61)
Return on assets is often stated in ratio form as the amount of average total assets divided by
income.
A)
True
B)
False
62)
Return on assets is also known as return on investment.
A)
True
B)
False
63)
Return on assets is useful in evaluating management, analyzing and forecasting profits, and
planning activities.
A)
True
B)
False
64)
Arrow’s net income of $117 million and average assets of $1,400 million results in a return on
assets of 8.36%.
A)
True
B)
False
65)
Return on assets reflects a company’s ability to generate profit through productive use of its assets.
A)
True
B)
False
66)
Risk is the uncertainty about the return we will earn.
A)
True
B)
False
67)
Generally, the lower the risk, the higher the return that can be expected.
A)
True
B)
False
68)
U.S. Government Treasury bonds provide low return and low risk to investors.
A)
True
B)
False
69)
The four basic financial statements include the balance sheet, income statement, statement of
owner’s equity, and statement of cash flows.
A)
True
B)
False
70)
An income statement reports on investing and financing activities.
A)
True
B)
False
71)
A balance sheet covers activities over a period of time such as a month or year.
A)
True
B)
False
72)
The income statement describes revenues earned and expenses incurred along with the resulting net
income or loss over a specified period of time, due to earnings activities.
A)
True
B)
False
73)
The statement of cash flows shows the net effect of revenues and expenses for a reporting period.
A)
True
B)
False
74)
The income statement shows the financial position of a business on a specific date.
A)
True
B)
False
75)
The first section of the income statement reports cash flows from operating activities.
A)
True
B)
False
76)
The balance sheet is based on the accounting equation.
A)
True
B)
False
77)
Investing activities involve the buying and selling of assets such as land and equipment that are
held for long-term use in the business.
A)
True
B)
False
78)
Operating activities include long-term borrowing and repaying cash from lenders, and cash
investments or withdrawals by the owner.
A)
True
B)
False
79)
The purchase of supplies appears on the statement of cash flows as an investing activity because it
involves the purchase of assets.
A)
True
B)
False
80)
The income statement reports on operating activities at a point in time.
A)
True
B)
False
81)
The statement of cash flows identifies cash flows separated into operating, investing, and financing
activities over a period of time.
A)
True
B)
False
82)
Ending capital reported on the statement of owner’s equity is calculated by adding owner
investments and net losses and subtracting net income and withdrawals.
A)
True
B)
False
83)
The materiality constraint looks at both the importance and relative size of an amount.
A)
True
B)
False
84)
The cost-benefit constraint prescribes that only information with benefits of disclosure less than the
costs of providing it, need be disclosed.
A)
True
B)
False
85)
The cost-benefit constraint prescribes that only information with benefits of disclosure greater than
the costs of providing it need be disclosed.
A)
True
B)
False
86)
Net income is sometimes called earnings or profit.
A)
True
B)
False
87)
Accounting is an information and measurement system that does all of the following except:
A)
Records business activities.
B)
Helps people make better decisions.
C)
Communicates business activities.
D)
Eliminates the need for interpreting financial data.
E)
Identifies business activities.
88)
Technology:
A)
Reduces the time, effort and cost of recordkeeping.
B)
In accounting is only available to large corporations.
C)
Has not improved the clerical accuracy of accounting.
D)
Has replaced accounting.
E)
In accounting has replaced the need for decision makers.
89)
The primary objective of financial accounting is to:
A)
Provide accounting information that serves external users.
B)
Serve the decision-making needs of internal users.
C)
Monitor and control company activities.
D)
Provide information on both the costs and benefits of looking after products and services.
E)
Know what, when, and how much product to produce.
90)
The area of accounting aimed at serving the decision making needs of internal users is:
A)
Financial accounting.
B)
SEC reporting.
C)
External auditing.
D)
Managerial accounting.
E)
Bookkeeping.
91)
External users of accounting information include all of the following except:
A)
Government regulators.
B)
Customers.
C)
Purchasing managers.
D)
Shareholders.
E)
Creditors.
92)
All of the following regarding a Certified Public Accountant are true except:
A)
Must meet education and experience requirements.
B)
Must pass an examination.
C)
May also be a Certified Management Accountant.
D)
Must exhibit ethical character.
E)
Cannot hold any certificate other than a CPA.
93)
Ethical behavior requires that:
A)
Auditors invest in businesses they audit.
B)
Auditors‘ pay depends on the success of the client’s business.
C)
Auditors‘ pay not depend on the success of the client’s business.
D)
Analysts report information favorable to their companies.
E)
Managers use accounting information to benefit themselves.
