Question 1

All of the following are examples of manufacturers except:
A) Whirlpool
B) Boeing
C) Amazon.com
D) Ford

Accepted Answer

Amazon.com is not a manufacturer, but rather an online retailer. Whirlpool manufactures appliances, Boeing manufactures airplanes, and Ford manufactures cars.

Question 2

When an entity's revenues exceed its expenses for a period of time, the entity will report net income.

Accepted Answer

This is the definition of net income, which represents the profit earned by the entity during a certain period.

Question 3

Owners' equity is the residual interest that remains after deducting liabilities from assets.

Accepted Answer

This statement accurately defines owners' equity as the portion of assets that belong to the owner(s) of a business after all liabilities have been paid off.

Question 4

The time period assumption assumes a company prepares financial statements every month.

Accepted Answer

The time period assumption assumes that a company prepares financial statements at regular interval of time, such as monthly, quarterly, or annually. However, it does not assume that the company prepares financial statements every month specifically. It depends on the company's reporting requirements and the nature of its business.

Question 5

The International Accounting Standards Board (IASB) was created in order to develop worldwide accounting standards that must be used for all financial statements prepared regardless of country.

Accepted Answer

The IASB develops International Financial Reporting Standards (IFRS) that organizations can choose to use, but adoption depends on the decision of individual countries' regulatory bodies.

Question 6

The IASB is a branch of the FASB.

Accepted Answer

The IASB (International Accounting Standards Board) is not a branch of the FASB (Financial Accounting Standards Board). They are two separate organizations that develop and issue accounting standards. The IASB develops International Financial Reporting Standards (IFRS) which are used in many countries around the world, while the FASB develops Generally Accepted Accounting Principles (GAAP) which are used primarily in the United States.

Question 7

The three forms of business entities are:
A) Government, cooperatives, and philanthropic organizations
B) Financing, investing, and operating
C) Sole proprietorships, partnerships, and corporations
D) Wholesaler, manufacturer, and retailer

Accepted Answer

Sole proprietorships, partnerships, and corporations are the three forms of business entities recognized by most legal systems. These forms of business entities have different characteristics and legal requirements, which allow entrepreneurs to choose the type of entity that best suits their goals and needs. Option A refers to types of organizations, while option B refers to functional aspects of businesses, and option D refers to types of industries.

Question 8

A company in the process of liquidation meets the requirements under the going concern assumption.

Accepted Answer

The going concern assumption assumes that a company will continue its operations in the foreseeable future. In the case of liquidation, it is assumed that the company will not continue its operations, and therefore does not meet the requirements under the going concern assumption.

Question 9

The primary objective of external auditors is to provide assurance to stockholders and other users that the statements are fairly presented.

Accepted Answer

The primary objective of external auditors is indeed to provide assurance to stockholders and other users that the financial statements are fairly presented in accordance with the applicable accounting standards and regulations.

Question 10

Because market values are subjective, many assets are carried on the balance sheet at their acquisition cost.

Accepted Answer

Market values are subjective and can vary greatly depending on a variety of factors such as supply and demand, economic conditions, and investor sentiment. Therefore, many assets are carried on the balance sheet at their acquisition cost, which is an objective and verifiable value. This helps to provide a more stable and reliable measure of the company's assets and financial position.

Question 11

Stockholders' equity is owners' equity in a corporation.

Accepted Answer

Stockholders' equity represents the residual interest of shareholders in a corporation after liabilities are deducted from assets. This is equivalent to owners' equity in a sole proprietorship or partnership.

Question 12

If a company prepares a statement of stockholders' equity, net income is deducted to retained earnings on this statement.

Accepted Answer

Net income is added to retained earnings on the statement of stockholders' equity, as it represents earnings that increase the equity of the company's shareholders.

Question 13

According to the accounting profession, the purpose of financial reporting is to provide information about a company that investors, lenders, and other creditors can use when deciding whether to provide resources to the entity.

Accepted Answer

This statement accurately represents the purpose of financial reporting as defined by the accounting profession.

Question 14

The going concern assumption infers that a company will continue to operate until a known date.

Accepted Answer

The going concern assumption implies that a company will continue to operate indefinitely into the future, rather than until a particular date.

Question 15

GAAP stands for Generally Accepted Accounting Procedures.

Accepted Answer

GAAP stands for Generally Accepted Accounting Principles.

Question 16

The term used to refer to an asset's original cost is "fair market value."

Accepted Answer

Fair market value refers to the current market value of an asset, while the term used to refer to an asset's original cost is "historical cost."

Question 17

Cross Country Busline is an example of a
A) producer
B) supplier
C) retailer
D) service provider

Accepted Answer

Cross Country Busline provides a service of transportation, making them a service provider.

Question 18

A balance sheet provides information during a period of time, while the other basic financial statements provide information on activities that occur over a point in time.

Accepted Answer

A balance sheet provides information on a specific day or point in time, while income statements and cash flow statements show activity and changes over a period of time.

Question 19

The independent auditor's report conveys whether or not the business followed GAAP.

Accepted Answer

The independent auditor's report is a statement that confirms whether or not the financial statements are presented fairly and in accordance with Generally Accepted Accounting Principles (GAAP).

Question 20

Information must be timely to be relevant.

Accepted Answer

Information that is not timely may still be relevant in certain contexts, but overall its relevance is dependent on its timeliness.

Quiz 1: Accounting As a Form of Communication

All of the following are examples of manufacturers except: