Accounting Mcgraw Hill Exam 1

True or False: Management Accounting Information is oriented toward the future while financial accounting information is historical in nature.

True

True or False: The tailoring of an accounting report to meet the needs of a specific decision maker is more characteristic of financial accounting reports than of management accounting reports.

False

True or False: Management accounting refers to the preparation and use of accounting information designed to meet the needs of decision makers outside the business organization.

False

True or False: The content of management accounting reports needs to be presented in conformity with generally accepted accounting principles.

False

True or False: One purpose of generally accepted accounting principles is to make accounting information prepared by different companies more comparable.

True

The information systems of most business organizations:

1)Are tailored to meet the organization's needs for accounting information and the resources available for operating the system.

2)Are similar in design to the journals, ledgers, and worksheets illustrated in this text.

3)Utilize data bases, rather than ledger accounts

4)Are designed by the certified public accountant (CPA) firm that performs the annual financial audit.

Are tailored to meet the organization's needs for accounting information and the resources available for operating the system.

The objectives of an accounting system include all of the following, except:

1) Interpret and record the effects of business transactions

2) Classify the effects of transactions to facilitate the preparation of reports

3) Summarize and communicate information to decision makers

4) Dictate the specific types of business transactions the enterprise may pursue

Dictate the specific types of business transactions the enterprise may pursue

Which financial statement is prepared as of a specific date?

1) The balance sheet

2) The income statement

3) The statement of cash flows

4)The balance sheet, income statement, and statement of cash flows are all for a period of time rather than at a specific date

The balance sheet

In comparison with a financial statement prepared in conformity with generally accepted accounting principles, a management accounting report is more likely to:

1) Be used by decision makers outside of the business organization

2) Focus upon the operation results of the most recently completed accounting period

3) View the entire organization as the reporting entity.

4) Be tailored to the specific needs of an individual decision maker.

Be tailored to the specific needs of an individual decision maker

Which financial statement is primarily concerned with reporting the financial position of a business at a particular time?

1) The balance sheet.

2) The income statement.

3) The statement of cash flows.

4) Consolidated statement of stockholders' equity.

The balance sheet

Financial statements are prepared:

1) Only for publicly owned business organizations.

2) For corporations, but not for sole proprietorships or partnerships

3) Primarily for the benefit of persons outside of the business organization.

4) In either monetary or nonmonetary terms, depending upon the need of the decision maker.

Primarily for the benefit of persons outside of the business organization.

Financial statements may be prepared for which time period?

1) One year.

2) Less than one year.

3) More than one vear.

4) Any time period.

Any time period

Although accounting information is used by a wide variety of external parties, financial reporting is primarily directed toward the informational needs of:

1) Investors and creditors.

2) Government agencies such as the Internal Revenue Service

4) Customers

5) Trade associations and labor unions

Investors and Creditors

Which of the following is a characteristic of financial accounting information?

1) Its preparation requires judgment.

2) It is more about the future than it is about the past.

3) None of it is based on estimates, assumptions, and judgments

4) Notes and explanations from management are not included

Its preparation requires judgment.

Which of the following statements is considered a "snapshot" of the business in financial or dollar terms?

1) Statement of financial position.

2) Statement of cash flows

3) Income statement.

4) The federal income tax return

Statement of financial position

Which of the following is not a user of internal accounting information?

1) Store manager

2) Chief executive officer

3) Creditor

4) Chief financial officer

Creditor

The set of standards, assumptions, and concepts that form the "ground rules" for financial reporting in the United States is termed:

1) The conceptual framework

2) Generally accepted accounting principles

3) Statements of Financial Accounting Concepts

4) American standards for certified public accountants

Generally accepted accounting principles

Generally accepted accounting principles are intended to assist accountants in preparing financial statements that:

1) Are relevant, verifiable, comparable, and understandable

2) Show the business to be both solvent and profitable

3) Comply with all income tax rules and regulations.

4) Are ideally suited to the specific needs of each user of the financial statements

Are relevant, verifiable, comparable, and understandable

Which of the following is not an objective of generally accepted accounting principles?