94)
The conceptual framework that the Financial Accounting Standards Board (FASB) and the
International Accounting Standards Board (IASB) are attempting to converge and enhance includes
the following broad areas to guide standard setting except:
A)
Uniformity
B)
Recognition and measurement
C)
Objectives
D)
Qualitative characteristics
E)
Elements
95)
All of the following are true regarding ethics except:
A)
Ethics can be difficult to apply.
B)
Ethics are beliefs that distinguish right from wrong.
C)
Are critical in accounting.
D)
Ethics rules are often set for CPAs.
E)
Ethics do not affect the operations or outcome of a company.
96)
The accounting concept that requires financial statement information to be supported by
independent, unbiased evidence is:
A)
Revenue recognition principle.
B)
Time-period assumption.
C)
Objectivity principle.
D)
Going-concern assumption.
E)
Business entity assumption.
97)
A corporation is:
A)
A business legally separate from its owners.
B)
The same as a limited liability partnership.
C)
Controlled by the FASB.
D)
Not subject to double taxation.
E)
Not responsible for its own acts and own debts.
98)
The independent group that is attempting to harmonize accounting practices of different countries
is the:
A)
CAP. B) IASB. C) SEC. D) AICPA. E) FASB.
99)
The private-sector group that currently has the authority to establish generally accepted accounting
principles in the United States is the:
A)
SEC. B) AAA. C) AICPA. D) APB. E) FASB.
100)
The accounting concept that requires every business to be accounted for separately from other
business entities, including its owner or owners is known as the:
A)
Time-period assumption.
B)
Revenue recognition principle.
C)
Measurement (Cost) principle.
D)
Business entity assumption.
E)
Going-concern assumption.
101)
The rule that requires financial statements to reflect the assumption that the business will continue
operating instead of being closed or sold, unless evidence shows that it will not continue, is the:
A)
Objectivity principle.
B)
Monetary unit assumption.
C)
Business entity assumption.
D)
Going-concern assumption.
E)
Measurement (Cost) Principle.
102)
If a company is considering the purchase of a parcel of land that was acquired by the seller for
$85,000, is offered for sale at $150,000, is assessed for tax purposes at $95,000, is recognized by
the purchaser as easily being worth $140,000, and is purchased for $137,000, the land should be
recorded in the purchaser’s books at:
A) $140,000. B) $137,000. C) $150,000. D) $138,500. E) $95,000.
103)
To include the personal assets and transactions of a business’s owner in the records and reports of
the business would be in conflict with the:
A)
Going-concern assumption.
B)
Business entity assumption.
C)
Objectivity principle.
D)
Revenue recognition principle.
E)
Monetary unit assumption.
104)
The accounting principle that requires accounting information to be based on actual cost and
requires assets and services to be recorded initially at the cash or cash-equivalent amount given in
exchange, is the:
A)
Going-concern assumption.
B)
Measurement (Cost) principle.
C)
Business entity assumption.
D)
Accounting equation.
E)
Realization principle.
105)
The rule that (1) requires revenue to be recognized at the time it is earned, (2) allows the inflow of
assets associated with revenue to be in a form other than cash, and (3) measures the amount of
revenue as the cash plus the cash equivalent value of any noncash assets received from customers
in exchange for goods or services, is called the:
A)
Measurement (Cost) principle.
B)
Objectivity principle.
C)
Business entity assumption.
D)
Going-concern assumption.
E)
Revenue recognition principle.
106)
The question of when revenue should be recognized on the income statement according to GAAP
is addressed by the:
A)
Business entity assumption.
B)
Objectivity principle.
C)
Going-concern assumption.
D)
Revenue recognition principle.
E)
Measurement (Cost) principle.
107)
The International Accounting Standards Board (IASB):
A)
Only applies to companies that are members of the European Union.
B)
Is the only source of generally accepted accounting principles (GAAP).
C)
Has the authority to impose its standards on companies around the world.
D)
Hopes to create harmony among accounting practices of different countries to improve
comparability.
E)
Is the government group that establishes reporting requirements for companies that issue
stock to the investing public.
108)
The Superior Company acquired a building for $500,000. The building was appraised at a value of
$575,000. The seller had paid $300,000 for the building 6 years ago. Which accounting principle
would require Superior to record the building on its records at $500,000?
A)
Business entity assumption.
B)
Revenue recognition principle.
C)
Monetary unit assumption.
D)
Measurement (Cost) principle.
E)
Going-concern assumption.
109)
On December 15 of the current year, Conrad Accounting Services signed a $40,000 contract with a
client to provide bookkeeping services to the client in the following year. Which accounting
principle would require Conrad Accounting Services to record the bookkeeping revenue in the
following year and not the year the cash was received?
A)
Going-concern assumption.
B)
Monetary unit assumption.
C)
Measurement (Cost) principle.
D)
Business entity assumption.
E)
Revenue recognition principle.