CHAP 1

41. Accountants refer to an

economic event as a 46. The accounting process
a. purchase. involves all of the following
b. sale. except
c. transaction. a. identifying economic
d. change in ownership. transactions that are relevant
to the business.
b. communicating financial
42. The starting point of the information to users by
accounting process is preparing financial reports.
a. communicating information to c. recording nonquantifiable
users. economic events.
b. identifying economic events. d. analyzing and interpreting
c. recording economic events. financial reports.
d. None of these answers are
correct. 47. The accounting process is
correctly sequenced as
43. Communication of economic a. identification,communication,
events is the part of the recording.
accounting process that b. recording,communication,
involves identification.
a. identifying economic events. c. identification,recording,
b. quantifying transactions into communication.
dollars and cents. d. communication,recording,
c. preparing accounting reports. identification.
d. recording and classifying
information.
48. Which of the following
44. Which of the following events techniques are not used by
cannot be quantified into accountants to interpret and report
dollars and cents and recorded financial information?
as an accounting transaction? a. Graphs.
a. The appointment of a new b. Special memos for each class
CPA firm to perform an audit. of external users.
b. The purchase of a new c. Charts.
computer. d. Ratios.
c. The sale of store equipment.
d. Payment of income taxes. 49. Which of the following would
not be considered an internal
45. Interpretation of reported user of accounting data for the
information involves each of LMN Company?
the following except a. President of the company.
a. limitations of reported data. b. Production manager.
b. meaning of reported data. c. Merchandise inventory clerk.
c. uses of reported data. d. President of the employees'
d. All of these choices are labor union.
correct.
 a
50. Which of the following would 55. All of the following are
not be considered an external services offered by public
user of accounting data for the accountants except
LMN Company? a. budgeting.
a. Internal Revenue Service b. auditing.
Agent. c. tax planning.
b. Management. d. consulting.
c. Creditors.
a
d. Customers. 56. Which list below best
describes the major services
performed by public
51. Which of the following would accountants?
not be considered internal a. Bookkeeping, mergers,
users of accounting data for a budgets.
company? b. Employee training, auditing,
a. The president of a company. bookkeeping.
b. The controller of a company. c. Auditing, taxation,
c. Creditors of a company. management consulting.
d. Salesmen of the company. d. Cost accounting, production
scheduling, recruiting.
52. Which of the following is an
a
external user of accounting 57. Preparing tax returns and
information? engaging in tax planning is
a. Labor unions. performed by
b. Finance directors. a. public accountants only.
c. Company officers. b. private accountants only.
d. Managers. c. both public and private
accountants.
53. Which one of the following is d. IRS accountants only.
not an external user of
a
accounting information? 58. A private accountant can
a. Regulatory agencies. perform many activities in a
b. Customers. business organization but
c. Investors. would not work in
d. All of these answers choices a. budgeting.
are external users. b. accounting information
systems.
c. external auditing.
54. Bookkeeping differs from
d. tax accounting.
accounting in that
bookkeeping primarily involves
59. The origins of accounting are
which part of the accounting
generally attributed to the work
process?
of
a. Identification.
a. Christopher Columbus.
b. Communication.
b. Abner Doubleday.
c. Recording.
c. Luca Pacioli.
d. Analysis.
d. Leonardo da Vinci.
60. Financial accounting provides b. standards that indicate how to
economic and financial report economic events.
information for all of the c. theories that are based on
following except physical laws of the universe.
a. creditors. d. principles that have been
b. investors. proven correct by academic
c. managers. researchers.
d. other external users.
‘ 65. The historical cost principle
61. The final step in solving an requires that when assets are
ethical dilemma is to acquired, they be recorded at
a. identify and analyze the a. appraisal value.
principal elements in the b. cost.
situation. c. market price.
b. recognize an ethical situation. d. book value.
c. identify the alternatives and
weigh the impact of each
alternative on stakeholders. 66. The historical cost of an asset
d. recognize the ethical issues and its fair value are
involved. a. never the same.
b. the same when the asset is
sold.
62.The first step in solving an ethical c. irrelevant when the asset is
dilemma is to used by the business in its
a. identify and analyze the operations.
principal elements in the d. the same on the date of
situation. acquisition.
b. identify the alternatives.
c. recognize an ethical situation 67. The body of theory underlying
and the ethical issues accounting is not based on
involved. a. physical laws of nature.
d. weigh the impact of each b. concepts.
alternative on various c. principles.
stakeholders. d. definitions.

63. Ethics are the standards of

conduct by which one's 68. The private sector organization
actions are judged as involved in developing
a. right or wrong. accounting principles is the
b. honest or dishonest. a. Feasible Accounting
c. fair or unfair. Standards Body.
d. All of these answer choices b. Financial Accounting Studies
are correct. Board.
c. Financial Accounting
64. Generally accepted accounting Standards Board.
principles are d. Financial Auditors' Standards
a. income tax regulations of the Body.
Internal Revenue Service.
69.The SEC and FASB are two 73. The fair value principle is
organizations that are primarily applied for
responsible for establishing a. all assets.
generally accepted accounting b. current assets.
principles. It is true that c. buildings.
a. they are both governmental d. investment securities.
agencies.
74. The proprietorship form of
b. the SEC is a private
business organization
organization of accountants.
a. must have at least three
c. the SEC often mandates
owners in most states.
guidelines when no
b. represents the largest number
accounting principles exist.
of businesses in the United
d. the SEC and FASB rarely
States.
cooperate in developing
c. combines the records of the
accounting standards.
business with the personal
records of the owner.
d. is characterized by a legal
70. GAAP stands for
distinction between the
a. Generally Accepted Auditing
business as an economic unit
Procedures.
and the owner.
b. Generally Accepted
Accounting Principles. 75. The economic entity
c. Generally Accepted Auditing assumption requires that the
Principles. activities
d. Generally Accepted a. of different entities can be
Accounting Procedures. combined if all the entities are
corporations.
71. Financial information that is b. must be reported to the
capable of making a difference Securities and Exchange
in a decision is Commission.
a. faithfully representative. c. of a sole proprietorship cannot
b. relevant. be distinguished from the
c. convergent. personal economic events of
d. generally accepted. its owners.
d. of an entity be kept separate
72. The Dulce Company has five from the activities of its owner.
plants nationwide that cost a
total of $200 million. The 76. A business organized as a
current fair value of the plants corporation
is $600 million. The plants will a. is not a separate legal entity
be recorded and reported as in most states.
assets at b. requires that stockholders be
a. $200 million. personally liable for the debts
b. $600 million. of the business.
c. $400 million. c. is owned by its stockholders.
d. $800 million. d. terminates when one of its
original stockholders dies.
77. The partnership form of b. Corporate businesses are
business organization generally smaller in size than
a. is a separate legal entity. partnerships and proprietor-
b. is a common form of ships.
organization for service-type c. The revenues of corporations
businesses. are greater than the combined
c. enjoys an unlimited life. revenues of partnerships and
d. has limited liability. proprietorships.
d. Corporations are separate
78. Which of the following is not an legal entities organized
advantage of the corporate exclusively under federal law.
form of business organization?
a. Limited liability of 82.A basic assumption of accounting
stockholders that requires activities of an entity be
b. Transferability of ownership kept separate from the activities of its
c. Unlimited personal liability for owner is referred to as the
stockholders a. stand alone concept.
d. Unlimited life b. monetary unit assumption.
c. corporate form of ownership.
79. A small neighborhood barber d. economic entity assumption.
shop that is operated by its
owner would likely be 83. Sam Ryo is the proprietor
organized as a (owner) of Sam's, a retailer of
a. joint venture. golf apparel. When recording
b. partnership. the financial transactions of
c. corporation. Sam's, Sam does not record an
d. proprietorship. entry for a car he purchased
for personal use. Sam took out
80. George and Ringo met at law a personal loan to pay for the
school and decide to start a car. What accounting concept
small law practice after guides Sam's behavior in this
graduation. They agree to split situation?
revenues and expenses evenly. a. Pay back concept
The most common form of b. Economic entity assumption
business organization for a c. Cash basis concept
business such as this would d. Monetary unit assumption
be a
a. joint venture. 84. A basic assumption of
b. partnership. accounting assumes that the
c. corporation. dollar is
d. proprietorship. a. unrelated to business
transactions.
81. Which of the following is true b. a poor measure of economic
regarding the corporate form activities.
of business organization? c. the common unit of measure
a. Corporations are the most for all business transactions.
prevalent form of business d. useless in measuring an
organization. economic event.
 c. Assets = Liabilities + Owner's
85. The assumption that the unit of Equity.