1) To minimize the amount of income taxes owed

2) To ensure that both preparers and users of financial statements understand the concepts and assumptions used in presenting information within these statements

3) To enhance the relevance and verifiability of information contained in financial statements.

4) To increase the comparability of financial statements prepared by different companies.

To minimize the amount of income taxes owed

Generally accepted accounting principles are the "ground rules" used in the preparation of:

1) income tax returns

2) All accounting reports.

3) Reports to federal and state regulatory agencies

4) Financial statements.

Financial statements

True or False: Notes payable and accounts payable both require a company to pay an amount owed by a certain date. Notes payable generally have interest, while accounts payable generally do not.

True

True or False: Total assets plus total liabilities must equal total owners' equity.

False

True or False: If a company purchases equipment with cash, its total assets will increase.

False

True or False: Articulation between the financial statements means that they relate closely to each other on the basis of the same underlying transaction information.

True

Which of the following is not a generally accepted accounting principle relating to the valuation of assets?

1) The cost principle - in general, assets are valued at cost, rather than at estimated market values.

2) The objectivity principle - accountants prefer to use objective, rather than subjective, information as the basis for accounting information.

3) The safety principle - assets are valued at no more than the value for which they are insured

4) The going-concern assumption - one reason for valuing assets such as buildings and equipment at cost rather than at their current market values is the assumption th

business will use these assets rather than sell them.

The safety principle - assets are valued at no more than the value for which they are insured

Decreases in owners' equity are caused by:

1) Purchases of assets and payment of liabilities.

2) Purchases of assets and incurrence of liabilities

3) Payment of liabilities and unprofitable operations.

4) Distributions of assets to the owners and unprofitable operations

Distributions of assets to the owners and unprofitable operations

If total assets equal $270,000 and total liabilities equal $202,500, the total owners' equity must equal:

$472,500.

$67,500.

$270.000.

Cannot be determined from the information given.

$67,500

Assets of $270,000 - Liabilities of $202,500 = Owners' equity of $67,500

Owners' equity in a business increases as a result of which of the following?

1) Payments of cash to the owners.

2) Losses from unprofitable operation of the business.

3) Earnings from profitable operation of the business

4) Borrowing from a commercial bank

Earnings from profitable operation of the business

A balance sheet

1) Provides owners, investors, and other interested parties with all the financial information they need to evaluate the financial strength, profitability, and future prospect given business entity.

2) Shows the current market value of the owners' equity in the business at the balance sheet date

3) Assists creditors in evaluating the debt-paying ability of a business by showing the assets and liabilities of the business, plus the assets and liabilities of its owner (or

4) Shows the assets, liabilities, and owners' equity of a business entity, valued in conformity with generally accepted accounting principles.

Shows the assets, liabilities, and owners' equity of a business entity, valued in conformity with generally accepted accounting principles.

Capital stock represents:

1) The amount invested in the business by stockholders when shares of stock were initially issued by a corporation

2) The owners' equity for a business organized as a corporation.

3) The owners' equity accumulated through profitable operations that have not been paid out as dividends.

4) The price paid by the current owners to acquire shares of stock in the corporation, regardless of whether they bought the shares directly from the corporation or from the stockholder.

The amount invested in the business by stockholders when shares of stock were initially issued by a corporation

The balance sheet item that represents the portion of owners' equity resulting from profitable operations of the business is:

1) Accounts receivable.

2) Cash.

3) Capital stock.

4) Retained earnings.

Retained earnings

At December 31, Year 1, the accounting records of Braun Corporation contain the following items

Accounts Payable $16,000

Land $240,000

Capital Stock $180,000

Building 160,000

Retained Earnings

$ 16,000

240,000

180,000

160, 000

Accounts Receivable

Cash

Equipment

Notes Payable

$ 40,000

?

120,000

190, 000

If Capital Stock is $260,000, what is the December 31, Year 1 cash balance?

If during the current year, liabilities of Corbett's Store increased by $220,000 and owners' equity increased by $160,000, then:

1) Assets at the end of the year total $380,000.

2) Assets at the end of the year total $60,000.

3) Assets increased during the year by $380,000

4) Assets decreased during the year by $60,000.

