Question 1

According to the cost principle, it is preferable for managers to report an estimate of an asset's value.

Accepted Answer

A) True 
 B)False

Question 2

The ________________ assumption states that transactions and events are expressed in money units.

Accepted Answer

The answer of The ________________ assumption states that transactions and...

Question 3

The purchase of supplies appears on the statement of cash flows as an investing activity because it involves the purchase of assets.

Accepted Answer

A) True 
 B)False

Question 4

The assets of a company total $700,000; the liabilities, $200,000. What are the claims of the owners?

Accepted Answer

A)   $900,000.
B)   $700,000.
C)   $500,000.
D)   $200,000.
E)   It is impossible to determine unless the amount of this owners' investment is known.

Question 5

______________ is the area of accounting aimed at serving external users.

Accepted Answer

Financial ...

Question 6

Operating activities:

Accepted Answer

A)   Are the means organizations use to pay for resources like land, buildings and equipment.
B)   Involve using resources to research, develop, purchase, produce, distribute and market products and services.
C)   Involve acquiring and disposing of resources that a business uses to acquire and sell its products or services.
D)   Are also called asset management.
E)   Are also called strategic management.

Question 7

The four basic financial statements include the balance sheet, income statement, statement of owner's equity, and statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 8

External auditors examine financial statements to verify that they are prepared according to generally accepted accounting principles.

Accepted Answer

A) True 
 B)False

Question 9

Managerial accounting is the area of accounting that provides internal reports to assist the decision making needs of internal users.

Accepted Answer

A) True 
 B)False

Question 10

The monetary unit assumption means that all international transactions must be expressed in dollars.

Accepted Answer

A) True 
 B)False

Question 11

If a parcel of land that was originally purchased for $85,000 is offered for sale at $150,000, is assessed for tax purposes at $95,000, is recognized by its purchasers as easily being worth $140,000, and is sold for $137,000. What is the effect of the sale on the accounting equation for the seller?

Accepted Answer

A)   Assets increase $52,000; owner's equity increases $52,000.
B)   Assets increase $85,000; owner's equity increases $85,000.
C)   Assets increase $137,000; owner's equity increases $137,000.
D)   Assets increase $140,000; owner's equity increases $140,000.
E)   Assets decrease $85,000; owner's equity decreases $85,000.

Question 12

Risk is:

Accepted Answer

A)   Net income divided by average total assets.
B)   The reward for investment.
C)   The uncertainty about the expected return to be earned.
D)   Unrelated to expected return.
E)   Derived from the idea of getting something back from an investment.

Question 13

Liabilities are the owner's claim on assets.

Accepted Answer

A) True 
 B)False

Question 14

The financial statement that reports whether the business earned a profit and also lists the revenues and expenses is called:

Accepted Answer

A)   A Balance sheet.
B)   A Statement of owner's equity.
C)   A Statement of cash flows.
D)   An Income statement.
E)   A Statement of financial position.

Question 15

An exchange of value between two entities is called:

Accepted Answer

A)   The accounting equation.
B)   Recordkeeping or bookkeeping.
C)   An external transaction.
D)   An asset.
E)   Net Income.

Question 16

Return on assets is useful to decision makers for evaluating management, analyzing and forecasting profits, and in planning activities.

Accepted Answer

A) True 
 B)False

Question 17

An external transaction is an exchange of value within an organization.

Accepted Answer

A) True 
 B)False

Question 18

Assets created by selling goods and services on credit are:

Accepted Answer

A)   Accounts payable.
B)   Accounts receivable.
C)   Liabilities.
D)   Expenses.
E)   Equity.

Question 19

Decreases in equity that represent costs of assets or services used to earn revenues are called:

Accepted Answer

A)   Liabilities.
B)   Equity.
C)   Withdrawals.
D)   Expenses.
E)   Owner's Investment.

Question 20

Della's Donuts had cash inflows from operating activities of $27,000; cash outflows from investing activities of $22,000, and cash outflows from financing activities of $12,000. Calculate the net increase or decrease in cash.

Accepted Answer

A)   $61,000 increase.
B)   $37,000 increase.
C)   $7,000 decrease.
D)   $7,000 increase.
E)   $34,000 decreasE.$27,000 - $22,000 - $12,000 = $7,000 decrease.

Exam 1: Accounting in Business

Managerial accounting is the area of accounting that provides internal reports to assist the decision making needs of internal users.

Correct AnswerverifiedShow Answer

Return on assets is useful to decision makers for evaluating management, analyzing and forecasting profits, and in planning activities.

Correct AnswerverifiedShow Answer

According to the cost principle, it is preferable for managers to report an estimate of an asset's value.

Correct AnswerverifiedShow Answer

The ________________ assumption states that transactions and events are expressed in money units.

Correct AnswerverifiedShow Answer

An exchange of value between two entities is called:

Correct AnswerverifiedShow Answer

The purchase of supplies appears on the statement of cash flows as an investing activity because it involves the purchase of assets.

Correct AnswerverifiedShow Answer

If a parcel of land that was originally purchased for $85,000 is offered for sale at $150,000, is assessed for tax purposes at $95,000, is recognized by its purchasers as easily being worth $140,000, and is sold for $137,000. What is the effect of the sale on the accounting equation for the seller?

Correct AnswerverifiedShow Answer

The assets of a company total $700,000; the liabilities, $200,000. What are the claims of the owners?

Correct AnswerverifiedShow Answer

Liabilities are the owner's claim on assets.

Correct AnswerverifiedShow Answer

External auditors examine financial statements to verify that they are prepared according to generally accepted accounting principles.

Correct AnswerverifiedShow Answer

The four basic financial statements include the balance sheet, income statement, statement of owner's equity, and statement of cash flows.

Correct AnswerverifiedShow Answer

The financial statement that reports whether the business earned a profit and also lists the revenues and expenses is called:

Correct AnswerverifiedShow Answer

Assets created by selling goods and services on credit are:

Correct AnswerverifiedShow Answer

Operating activities:

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The monetary unit assumption means that all international transactions must be expressed in dollars.

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Risk is:

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An external transaction is an exchange of value within an organization.

Correct AnswerverifiedShow Answer

______________ is the area of accounting aimed at serving external users.

Correct AnswerverifiedFinancial ...View AnswerShow Answer

Della's Donuts had cash inflows from operating activities of $27,000; cash outflows from investing activities of $22,000, and cash outflows from financing activities of $12,000. Calculate the net increase or decrease in cash.

Correct AnswerverifiedShow Answer

Decreases in equity that represent costs of assets or services used to earn revenues are called:

Correct AnswerverifiedShow Answer

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Financial ...
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