Question 1

Macon Enterprises purchased land for $2,000,000 in 2001. In 2015, an independent appraiser assessed the value at $3,400,000. What amount should appear on the financial statements in 2015 with respect to the land?
A) $2,000,000
B) $1,400,000
C) $3,400,000
D) Whatever amount the company believes is the best indicator of the true value of the land.

Accepted Answer

The answer of Macon Enterprises purchased land for $2,000,000 in...

Question 2

The Securities and Exchange Commission SEC is concerned with
A) All companies in the United States regardless of size.
B) Companies that issue securities to the general public.
C) Accounting reports issued by government entities.
D) All domestic and international companies that issue accounting reports.

Accepted Answer

The SEC is concerned with companies that issue securities to the general public. This includes both domestic and international companies that issue financial statements in the United States. The SEC is responsible for ensuring that companies comply with disclosure requirements and that investors have access to accurate and timely information. They also regulate securities transactions and investigate potential violations of securities laws.

Question 3

The natural progression in items from one statement to another and preparation of financial statements is best represented by the following order:
A) Balance sheet and statement of cash flows > statement of retained earnings > income statement
B) Balance sheet and statement of cash flows > income statement > statement of retained earnings
C) Statement of retained earnings > income statement > balance sheet and statement of cash flows
D) Income statement > statement of retained earnings > balance sheet and statement of cash flows

Accepted Answer

The correct order starts with the income statement, which determines the net income or loss. This figure is then used in the statement of retained earnings to adjust the beginning retained earnings balance. Finally, the updated retained earnings figure is used in the balance sheet, and the statement of cash flows is prepared, which uses information from all the other financial statements.

Question 4

The statement of retained earnings accomplishes which of the following?
A) It summarizes income earned and dividends paid over a single period of the business.
B) It accumulates all revenues for the year.
C) It summarizes the balance sheet accounts.
D) It summarizes the capital stock accounts over the life of the business.

Accepted Answer

The statement of retained earnings summarizes income earned and dividends paid over a single period of the business. It shows how the beginning balance of retained earnings was adjusted by the net income or loss for the period and the dividends paid, resulting in the ending balance of retained earnings for the period.

Question 5

Sawaddee Enterprises began the year with total assets of $450,000 and total liabilities of $230,000. If Sawaddee's total assets increased by $80,000 and its total liabilities increased by $57,000 during the year, what is the amount of Sawaddee's owners' equity at the end of the year?
A) $197,000
B) $543,000
C) $243,000
D) $220,000

Accepted Answer

The formula for owner's equity is: 
Owner's Equity = Total Assets - Total Liabilities

At the beginning of the year, Sawaddee's Owner's Equity was:

$450,000 - $230,000 = $220,000

During the year, Sawaddee's assets increased by $80,000 and liabilities increased by $57,000.

At the end of the year, Sawaddee's total assets were:

$450,000 + $80,000 = $530,000

And its total liabilities were:

$230,000 + $57,000 = $287,000

Using the formula above:

Owner's Equity = Total Assets - Total Liabilities 
Owner's Equity = $530,000 - $287,000 
Owner's Equity = $243,000

Therefore, the amount of Sawaddee's owners' equity at the end of the year is $243,000 (choice C).

Question 6

Which concept is the reason the dollar is used in the preparation of financial statements?
A) Going concern
B) Legal entity
C) Monetary unit
D) Time Period

Accepted Answer

The concept of monetary unit states that financial transactions should be measured and reported in a stable currency. In the United States, the dollar is the stable currency and therefore, it is used in the preparation of financial statements.

Question 7

Which one of the following statements is true concerning assets?
A) They are recorded at market value and then adjusted for inflation.
B) They are recorded at market value for financial reporting purposes as historical cost may be arbitrary.
C) Accountants use the term historical cost to refer to the original cost of an asset.
D) Assets are measured using the time-period approach.

Accepted Answer

Accountants use the term historical cost to refer to the original cost of an asset. This means that assets are recorded at their original cost when they were acquired, rather than at their current market value.

Question 8

Which of the following is a five-member body that has the authority from Congress to set standards for conducting audits?
A) FASB
B) SEC
C) PCAOB
D) AICPA

Accepted Answer

The Public Company Accounting Oversight Board (PCAOB) is a five-member body that was created by the Sarbanes-Oxley Act of 2002 and has the authority from Congress to set standards for conducting audits of public companies. FASB (Financial Accounting Standards Board), SEC (Securities and Exchange Commission), and AICPA (American Institute of Certified Public Accountants) do not have the authority to set standards for conducting audits.

Question 9

The second step in the ethical decision-making model is to:
A) list alternatives and evaluate the impact of each on those affected.
B) select the best alternative.
C) recognize an ethical dilemma.
D) analyze the key elements in the situation.

Accepted Answer

The answer of The second step in the ethical decision-making...

Question 10

To which of the following entities must a company report if it sells its stock on the organized stock market?
A) American Institute of Certified Public Accountants AICPA
B) American Accounting Association AAA
C) International Accounting Standards Board IASB
D) Securities and Exchange Commission SEC

Accepted Answer

A company must report to the Securities and Exchange Commission (SEC) if it sells its stock on the organized stock market. The SEC is responsible for regulating the securities industry and ensuring that companies comply with securities laws and regulations.

Question 11

Which one of the following is an assumption made in the preparation of financial statements?
A) Financial statements are prepared for a specific entity that is distinct from the entity owners.
B) Financial statements are prepared assuming that inflation has a distinct effect on the monetary unit.
C) Preparation of financial statements for a specific time period assumes that the balance sheet covers a period of time.
D) Market values are always assumed to be irrelevant when preparing financial statements.

Accepted Answer

The assumption that financial statements are prepared for a specific entity that is distinct from the entity owners is a fundamental principle of accounting known as the entity concept. This concept requires that the financial affairs of a business be treated separately from those of its owners, and that the business be viewed as a distinct economic unit in its own right.

Question 12

In order for accounting information to be useful in making informed decisions, it must be:
A) relevant.
B) reliable.
C) both relevant and reliable.
D) neither relevant nor reliable.

Accepted Answer

Accounting information must be both relevant and reliable to be useful for decision-making. Relevance ensures the information is applicable to the decision at hand, while reliability ensures it is accurate and trustworthy.

Question 13

Sawaddee Enterprises began the year with total assets of $450,000 and total liabilities of $230,000. If Sawaddee's total assets doubled to $900,000 and its owners' equity remained the same during the year, what was the amount of its total liabilities at the end of the year?
A) $670,000
B) $680,000
C) $440,000
D) $900,000

Accepted Answer

If total assets doubled to $900,000 and owners' equity remained the same, then owners' equity would still be $220,000 ($450,000 - $230,000). Therefore, the amount of total liabilities would be $680,000 ($900,000 - $220,000).

Question 14

Sawaddee Enterprises began the year with total assets of $450,000 and total liabilities of $230,000. If Sawaddee total liabilities increased by $31,000 and its owners' equity decreased by $53,000 during the year, what was the amount of its total assets at the end of the year?
A) $472,000
B) $242,000
C) $198,000
D) $428,000

Accepted Answer

To find out the amount of total assets at the end of the year, we need to use the accounting equation:
Assets = Liabilities + Owners' Equity
We know that at the beginning of the year: 
Total Assets = $450,000 
Total Liabilities = $230,000 
Therefore, owners' equity (OE) = Total Assets - Total Liabilities 
OE = $450,000 - $230,000 
OE = $220,000 
During the year: 
Total liabilities increased by $31,000 
Therefore, at the end of the year, Total Liabilities = $230,000 + $31,000 = $261,000 
Owners' equity decreased by $53,000 
Therefore, at the end of the year, Owners' Equity = $220,000 - $53,000 = $167,000 
Using the accounting equation again: 
Assets = Liabilities + Owners' Equity 
Assets = $261,000 + $167,000 
Assets = $428,000 
Therefore, the amount of total assets at the end of the year was $428,000 (Option D).

Question 15

Which of the following organizations is responsible for setting auditing standards followed by public accounting firms in conducting independent audits of financial statements?
A) Financial Accounting Standards Board FASB
B) Securities and Exchange Commission SEC
C) Public Company Accounting Oversight Board PCAOB
D) International Accounting Standards Board IASB

Accepted Answer

The Public Company Accounting Oversight Board (PCAOB) is responsible for setting auditing standards followed by public accounting firms in conducting independent audits of financial statements for publicly traded companies in the United States. The Financial Accounting Standards Board (FASB) sets accounting standards, the Securities and Exchange Commission (SEC) oversees the financial reporting of publicly traded companies, and the International Accounting Standards Board (IASB) sets global accounting standards.

