70) International Financial Reporting Standards ________ U.S. Generally Accepted Accounting Principles.
A) are the same as
B) are generally less specific than
C) are based less on principle than
D) leave less room for professional judgment than
71) Which of the following statements, regarding International Financial Reporting Standards (IFRS), is
correct?
A) International Financial Reporting Standards are issued by the Financial Accounting Standards Board.
B) The Securities and Exchange Commission is the private organization that oversees the creation and
governance of International Financial Reporting Standards.
C) International Financial Reporting Standards represent a set of global accounting standards that are
generally more specific and based less on principle than U.S. Generally Accepted Accounting Principles.
D) Companies who are incorporated in or do significant business in another country might be required to
publish financial statements using International Financial Reporting Standards.
72) The Public Company Accounting Oversight Board is a watchdog agency that monitors the work of
independent accountants who audit public companies.
73) An audit is an examination of a company‘s financial statements and records.
74) The Sarbanes-Oxley Act (SOX) requires companies to review internal control and take responsibility
for the accuracy and completeness of their financial reports.
75) The Sarbanes-Oxley Act (SOX) ________.
A) requires independent accountants to take responsibility for the accuracy and completeness of the
financial reports
B) created the SEC
C) ensures that financial scandals will no longer occur
D) requires companies to take responsibility for the accuracy and completeness of their financial reports
76) Which of the following organizations requires publicly owned companies to be audited by
independent accountants (CPAs)?
A) Securities and Exchange Commission (SEC)
B) Public Company Accounting Oversight Board (PCAOB)
C) Financial Accounting Standards Board (FASB)
D) American Institute of Certified Public Accountants (AICPA)
77) The Public Company Accounting Oversight Board (PCAOB) was created ________.
A) by the Sarbanes-Oxley Act (SOX)
B) to perform audits of public companies
C) to make restitution to investors who were defrauded by the issuance of fraudulent financial reports
D) to require auditors to take responsibility for the accuracy and completeness of financial reports from
firms they audit
1) The left side of the accounting equation measures the amount that the business owes to creditors and
to the stockholders.
2) The total amount of assets a business possesses may or may not be equal to the total of liabilities and
equity of the business.
3) The left side of the accounting equation always equals the right side of the accounting equation.
4) Which of the following is the correct accounting equation?
A) Assets + Liabilities = Equity
B) Assets = Liabilities + Equity
C) Assets + Revenues = Equity
D) Assets + Revenues = Liabilities + Expenses
5) The equity of Alliance Company is $170,000 and the total liabilities are $30,000. The total assets are
________.
A) $340,000
B) $60,000
C) $140,000
D) $200,000
6) Spring Company has assets and equity that amount to $220,000 and $20,000, respectively. Liabilities
total ________.
A) $20,000
B) $200,000
C) $220,000
D) $240,000
7) The assets of Star Company are $120,000 and the total liabilities are $10,000. The equity is ________.
A) $120,000
B) $130,000
C) $10,000
D) $110,000
8) Regarding the accounting equation, which of the following is a correct statement?
A) The accounting equation is made up of three parts.
B) The accounting equation is the basic tool of accounting.
C) Assets – Liabilities = Equity.
D) All of the statements are correct.
9) Using the following information, provide the complete accounting equation.
Use this information to
Provide the accounting equation
Assets $150,000; Equity $60,000
Liabilities $200,000; Equity $45,000
Assets $75,000; Liabilities $40,000
Assets $150,000; Equity $60,000
Liabilities $200,000; Equity $45,000
Assets $75,000; Liabilities $40,000
10) Using the following information, provide the complete accounting equation.
Use this information to
Provide the accounting equation to
Equity $200,000; Assets $360,000
Liabilities $180,000; Assets $320,000
Equity $725,000 Liabilities $350,000
Use this information to
Provide the accounting equation
Equity $200,000; Assets $360,000
Assets = Liabilities + Equity
$360,000 = $160,000 + $200,000
Liabilities $180,000; Assets $320,000
Assets = Liabilities + Equity
$320,000 = $180,000 + $140,000
Equity $725,000 Liabilities $350,000
Assets = Liabilities + Equity
$1,075,000 = $350,000 + $725,000
11) What is the accounting equation? Briefly explain each of the three parts.
12) Assets are something of value that the business owns or has control of.
13) Assets are economic resources that have no future benefits for the business.
14) The economic resources of a business such as furniture, building, and land are its ________.
A) liabilities
B) revenues
C) assets
D) dividends
15) Which of the following is true of assets?
A) Assets include Cash, Merchandise Inventory, and Accounts Payable.
B) Assets are something of value the business owns or controls.
C) Assets do not need to provide future benefit to the business.
D) Assets can be recorded at the market value if acquired at a bargain.
16) Define assets. Provide three examples of assets.
17) Liabilities represent creditors’ claims on the business’s assets.
18) Many liabilities have the word receivable in their titles.
19) A creditor who has loaned money to a business has a claim to some of the assets of the business until
the debt is paid.
20) A debt that a business owes is called ________.
A) an asset
B) a liability
C) stockholders’ equity
D) revenue
21) Regarding liabilities, which of the following statements is incorrect?
A) Liabilities represent one of the two claims to assets.
B) A creditor who has loaned money to a business has a claim to some of the business’s assets until the
business pays the debt.
C) Liabilities are economic resources that are expected to benefit the business in the future.
D) Many, but not all, liabilities have the word payable in their titles.
22) Define liabilities. Provide three examples of liabilities.
23) Equity increases when revenues are earned.
24) Equity decreases with expenses and revenues.
25) Dividends are the expenses of a business.
26) Dividends are a distribution of a corporation’s earnings to stockholders.
27) The three types of events that affect retained earnings are dividends, revenues, and expenses.
28) The distribution of dividends represents an increase in retained earnings.
29) Common stock represents the basic ownership of every corporation.