ACC205 CSU Governance of Accounting Standards Questions Response

Question 1

1. Transactions during the first year of operations are provided below.
   The owner, Sharon McCoy, contributed $10,000 cash in exchange for capital.
   Paid $1,100 cash for equipment to be used for plumbing repairs.
   Borrowed $12,000 from a local bank and deposited the money in the checking account.
   Paid $300 rent for the year.
   Purchased $200 of office supplies by cash.
   Completed a plumbing repair project for a local lawyer and received $3,200 cash.
   Calculate the amount of total liabilities at the end of the first year.

   		$12,000
   		$10,000
   		$20,900
   		$3,200

   Question 2
   

   1. The earnings of a sole proprietorship are __________.

      		not separated from the personal income of the proprietor
      		a separate taxable entity from the proprietor’s personal income
      		subject to double taxation
      		handled similarly to that of a corporation

   Question 3
   

   1. Hollywood Talent Services is a sole proprietorship operated by Phil Morris. The net income of Hollywood Talent Services is $23,000 for the year. The beginning and ending Morris, Capital account was $33,000 and $50,000, respectively. During the year, there were no new capital contributions. Calculate the amount of the owner’s withdrawals for the year.

      		$16,000
      		$6,000
      		$10,000
      		$9,000

      Question 4
      
      1. Dynamic Production Services started the year with total assets of $130,000 and total liabilities of $50,000. The company is a sole proprietorship. The revenues and the expenses for the year amounted to $100,000 and $60,000, respectively. During the year, there were no new capital contributions, and the owner withdrew $45,000. Calculate Dynamic’s net income for the year.

         		$40,000
         		$100,000
         		$60,000
         		$130,000

         Question 5
         
         1. The equity of Alliance Company is $100,000 and the total liabilities are $10,000. The total assets are __________.

            		$200,000
            		$20,000
            		$90,000
            		$110,000

            Question 6
            
            Which of the following organizations is responsible for the creation and governance of accounting standards in the United States?

            		Financial Accounting Standards Board
            		Institute of Management Accountants
            		American Institute of Certified Public Accountants
            		Securities and Exchange Commission

            Question 7
            

            The Sarbanes-Oxley Act (SOX) __________.

            		requires independent accountants to take responsibility for the accuracy and completeness of the financial reports
            		created the SEC
            		ensures that financial scandals will no longer occur
            		requires companies to take responsibility for the accuracy and completenes

            Question 8
            
            The Public Company Accounting Oversight Board (PCAOB) was created __________.

            		by the Sarbanes-Oxley Act (SOX)
            		to perform audits of public companies
            		to make restitution to investors who were defrauded by the issuance of fraudulent financial reports
            		to require auditors to take responsibility for the accuracy and completeness of

            Question 9
            
            Which of the following statements is TRUE of a sole proprietorship?

            		A sole proprietorship joins two or more individuals as co-owners.
            		The sole proprietor is personally liable for the liabilities of the business.
            		A sole proprietorship is taxed separately from the owner.
            		A sole proprietorship has to pay business income taxes.

            Question 10
            

            Which of the following is a characteristic of a limited-liability company (LLC)?

            		An LLC’s life is terminated at any member’s choice or death.
            		Each member of an LLC is liable only for his or her own actions.
            		An LLC must have more than five members.
            		The earnings of an LLC are subject to double taxation.

            Question 11
            

            Which of the following organizations requires publicly owned companies to be audited by independent accountants (CPAs)?

            		Securities and Exchange Commission (SEC)
            		Public Company Accounting Oversight Board (PCAOB)
            		Financial Accounting Standards Board (FASB)
            		American Institute of Certified Public Accountants (AICPA)

            Question 12
            
            GAAP refers to guidelines for accounting information in the United States. The acronym GAAP in this statement refers to __________.

            		Globally Accepted Accounting Policies
            		Government Approved Accounting Principles
            		Generally Accredited Accounting Policies
            		Generally Accepted Accounting Principles

            Question 13
            
            Montgomery Equipment Rental Company received $1,000 cash from a customer; the amount was owed to the business from the previous month. What is the effect of this transaction on the accounting equation?

            		Accounts Receivable increases and Service Revenue increases
            		Cash increases and Accounts Receivable decreases
            		Cash increases and Service Revenue increases
            		Cash increases and Accounts Payable decreases

            Question 14
            
            1. According to the __________, acquired assets should be recorded at the amount actually paid rather than at the estimated market value.

               		going concern assumption
               		economic entity concept
               		cost principle
               		monetary unit assumption

               Question 15
               
               1. Which of the follow statements regarding the primary objective of financial reporting is correct?

                  		The primary objective of financial reporting is to provide information useful for the acquisition of long-term assets.
                  		Information that is faithfully represented is complete, neutral, and free from error.
                  		Relevant information ensures that users of the information will make the correct decisions.
                  		To be useful, information must follow the Generally Accepted Accounting Principles, which are created and governed by the Securities and Exchange Commission.

                  Question 16
                  

                  1. Which of the following is the correct accounting equation?

                     		Assets + Liabilities = Equity
                     		Assets = Liabilities + Equity
                     		Assets + Revenues = Equity
                     		Assets + Revenues = Liabilities + Expenses

                     Question 17
                     
               Managerial accounting provides information to __________.

               		internal decision makers
               		outside investors and lenders
               		creditors
               		taxing authorities

               Question 18
               

               Nick’s Landscaping Services incurred $500 as a repair expense and promised to pay the repair company within 30 days. Which of the following accounts will increase as a result of this transaction?

               		Accounts Receivable
               		Cash
               		Accounts Payable
               		Nick, Capital

               Question 19
               

               1. The field of accounting that focuses on providing information for external decision makers is __________.

                  		managerial accounting
                  		financial accounting
                  		cost accounting
                  		nonmonetary accounting

                  Question 20
                  

                  
                  

               1. Maxwell Plumbing Services earned $500 by completing a job for Smith Company. The $500 earned by Maxwell Plumbing Services is its __________.

                  		revenue
                  		expense
                  		gain
                  		debt

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