) of the period's change in total liabilities is a.$23,000 increase

b.$47,000 decrease
c.$71,000 decrease
d.$71,000 increase

ANS:C

12. How does the owner withdrawing cash from the business affect the accounting equation? a.assets decrease; owner's equity decreases
b.assets decrease; owner's equity increases
c.assets increase; liabilities decrease
d.no effect on the assets, liabilities, or owner's equity

ANS:A

13. The Kennedy Company sold land for $60,000 in cash. The land was originally purchased for $40,000, and at the time of the sale, $15,000 was still owed to First National Bank on that purchase. After the sale, The Kennedy Company paid off the loan to First National Bank. What is the effect of the sale and the payoff of the loan on the accounting...
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