Chapter 1: Uses of Accounting Information and the Financial Statements
1. A company's ability to attract and hold investment capital ultimately depends on its
C. new product development
2. A primary user of accounting information, with a direct financial interest in the business, is a
A. Regulatory agency
B. Tax authority
D. Labor union
3. The separate entity concept requires that
A. Tax records must be kept separate from financial reporting records.
B. the personal assets and liabilities of an owner not be shown on the business's financial statements
C. Transactions that involve an exchange of value be kept separate from those that do not.
D. a separate set of books be established for each segment of a business.
4. Which of the following is a characteristic of a corporation?
A. Not a separate economic unit
B. Unlimited liability of owners
C. Separate legal entity
D. Dissolved when ownership changes
5. Liabilities are affected by the
A. Purchase of equipment for cash.
B. Billing of a customer for services performed.
C. Payment to a supplier for office supplies purchased on credit.
D. Withdrawal of cash by the owner.
6. At the beginning of the year, Risko Company had assets of $85,000 and owner's equity of $40,000. If assets increased by $30,000 and liabilities increased by $35,000, what was the owner's equity at the end of the year?
7. The collection of fees in cash when services are performed
A. Increases assets and increases owner's equity.
B. Decreases assets and decreases liability.
C. Decreases assets and decreases owner's equity.
D. Decreases assets and increases liabilities.
8. Which of the following financial statements is concerned with the enterprise at a specific point in time?
A. Statement of cash flows
B. Income statement
C. Statement of owner's equity
D. Balance sheet
9. Which of the following organizations has primary responsibility for developing and issuing rules on accounting practice?
10. Which of the following is not one of the broad principles underlying the accountant's code of professional conduct?
11. The purchase of equipment is an example of a financing activity.
12. Increasing the selling price of a bale of hay from $4.00 per bale to $5.00 per bale is an example of a business transaction.
13. A partnership differs from a sole proprietorship in that the partners have limited liability and a sole proprietor has unlimited liability.
14. At the beginning of the year, Chock Company had $50,000 in assets and $20,000 in liabilities. At the end of the year, the company had $80,000 in assets and $40,000 in liabilities. If, during the year, no investments were made in the business and the owner withdrew $2,000, net income for the year must have been $8,000.
15. One way of stating the accounting equation is Assets + Liabilities = Owner's Equity.
16. Decreases in both the Cash and Accounts Payable accounts represent the payment of a liability
17. Equipment is an asset that is considered nonmonetary in nature.
18. If the Cash balance reported on the Balance Sheet as of December 31, 20x2 is $45,600, then Cash at End of Month, reported on the Statement of Cash Flows for the month ended December 31, 20x2, will also be $45,600.
19. The statement of cash flows...