1) Which of the following is a decision made by an internal user? 1) _______

A) How much money should the business budget for production?

B) Should we lend money to the business?

C) Should I invest in the business?

D) All of the above are correct.

2) Which of the following organizations is responsible for the creation and governance of accounting standards in the United States? 2) _______

A) Securities and Exchange Commission

B) Institute of Management Accountants

C) Financial Accounting Standards Board

D) American Institute of Certified Public Accountants

3) Regarding generally accepted accounting principles (GAAP), which of the following statements is incorrect? 3) _______

A) GAAP rests on a conceptual framework that identifies the objectives, characteristics, elements, and implementation of financial statements.

B) Relevant information is complete, neutral, and free from error.

C) GAAP is currently formulated by the Financial Accounting Standards Board.

D) The primary objective of financial reporting is to provide information useful for making investment and lending decisions.

4) Regarding a business organized as a partnership, which of the following is an incorrect statement? 4) _______

A) Mutual agency is present in a partnership.

B) A partnership's life is not dependent on a specific individual's ownership.

C) Partners pay tax on their share of the partnership earnings.

D) Partners are personally liable for the debts of the business.

5) Which of the following statements is true of the corporate form of business? 5) _______

A) Changes in the ownership of stock have a negative effect on the continuity of the corporation.

B) The board of directors sets policy for the corporation and appoints the officers.

C) Any stockholder may commit the corporation to a contract.

D) It is easy for stockholders to lodge an effective protest against management.

6) In a limited-liability company, the ________. 6) _______

A) business terminates at the death of a member

B) members are personally liable to pay the company's debts

C) members are liable for each other's actions

D) members pay income tax on their share of earnings

7) Beverly Dalton incorporated her CPA practice in 2013. At that time, the corporation purchased land for $29,000. The December 31, 2019 market value of the land is $85,000. On the December 31, 2019 balance sheet, this asset should be reported at ______ under U.S. GAAP and at _______ under international reporting standards. 7) _______

A) $85,000; $85,000 B) $29,000; $29,000

C) $29,000; $85,000 D) $85,000; $29,000

8) Which of the following is the correct accounting equation? 8) _______

A) Assets + Revenues = Liabilities + Expenses

B) Assets + Liabilities = Equity

C) Assets = Liabilities + Equity

D) Assets + Revenues = Equity

9) Regarding the accounting equation, which of the following is a correct statement? 9) _______

A) The accounting equation is the basic tool of accounting.

B) Assets - Liabilities = Equity.

C) The accounting equation is made up of three parts.

D) All of the statements are correct.

10) Regarding liabilities, which of the following statements is incorrect? 10) ______

A) Many, but not all, liabilities have the word payable in their titles.

B) Liabilities represent one of the two claims to assets.

C) Liabilities are economic resources that are expected to benefit the business in the future.

D) 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.

11) The owners' claims to the assets of the business are called ________. 11) ______

A) expenses B) debt C) return on assets D) equity

12) Accountants record ________. 12) ______

A) only those events that have dollar amounts than can be measured reliably

B) economic recessions

C) estimated future transactions

D) the $20,000 increase in value of a building that actually cost $50,000 but could be sold for $70,000

13) Mars Electronic Company receives cash from a stockholder, John Tilden, and issues common stock to him. The two accounts involved in this transaction are ________. 13) ______

A) Accounts Payable and Cash B) Cash and Common Stock

C) Common Stock and Accounts Receivable D) Common Stock and Accounts Payable

14) Saturn, Inc. paid $13,000 on accounts payable. How does this transaction affect the accounting equation of Saturn? 14) ______

A) assets decrease by $13,000 and liabilities decrease by $13,000

B) assets increase by $13,000 and liabilities increase by $13,000

C) assets increase by $13,000 and equity decreases by $13,000

D) assets decrease by $13,000 and equity increases by $13,000

15) Which of the following statements best defines financial statements? 15) ______

A) Financial statements are the verbal statements made to business news organizations by chief financial officers.

B) Financial statements are plans and forecasts for future time periods based on information from past financial periods.

C) Financial statements are the information systems that record monetary and nonmonetary business transactions.

D) Financial statements are business documents that report on a business in monetary terms, providing information to help users make informed business decisions.

16) Which of the following statements is true of an income statement? 16) ______

A) There is a net loss when total expenses are less than total revenue.

B) There is net income when total expenses are greater than total revenues.

C) There is net income when total revenues are greater than total expenses.

D) There is a net loss when total expenses are greater than total liabilities.

17) Following is a list of account balances of Lincoln Lawn Services as of December 31, after the first year of operations.

Accounts Receivable	$6,000
Accounts Payable	5,000
Salaries Expense	7,000
Repairs Expense	900
Truck	11,000
Equipment	12,000
Notes Payable	26,100
Cash	20,000
Supplies Expense	200
Service Revenue	32,000
Gasoline Expense	7,200
Salaries Payable	1,200

Calculate the net income. 17) ______

A) $16,700 B) $49,000 C) $17,900 D) $31,100

18) Which of the following financial statements reports expenses in decreasing order of their amounts, by stating the largest expense first? 18) ______

A) Statement of cash flows B) Statement of retained earnings

C) Balance sheet D) Income statement

19) Which of the following transactions will affect the balance of Retained Earnings? 19) ______

A) purchased land for cash B) issued common stock for cash

C) collection on account D) paid rent expense for the month

20) The amount of net income is transferred from ________ to ________. 20) ______

A) the income statement; the statement of retained earnings

B) the income statement; the statement of expenditures

C) the balance sheet; the statement of cash flows

D) the balance sheet; the income statement

21) Which financial statement includes a specific date in its heading? 21) ______

A) Balance sheet B) Income statement

C) Statement of cash flows D) Statement of retained earnings

22) The total assets and the total liabilities of Atlas Financial Services are shown below. The company issued no common stock and paid no dividends during the year.

	Total Assets	Total Liabilities
Beginning of year	$405,000	$295,000
End of year	455,000	305,000

What was the amount of net income for the year? 22) ______

A) $40,000 B) $60,000 C) $50,000 D) $10,000

23) Which of the following financial statements is used to report cash receipts for services provided? 23) ______

A) income statement B) statement of retained earnings

C) balance sheet D) statement of cash flows

24) Lawton Corporation records business transactions in dollars and disregards changes in the value of a dollar over time. Which of the following accounting assumptions does this represent? 24) ______

A) going concern assumption B) monetary unit assumption

C) economic entity assumption D) accounting period assumption

25) Regarding the monetary unit assumption, which of the following statements is correct? 25) ______

A) The value of a dollar does not change over time.

B) During periods of inflation, a dollar will purchase more.

C) Accountants assume that the dollar's purchasing power is stable.

D) This assumption requires that the items on the financial statements be measured at their current market value.