978-0136115274 Chapter 2 Quiz Chapter 2

CHAPTER 2 NAME ___________________________________

TEN-MINUTE QUIZ SECTION _____________ DATE____________

_____________________________________________________________________________

_

_____ 1. Generally accepted accounting principles (GAAP) are established by:

a. Internal Revenue Service (IRS)

b. U.S. Congress

c. Financial Accounting Standards Board (FASB)

d. GAAP Commission

_____ 2. The information in a financial statement relates to a specific business or company.

The owner’s personal financial records are not part of the financial statements of

the business. This is called the:

a. GAAP assumption

b. Matching principle

c. Going-concern assumption

d. Separate-entity assumption

_____ 3. To be useful, information must be:

a. Relevant

b. Reliable

c. Both A and B

d. Expensive

_____ 4. Assets:

a. Are economic resources owned by the company

b. Result from past events or transactions

c. Provide future benefit to the company

d. All of the above

_____ 5. Current assets:

a. Will be used or converted into cash within one year

b. Will not be used within one year

c. Include only cash

d. None of the above

_____ 6. Amazing Toy Company owes Northern Plastics Company $1,000. Amazing Toy

would reflect this on its:

a. Balance sheet

b. Income statement

c. Statement of shareholders’ equity

d. Statement of cash flows

_____ 7. Revenue is recognized when:

a. Cash is received

b. It is earned

c. Expenses are recognized

d. Cash is paid

_____ 8. Expenses are recognized when:

a. Cash is received

b. Cash is paid

c. They are earned

d. They are incurred

_____ 9. Risk and return are:

a. Negatively correlated (when risk increases, expected return decreases)

b. Positively correlated (when risk increases, expected return increases)

c. Always equal

d. Not related

_____ 10. Noncurrent assets include:

a. Accounts receivable

b. Cash

c. Inventory

d. None of the above

ANSWER KEY – CHAPTER 2 – TEN-MINUTE QUIZ