measure remains sufficiently d. All of these answer choices
constant over time is part of the are correct..
a. economic entity assumption.
b. cost principle. 91. Liabilities
c. historical cost principle. a. are future economic benefits.
d. monetary unit assumption. b. are existing debts and
obligations.
c. possess service potential.
86. A business whose owners
d. are things of value used by
enjoy limited liability is a
the business in its operation.
a. proprietorship.
b. partnership.
92. Liabilities of a company would
c. corporation.
not include
d. sole proprietorship.
a. notes payable.
b. accounts payable.
87. A problem with the monetary c. salaries and wages payable.
unit assumption is that d. cash.
a. the dollar has not been stable
over time. 93. Liabilities of a company are
b. the dollar has been stable owed to
over time. a. debtors.
c. the dollar is a common b. benefactors.
medium of exchange. c. creditors.
d. it is impossible to account for d. underwriters.
international transactions.
94. Owner's equity can be
described as
88. The common characteristic
a. creditorship claim on total
possessed by all assets is
assets.
a. long life.
b. ownership claim on total
b. great monetary value.
assets.
c. tangible nature.
c. benefactor's claim on total
d. future economic benefit.
assets.
d. debtor claim on total assets.
89. Owner's equity is best depicted
by the following:
a. Assets = Liabilities.
95. Owner's equity is often
b. Liabilities + Assets.
referred to as
c. Residual equity + Assets.
a. residual equity.
d. Assets – Liabilities.
b. leftovers.
c. spoils.
90. The basic accounting equation
d. second equity.
may be expressed as
a. Assets = Equities.
96.When an owner withdraws cash or
b. Assets – Liabilities = Owner's
other assets from a business for
Equity.
personal use, these withdrawals are c. expenses.
termed d. owner's drawings.
a. depletions.
b. consumptions. 102. A net loss will result during a
c. drawings. time period when
d. a credit line. a. liabilities exceed assets.
b. drawings exceed investments.
97. Capital is c. expenses exceed revenues.
a. an owner's permanent d. revenues exceed expenses.
investment in the business.
b. equal to liabilities minus 103. If total liabilities decreased by
owner's equity. $40,000 and owner’s equity increased
c. equal to assets minus owner's by $30,000 during a period of time,
equity. then total assets must change by
d. equal to liabilities plus what amount and direction during
drawings. that same period?
a. $50,000 decrease
98. Revenues would not result b. $10,000 decrease
from c. $10,000 increase
a. sale of merchandise. d. $50,000 increase
b. initial investment of cash by
owner. Solution: $30,000  $40,000 = $10,000
c. performance of services. decrease
d. rental of property.
104. If total liabilities decreased by
99. Sources of increases to $40,000 and owner’s equity
owner's equity are decreased by $30,000 during a
a. additional investments by period of time, then total
owners. assets must change by what
b. purchases of merchandise. amount and direction during
c. withdrawals by the owner. that same period?
d. expenses. a. $70,000 decrease
b. $10,000 decrease
100. The basic accounting equation c. $10,000 increase
cannot be restated as d. $70,000 increase
a. Assets – Liabilities = Owner's
Equity. Solution: ($40,000)  ($30,000) =
b. Assets – Owner's Equity = ($70,000) decrease
Liabilities.
c. Owner's Equity + Liabilities = 105. If total liabilities
Assets. decreased by $60,000 and
d. Assets + Liabilities = Owner's owner’s equity increased by
Equity. $30,000 during a period of
time, then total assets must
101. Owner's equity is decreased by change by what amount and
all of the following except direction during that same
a. owner's investments. period?
b. owner's withdrawals. a. $90,000 decrease
 b. $30,000 decrease Solution: ($30,000) + ($15,000) =
c. $30,000 increase ($45,000) decrease
d. $90,000 increase
107. If total liabilities increased by
Solution: $30,000  $60,000 = $9,000 during a period of time
($30,000) decrease and owner’s equity decreased
by $25,000 during the same
106. If total liabilities decreased by period, then the amount and
$30,000 and owner’s equity direction (increase or
decreased by $15,000 during a decrease) of the period’s
period of time, then total change in total assets is a(n)
assets must change by what a. $34,000 decrease.
amount and direction during that b. $16,000 decrease.
same period? c. $16,000 increase.
a. $45,000 decrease d. $34,000 increase.
b. $15,000 decrease
c. $15,000 increase
d. $45,000 increase Solution: $9,000  $25,000 =
($16,000) decrease
108. The accounting equation for Cineo Enterprises is as follows:
Assets Liabilities Owner’s Equity
$120,000 = $60,000 + $60,000
If Cineo purchases office equipment on account for $15,000, the
accounting equation will change to
Assets Liabilities Owner’s Equity
a. $120,000 = $60,000 + $60,000
b. $135,000 = $60,000 + $75,000
c. $135,000 = $67,500 + $67,500
d. $135,000 = $75,000 + $60,000

Solution: $120,000 + $15,000 = $135,000; $60,000 + $15,000  $75,000

109. As of June 30, 2016, Little a. drawings.

Giantz Company has assets of b. revenues.
$100,000 and owner’s equity of c. expenses.
$60,000. What are the liabilities d. liabilities.
for Little Giantz Company as of
June 30, 2016? 111. Owner's equity is decreased by
a. $40,000 a. assets.
b. $60,000 b. revenues.
c. $100,000 c. expenses.
d. $160,000 d. liabilities.

Solution: $100,000  $60,000 = 112. If total liabilities increased by

$40,000 $6,000, then
a. assets must have decreased
110. Owner's equity is increased by by $6,000.
 b. owner's equity must have d. liabilities will decrease.
increased by $6,000.
c. assets must have increased 117. If expenses are paid in cash,
by $6,000, or owner's equity then
must have decreased by a. assets will increase.
$6,000. b. liabilities will decrease.
d. assets and owner's equity c. owner's equity will increase.
each increased by $3,000. d. assets will decrease.

113. Collection of a $1,500 118. If an owner makes a withdrawal

Accounts Receivable of cash from a proprietorship,
a. increases an asset $1,500; then
decreases an asset $1,500. a. there has been a violation of
b. increases an asset $1,500; accounting principles.
decreases a liability $1,500. b. owner's equity will increase.
c. decreases a liability $1,500; c. owner's equity will decrease.
increases owner's equity d. there will be a new liability
$1,500. showing the owner owes
d. decreases an asset $1,500; money to the business.
decreases a liability $1,500.
119. If supplies that have been
114. Revenues are purchased are used in the
a. the cost of assets consumed course of business, then
during the period. a. a liability will increase.
b. gross increases in owner's b. an asset will increase.
equity resulting from business c. owner's equity will decrease.
activities. d. owner's equity will increase.
c. the cost of services used
during the period. 120. As of December 31, 2016,
d. actual or expected cash Cancon Company has assets
outflows. of $42,000 and owner's equity
of $22,000. What are the
115. If an individual asset is liabilities for Cancon Company
increased, then as of December 31, 2016?
a. there must be an equal a. $22,000.
decrease in a specific liability. b. $20,000.
b. there must be an equal c. $42,000.
decrease in owner's equity. d. $64,000
c. there must be an equal Solution: $42,000  $22,000 =
decrease in another asset. $20,000
d. All of these answer choices
are possible. 121. Which of the following events
is not a business transaction?
116. If services are rendered for a. Investment of cash by the
credit, then owner.
a. assets will decrease. b. Hired employees.
b. liabilities will increase. c. Incurred utility expenses for
c. owner's equity will increase. the month.
 d. Earned revenue for services
provided. 125. An income statement
a. summarizes the changes in
122. Net income results when owner's equity for a specific
a. Assets > Liabilities. period of time.
b. Revenues = Expenses. b. reports the changes in assets,
c. Revenues > Expenses. liabilities, and owner's equity
d. Revenues < Expenses. over a period of time.
c. reports the assets, liabilities,
123. Owner's capital at the end of and owner's equity at a
the period is equal to specific date.
a. owner's capital at the d. presents the revenues and
beginning of the period plus expenses for a specific period
net income minus liabilities. of time.
b. owner's capital at the
beginning of the period plus 126. If owner's equity increases
net income minus drawings. from the beginning of the year
c. net income. to the end of the year, then
d. assets plus liabilities. a. net income is less than owner
drawings.
124. A balance sheet shows b. a net loss is less than owner
a. revenues, liabilities, and drawings.
owner's equity. c. additional owner investments
b. expenses, drawings, and are less than net losses.
owner's equity. d. net income plus investments
c. revenues, expenses, and is greater than owner
drawings. drawings.
d. assets, liabilities, and owner's
equity.

127. Eli’s Electronic Repair Shop Solution: ($300,000  $200,000)

started the year with total + ($400,000  $300,000) 
assets of $300,000 and total $50,000 = $150,000
liabilities of $200,000. During
the year, the business 128. Eli’s Electronic Repair Shop
recorded $400,000 in electronic started the year with total
repair revenues, $300,000 in assets of $300,000 and total
expenses, and Eli withdrew liabilities of $200,000. During
$50,000. Eli's Owner’s Capital the year, the business
balance at the end of the year recorded $400,000 in electronic
was repair revenues, $300,000 in
a. $200,000. expenses, and Eli withdrew
b. $100,000. $50,000. The net income
c. $150,000. reported by Eli's Electronic
d. $350,000. Repair Shop for the year was
a. $100,000.
b. $150,000.
 c. $250,000. expenses, and Eli withdrew
d. $300,000. $50,000. Eli's Owner’s Capital
Solution: $400,000  $300,000 = balance changed by what
$100,000 amount from the beginning of
the year to the end of the year?
129. Eli’s Electronic Repair Shop a. $100,000.
started the year with total b. $ 50,000.
assets of $300,000 and total c. $200,000.
liabilities of $200,000. During d. $250,000.
the year, the business
recorded $400,000 in electronic Solution: ($400,000  $300,000)
repair revenues, $300,000 in  $50,000  $50,000

130. The balance sheet is frequently

referred to as
a. an operating statement. 132. All of the financial statements
b. the statement of financial are for a period of time except the
position. a. income statement.
c. the statement of cash flows. b. owner's equity statement.
d. the statement of owner's c. balance sheet.
equity. d. statement of cash flows.

131. The primary purpose of the 133. The ending owner's equity
statement of cash flows is to amount is shown on
report a. the balance sheet only.
a. a company's investing b. the owner's equity statement
transactions. only.
b. a company's financing c. both the income statement
transactions. and the owner's equity
c. information about cash statement.
receipts and cash payments d. both the balance sheet and
of a company. the owner's equity statement.
d. the net increase or decrease
in cash.

134. Alicia Keyes Company began Solution: $280,000 + ($375,000 

the year with owner’s equity of $265,000)  $30,000 = $360,000
$280,000. During the year, the
company recorded revenues of 135. Martha Innocenzi Ito began the
$375,000, expenses of $265,000, and Innocenzi Company by
had owner drawings of $30,000. What investing $75,000 of cash in
was Alicia Keyes’ owner’s equity at the business. The company
the end of the year? recorded revenues of $555,000,
a. $280,000. expenses of $410,000, and had
b. $360,000. owner drawings of $30,000.
c. $390,000. What was Innocenzi’s net
d. $420,000. income for the year?
a. $115,000.
 b. $145,000. c. $605,000.
c. $175,000. d. $633,000.
d. $190,000. Solution: $105,000 + $147,000 + (X 
$420,000)  $28,000 = $290,000; X 
Solution: $555,000  $410,000 = $486,000
$145,000
138. Foxes Service Shop started the
136. El Centro Company began the year with total assets of
year with owner’s equity of $320,000 and total liabilities of
$30,000. During the year, El $240,000. During the year, the
Centro received additional business recorded $630,000 in
owner investments of $42,000, revenues, $450,000 in
recorded expenses of expenses, and owner drawings
$120,000, and had owner of $60,000.
drawings of $12,000. If El Owner’s equity at the end of
Centro’s ending owner’s equity the year was
was $112,000, what was the a. $80,000.
company’s revenue for the b. $200,000.
year? c. $310,000.
a. $164,000. d. $370,000.
b. $172,000. Solution: ($320,000  $240,000)
c. $202,000. + ($630,000  $450,000) 
d. $214,000. $60,000 = $200,000

Solution: $30,000 + $42,000 + (X 

139. Foxes Service Shop started the
$120,000)  $12,000 = $112,000; X 
year with total assets of
$172,000
$320,000 and total liabilities of
$240,000. During the year, the
137. Letty Company began the year
business recorded $630,000 in
with owner’s equity of
revenues, $450,000 in
$105,000. During the year,
expenses, and owner drawings
Letty received additional owner
of $60,000.
investments of $147,000,
The net income reported by
recorded expenses of
Foxes Service Shop for the
$420,000, and had owner
year was
drawings of $28,000. If Letty’s
a. $140,000.
ending owner’s equity was
b. $180,000.
$290,000, what was the
c. $200,000.
company’s revenue for the
d. $270,000.
year?
Solution: $630,000  $450,000 =
a. $458,000.
$180,000
b. $486,000.

140. Mirah Company compiled the following financial information as of

December 31, 2016:
Revenues $340,000
Owner’s Capital (1/1/16) 140,000
 Equipment 80,000
Expenses 240,000
Cash 90,000
Owner’s Drawings 20,000
Supplies 20,000
Accounts payable 40,000
Accounts receivable 70,000
Mirah’s assets on December 31, 2016 are
a. $190,000.
b. $260,000.
c. $360,000.
d $480,000.

Solution: $80,000 + $90,000 + $20,000 + $70,000  $260,000

141. Mirah Company compiled the following financial information as of

December 31, 2016:
Revenues $340,000
Owner’s Capital (1/1/16) 140,000
Equipment 80,000
Expenses 240,000
Cash 90,000
Owner’s Drawings 20,000
Supplies 20,000
Accounts payable 40,000
Accounts receivable 70,000

Mirah’s owner’s equity on December 31, 2016 is

a. $100,000.
b. $140,000.
c. $220,000.
d. $260,000.
Solution: $140,000 + ($340,000  $240,000)  $20,000  $220,000