Question 16

The reliability of the information in a company's financial statements is the responsibility of which of the following?
A) The Securities and Exchange Commission SEC
B) The Certified Public Accountant in charge of the audit of the company's financial statements
C) The company's management
D) The stockholders of the company

Accepted Answer

The answer of The reliability of the information in a...

Question 17

Which organization, in addition to the Financial Accounting Standards Board FASB, occasionally issues authoritative rules for financial statements?
A) The Accounting Profession
B) International Accounting Standards Board IASB
C) Securities and Exchange Commission SEC
D) Internal Revenue Service IRS

Accepted Answer

The Securities and Exchange Commission (SEC) also occasionally issues authoritative rules for financial statements.

Question 18

Why is the time period assumption required?
A) Inflation exists
B) External users of financial statements want statements that accurately reflect net income or earnings for a specific time period.
C) The dollar is the monetary unit in the United States.
D) The federal government requires it.

Accepted Answer

The time period assumption is required because external users of financial statements want statements that accurately reflect net income or earnings for a specific time period. Without this assumption, it would be difficult to compare financial statements from different time periods or make informed decisions based on financial information. Inflation, the use of the dollar, and government requirements may impact financial reporting, but they do not specifically necessitate the time period assumption.

Question 19

Which the following organizations are primarily responsible for establishing GAAP today?
A) Financial Accounting Standards Board FASB
B) Securities and Exchange Commission SEC
C) Internal Revenue Service IRS
D) Federal Government

Accepted Answer

The Financial Accounting Standards Board (FASB) is primarily responsible for establishing and improving Generally Accepted Accounting Principles (GAAP) in the United States.

Question 20

All of the following are different expressions for net income except:
A) Profits
B) Excess of revenues over expenses
C) Capital
D) Earnings

Accepted Answer

"Capital" is not an expression for net income, as it typically refers to the total amount of money invested in a business or organization. A, B, and D are all commonly used expressions for net income.

Quiz 1: Accounting As a Form of Communication

Macon Enterprises purchased land for $2,000,000 in 2001. In 2015, an independent appraiser assessed the value at $3,400,000. What amount should appear on the financial statements in 2015 with respect to the land?

The Securities and Exchange Commission SEC is concerned with

The natural progression in items from one statement to another and preparation of financial statements is best represented by the following order:

The statement of retained earnings accomplishes which of the following?

Sawaddee Enterprises began the year with total assets of $450,000 and total liabilities of $230,000. If Sawaddee's total assets increased by $80,000 and its total liabilities increased by $57,000 during the year, what is the amount of Sawaddee's owners' equity at the end of the year?

Which concept is the reason the dollar is used in the preparation of financial statements?

Which one of the following statements is true concerning assets?

Which of the following is a five-member body that has the authority from Congress to set standards for conducting audits?

The second step in the ethical decision-making model is to:

To which of the following entities must a company report if it sells its stock on the organized stock market?

Which one of the following is an assumption made in the preparation of financial statements?

In order for accounting information to be useful in making informed decisions, it must be:

Sawaddee Enterprises began the year with total assets of $450,000 and total liabilities of $230,000. If Sawaddee's total assets doubled to $900,000 and its owners' equity remained the same during the year, what was the amount of its total liabilities at the end of the year?

Sawaddee Enterprises began the year with total assets of $450,000 and total liabilities of $230,000. If Sawaddee total liabilities increased by $31,000 and its owners' equity decreased by $53,000 during the year, what was the amount of its total assets at the end of the year?

Which of the following organizations is responsible for setting auditing standards followed by public accounting firms in conducting independent audits of financial statements?

The reliability of the information in a company's financial statements is the responsibility of which of the following?

Which organization, in addition to the Financial Accounting Standards Board FASB, occasionally issues authoritative rules for financial statements?

Why is the time period assumption required?

Which the following organizations are primarily responsible for establishing GAAP today?

All of the following are different expressions for net income except: