Accounting 9th Edition Hoggett Test Bank

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Accounting 9th Edition Hoggett Test Bank

 

Testbank
to accompany
Accounting
9th edition
by
John Hoggett, Lew Edwards,
John Medlin, Keryn Chalmers, Andreas
Hellmann, Claire Beattie & Jodie Maxfield
Prepared by
Peter Hall
© John Wiley & Sons Australia, Ltd 2015
Testbank to accompany Accounting 9e
© John Wiley and Sons Australia, Ltd 2015 2.2
Chapter 2: Financial statements for decision making
Multiple-choice questions
1. Which of the following statements is incorrect?:
a. The liability of shareholders to contribute to the debts of an insolvent company
is limited.
b. A sole proprietorship is an accounting entity.
c. Individual partners are personally liable for partnership debts.
*d. Partnerships are regarded as separate legal entities.
Correct answer: d
Learning Objective 2.1 ~ identify the common types of business entities.
2. In order to avoid later disputes it is desirable that a partnership agreement:
*a. is in writing.
b. should have the partners sharing profits and losses equally.
c. should set up the partnership as a separate legal entity.
d. should set out in detail how the how all likely transactions are to be recorded.
Correct answer: a
Learning Objective 2.1 ~ identify the common types of business entities.
3. Which of the following is the correct expression of the accounting equation?
a. Assets + liabilities = equity.
b. Assets = liabilities – equity.
c. Assets + equity = liabilities.
*d. Assets = liabilities + equity.
Correct answer: d
Feedback: Assets = liabilities + equity.
Learning Objective 2.1 ~ identify the common types of business entities.
Chapter 2: Financial statements for decision making
© John Wiley and Sons Australia, Ltd 2015 2.3
4. Maintaining a satisfactory relationship between an entity’s resource inputs and its output
of product or services is referred to as:
a. planning.
*b. efficiency.
c. organising.
d. effectiveness.
Correct answer: b
Learning Objective 2.2 ~ discuss the functions carried out by managers.
5. How well an entity attains its goals is referred to as:
a. efficiency.
b. planning.
c. organising.
*d. effectiveness.
Correct answer: d
Learning Objective 2.2 ~ discuss the functions carried out by managers.
6. The statement of changes in equity:
a. indicates the ability of the entity to generate cash flow.
b. shows the selling price of the entity’s assets.
c. shows how profit was determined.
*d. serves as a connecting link between the income statement and the balance sheet.
Correct answer: d
Learning objective 2.3 ~ outline the basic financial statements used in business to report to
users for decision-making purposes.
7. A balance sheet:
a. is classified into operating, investing and financing activities.
b. measures the entities financial performance.
*c. lists assets, liabilities and equity at a specific point in time.
d. shows how profit was determined.
Correct answer: c
Learning objective 2.3 ~ outline the basic financial statements used in business to report to
users for decision-making purposes.
Testbank to accompany Accounting 9e
© John Wiley and Sons Australia, Ltd 2015 2.4
8. Assume you are examining a financial statement headed ‘As at the 31 December 2014’.
The heading indicates the statement is the:
a. trial balance.
b. income statement.
c. statement of changes in equity.
*d. balance sheet.
Correct answer: d
Learning objective 2.3 ~ outline the basic financial statements used in business to report to
users for decision-making purposes.
9. Which of the following statements concerning the income statement is not true?
a. The heading must indicate the length of time the report covers.
*b. It shows the change in the entity’s cash balance for the period.
c. If expenses exceed income than a loss has been incurred for the period.
d. An alternative name is the statement of financial performance.
Correct answer: b
Learning objective 2.3 ~ outline the basic financial statements used in business to report to
users for decision-making purposes.
10. Which of the following statements concerning equity is true?
*a. It is the owner’s claim to the assets of the entity after deducting liabilities.
b. It is fixed at the amount initially contributed when the business was established.
c. It is decreased by profit.
d. Assets + liabilities = equity.
Correct answer: a
Learning objective 2.3 ~ outline the basic financial statements used in business to report to
users for decision-making purposes.
11. Sydney & Associates had the following assets and liabilities. Equity is:
$
Cash in hand 4 000
Bank overdraft 11 000
Sundry creditors 3 000
Inventory 2 700
Sundry debtors 8 100
Office furniture 4 500
Loan from Perth Ltd 12 000
Motor vehicles 12 000
a. $8300.
Chapter 2: Financial statements for decision making
© John Wiley and Sons Australia, Ltd 2015 2.5
b. $27 300.
*c. $5300.
d. $13 300.
Correct answer: c
Learning objective 2.3 ~ outline the basic financial statements used in business to report to
users for decision-making purposes.
12. The following balances were taken from the accounts of Adelaide Enterprises.
31 Dec. 2013 31 Dec. 2014
Assets $450 000 $610 000
Liabilities 270 000 310 000
Assuming there were no drawings or contributions of capital, profit for 2014 must have
been:
a. $160 000.
*b. $120 000.
c. $300 000.
d. $220 000.
Correct answer: b
Feedback: Net assets at end less net assets at start.
Learning objective 2.3 ~ outline the basic financial statements used in business to report to
users for decision-making purposes.
13. The assets of Frank’s business increased by $40 000 and the liabilities increased by $10
000 during the current year. If the profit for this period was $25 000, what additional
contribution or withdrawal was made by the owner? (Assume only a withdrawal or a
contribution was made.)
a. Drawings $10 000
b. Contribution $10 000
*c. Contribution $5000
d. Drawings $5000
Correct answer: c
Learning objective 2.3 ~ outline the basic financial statements used in business to report to
users for decision-making purposes.
14. Delta Company reports the following balance sheet information for 2014.
1 January 2014 31 December 2014
Assets $60 000 $70 000
Liabilities $12 000 $14 000
Testbank to accompany Accounting 9e
© John Wiley and Sons Australia, Ltd 2015 2.6
Assuming the capital contribution made by the owners during 2011 was $3000 and
withdrawals were $12 000, profit for 2014 must have been:
*a. $17 000.
b. $14 000.
c. $16 000.
d. $12 000.
Correct answer: a
Feedback: Net assets at end less net assets at start less capital contribution plus drawings.
Learning objective 2.3 ~ outline the basic financial statements used in business to report to
users for decision-making purposes.
15. Which statement is not correct?
a. Information in the cash flow statement is useful in assessing the ability of an entity
to pay its debts as they fall due.
b. A comparison of the cash flow statement and the income statement can indicate to
what extent the profit is represented by cash inflows.
c. The cash flow statement classifies cash flows into operating investing and
financing groupings.
*d. Operating activities are concerned with activities involving the sales and purchases
of fixed assets.
Correct answer: d
Learning objective 2.3 ~ outline the basic financial statements used in business to report to
users for decision-making purposes.
16. Which of the following statements concerning the cash flow statement is correct?
*a. It provides the connecting link between the income statement and the balance
sheet.
b. It summarises the cash flows into and out of an entity.
c. An alternative name is the cash budget.
d. It includes cash and non-cash items.
Correct answer: a
Learning objective 2.3 ~ outline the basic financial statements used in business to report to
users for decision-making purposes.
17. A business transaction creating an inflow of net assets resulting from the sale of goods or
services is a(n):
a. expense transaction.
*b. income transaction.
c. cash disbursement.
d. capital transaction.