142. Teamboo Company’s owner’s Solution: $740,000 + $175,000 

equity at the beginning of August $80,000  $835,000
2016 was $740,000. During the
month, the company earned net
143. On January 1, 2016, Utah Utility
income of $175,000 and owner’s
Company reported owner’s
drawings were $80,000. At the end of
equity of $705,000. During the
August 2016, what is the balance in
year, the owner withdrew cash
owner’s equity?
of $30,000. At December 31,
a. $660,000
2016, the balance in owner’s
b. $740,000
equity was $795,000. What
c. $820,000
amount of net income or net
d. $835,000
 loss would the company report
for 2016? 146. Luis Consulting started the
a. Net loss of $60,000 year with total assets of $60,000 and
b. Net income of $90,000 total liabilities of $17,000. During the
c. Net income of $120,000 year, the business recorded $48,000
d. Net income of $150,000 in consulting revenues and $36,000
in expenses. Luis made an additional
Solution: $705,000 + X  $30,000 investment of $8,000 and withdrew
 $795,000; X  $120,000 cash of $9,000 during the year.
Owner’s equity changed by what
amount from the beginning of the
144. Luis Consulting started the year to the end of the year?
year with total assets of a. $3,000.
$60,000 and total liabilities of b. $11,000.
$17,000. During the year, the c. $12,000.
business recorded $48,000 in d. $45,000.
consulting revenues and
Solution: ($60,000  $17,000) +
$36,000 in expenses. Luis
($48,000  $36,000) + $8,000  $9,000
made an additional investment
of $8,000 and withdrew cash of  $54,000; $54,000  $43,000 
$9,000 during the year. The $11,000
owner’s equity at the end of
the year was 147. During the year 2016, Dallas
a. $33,000. Company earned revenues of
b. $54,000. $90,000, had expenses of
c. $57,000. $62,000, purchased assets with
d. $63,000. a cost of $10,000 and had
Solution: ($60,000  $17,000) + owner drawings of $6,000. Net
($48,000  $36,000) + $8,000  $9,000 income for the year is
 $54,000 a. $18,000.
b. $22,000.
c. $28,000.
145. Luis Consulting started the d. $32,000.
year with total assets of
Solution: $90,000  $62,000  $28,000
$60,000 and total liabilities of
$17,000. During the year, the
business recorded $48,000 in 148. At October 1, Flambo Company
consulting revenues and reported owner’s equity of
$36,000 in expenses. Luis $70,000. During October, no
made an additional investment additional investments were
of $8,000 and withdrew cash of made and the company earned
$9,000 during the year. The net net income of $18,000. If
income reported by Luis owner’s equity at October 31
Consulting for the year was: totals $80,000, what amount of
a. $3,000. owner drawings were made
b. $12,000. during the month?
c. $18,000. a. $0
d. $27,000. b. $8,000
Solution: $48,000  $36,000  $12,000 c. $10,000
 d. $26,000 31 totals $78,000, what amount of
Solution: $70,000 + $18,000  X  owner drawings were made during
$80,000; X  $8,000 the month?
a. $0
b. $4,000
149. At October 1, Flambo Company c. $8,000
reported owner’s equity of d. $10,000
$76,000. During October, no
Solution: $70,000 + $4,000 + $14,000 
additional investments were
X  $78,000; X  $10,000
made and the company posted
a net loss of $8,000. If owner’s
151. At October 1, Flambo Company
equity at October 31 totals
reported owner’s equity of
$64,000, what amount of owner
$68,000. During October, the
drawings were made during
owner made additional
the month?
investments of $10,000 and the
a. $0
company posted a net loss of
b. $4,000
$4,000. If owner’s equity at
c. $8,000
October 31 totals $70,000, what
d. $16,000
amount of owner drawings
Solution: $76,000  $8,000  X 
were made during the month?
$64,000; X  $4,000
a. $0
b. $4,000
150. At October 1, Flambo Company c. $6,000
reported owner’s equity of $70,000. d. $10,000
During October, the owner made Solution: $68,000 + $10,000 
additional investments of $4,000 and $4,000  X  $70,000; X 
the company earned net income of $4,000
$14,000. If owner’s equity at October