Assets increased during the year by $380,000

Change in Assets = Change in Total Liabilities and Owner's Equity

Increase in Assets = Increase in Liabilities ($220,000) + Increase in Owners' Equity ($160,000)

Increase in Assets = $220,000 + $160,000 = $380,000

If during the current year, liabilities of Hayden Travel decreased by $50,000 and owners' equity increased by $75,000, then:

Assets at the end of the year total $125,000.

Assets at the end of the year total $25,000.

Assets

increased during the year by $25,000.

Assets decreased during the year by $125,000.

Assets

increased during the year by $25,000.

Change in Assets = Change in Total Liabilities and Owner's Equity

Change in Assets = Decrease in Liabilities ($50,000) + Increase in Owners' Equity ($75,000)

Increase in Assets = $75,000 - $50,000 = $25,000

At the end of the current year, the owners' equity in Durante Company is $360,000. During the year, the assets of the business had increased by $68,000 and the liabilities had increased by $118,000. Owners' equity at the beginning of the year must have been:

$410,000.

$310,000.

$546,000.

$174,000.

$410,000

Change in Assets = Change in Total Liabilities and Owner's Equity

Increase in Total Assets ($68.000) =

Increase in Total Liabilities ($118.000) + Change in Owners' Equity

Decrease in Owners' Equity = $68,000 - $118,000 = ($50,000)

Owners' Equity at beginning of year -

Decrease in Owners' Equity ($50,000) =

Owners' Equity at end of year ($360.000)

Owners' Equity at beginning of year = $360,000 + $50,000 = $410,000

Astoria Company had the following transactions during the month of August Year 1:

(1) Cash received from bank loans was $20,000.

(2) Dividends of $9,500 were paid to stockholders in cash.

(3) Revenues earned and received in cash amounted to $33,500.

(4) Expenses incurred and paid were $26,000.

What amount of net income will be reported on an income statement for the month of August?

$20,000.

$7,500

$0.

$33,500.

$7,500

Revenues of $33,500 - Expenses of $26,000 = Net income of $7,500

Astoria Company had the following transactions during the month of August Year 1:

(1) Cash received from bank loans was $20,000.

(2) Dividends of $9,500 were paid to stockholders in cash.

(3) Revenues earned and received in cash amounted to $33,500.

(4) Expenses incurred and paid were $26,000.

At the beginning of August, Year 1, owners' equity in Astoria was $160,000. Given the transactions of August, what will be the owners' equity be at the end of the month?

$167.500

$150.500

$193,500.

$158,000.

158,000

Beginning Owners' Equity of $160,000 + Net income of $7,500 - Dividends of $9,500 = Ending Owners' Equity of $158,000

The change in owners' equity due to only revenue and expense transactions is explained by the:

1) Statement of cash flows

2) Statement of financial position

3) income statement.

4) Tax return.

income statement

The balance sheet items of Kiner Company as of December 31, current year, follow in random order.

Land $90,000

Accounts payable $43,800

Accounts receivable $56,700

Cash $36,300

Office equipment $12,40"

Building $210,000

Capital stock $88,000

Notes payable $207,000

Retained earnings ?

a. Compute the amount for Retained Earnings.

$66,600

The amount of retained earnings is calculated as the difference between total assets and liabilities plus capital stock: $405,400 - ($250,800 +

$88,000) = $66,600

The balance sheet items of Kiner Company as of December 31, current year, follow in random order.

Land $90,000

Accounts payable $43,800

Accounts receivable $56,700

Cash $36,300

Office equipment $12,40"

Building $210,000

Capital stock $88,000

Notes payable $207,000

Retained earnings ?

b. Prepare a balance sheet for the company.

KINER COMPANY

Balance Sheet

December 31, Current Year

Assets:

Accounts receivable $56,700

Building $210,000

Cash $36,300

Land $90,000

Office equipment $12,400

Liabilities & Owners' Equity:

56,700 0

210,000 0

Liabilities:

Accounts payable

Notes payable

36,300 0

90,000 0

Total liabilities

12,400 Owners' equity:

Capital stock

Retained earnings

• S

43,800 0

207,000 0

250,800

•

88,000 0

66,600 O

Total Assets

405,400

Total Liabilities & Owners' Equity

$ 405.400

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