152. Which of the following is not measured in dollars and cents is

part of the accounting called
process? a. communicating.
a. Recording b. identifying.
b. Identifying c. processing.
c. Financial decision making d. recording.
d. Communicating
155. A proprietorship is a business
153. The first part of the accounting a. owned by one person.
process is b. owned by two or more
a. communicating. persons.
b. identifying. c. organized as a separate legal
c. processing. entity under state corporation
d. recording. law.
d. owned by a governmental
154. Keeping a systematic, agency.
chronological diary of events that are
156. Internal users of accounting b. a decrease in Cash and an
information include all of the increase in Owner’s Capital.
following except c. an increase in Accounts
a. company officers. Payable and a decrease in
b. investors. Owner’s Capital.
c. marketing managers. d. a decrease in Accounts
d. production supervisors. Payable and an increase in
Owner’s Capital.
157. The organization(s) primarily
responsible for establishing 161. Mellon Company purchases
generally accepted accounting $1,500 of equipment from
principles is(are) the Office Equipment Inc. for cash.
The effect on the components of
FASB SEC
the basic accounting equation of
a. no no
Mellon Company is
b. yes no
a. an increase in assets and
c. no yes
liabilities.
d. yes yes
b. a decrease in assets and
liabilities.
158. The primary accounting
c. no change in total assets.
standard-setting body in the
d. an increase in assets and a
United States is the
decrease in liabilities.
a. Financial Accounting
Standards Board.
162. Juggernaut Company buys
b. International Accounting
a $29,000 van on credit. The
Standards Board.
transaction will affect the
c. Internal Revenue Service.
a. income statement only.
d. Securities and Exchange
b. balance sheet only.
Commission.
c. income statement and
owner's equity statement only.
159. A net loss will result during a
d. income statement, owner's
time period when
equity statement, and balance
a. assets exceed liabilities.
sheet.
b. assets exceed owner's equity.
163. Auditing is
c. expenses exceed revenues.
a. the examination of financial
d. revenues exceed expenses.
statements by a CPA in order
to express an opinion on their
160. Big Bite Diner received a bill of
fairness.
$800 from the Blackstone Wine
b. a part of accounting that
Advertising Agency. The
involves only recording of
owner, K. T. Lang, is
economic events.
postponing payment of the bill
c. an area of accounting that
until a later date. The effect on
involves such activities as
specific items in the basic
cost accounting, budgeting,
accounting equation is
and accounting information
a. a decrease in Cash and an
systems.
increase in Accounts Payable.
 d. conducted by the Securities 169. U.S. standards are developed
and Exchange Commission to by the
ensure that registered a. IFRS.
financial statements are b. GAAP.
presented fairly. c. IASB.
164. Which of the following is not a d. FASB.
reason one set of international
accounting standards are 170. The United States and the
needed? international standard-setting
a. Multinational corporations. environment are primarily
b. Mergers and acquisitions. driven by meeting the needs of
c. Information technology. a. investors and creditors.
d. All of these answer choices b. tax authorities.
are reasons one set of c. central government planners.
international accounting d. academic researchers.
standards are needed.
171. The internal control standards
165. Which of the following is not a applicable to Sarbanes-Oxley
reason one set of international apply to
accounting standards are a. all U.S. and international
needed? companies.
a. Multinational corporations. b. U.S. and international
b. Financial markets. companies listed on U.S.
c. Information technology. exchanges.
d. All of these answer choices c. International companies listed
are correct. on U.S. exchanges.
d. U.S. companies listed on U.S.
166. International standards are exchanges.
referred to as
a. IFRS. 172. The concern about
b. GAAP. international companies
c. IASB. adopting SOX-type standards
d. FASB. centers on
a. cost-benefit analysis.
167. U.S. standards are referred to b. ethics issues.
as c. the governing authorities.
a. IFRS. d. comparability.
b. GAAP.
c. IASB. 173. Financial accounting ethics
d. FASB. violations are
a. not a problem in the U.S. or
168. International standards are internationally.
developed by the b. much more common in the
a. IFRS. U.S. than internationally.
b. GAAP. c. much more common
c. IASB. internationally than in the U.S.
d. FASB. d. a major problem both in the
U.S. and internationally.
 a. are the three most common
174. IFRS, compared to GAAP, forms of business
tends to be more organizations in the U.S.
a. detailed. b. are the three most common
b. rules-based. forms of business
c. principles-based. organizations internationally.
d. full of disclosure c. are used in different
requirements. proportions in different
countries.
175. GAAP, compared to IFRS, d. all of these answer choices
tends to be more are correct.
a. simple in accounting 177. The conceptual framework that
requirements. underlies IFRS
b. rules-based. a. is very similar to that used to
c. principles-based. develop GAAP.
d. simple in disclosure b. does not define assets or
requirements. liabilities.
c. does not define equity.
176. Proprietorships, partnerships, d. does not define income or
and corporations expenseS