TESTBANK
Accounting Principles 14th Edition
by Jerry J. Weygandt, Paul D. Kimmel
Chapters 1 - 27, Complete
,TABLE OF CONTENTS
1 Accounting in Action
2 The Recording Process
3 Adjusting the Accounts
4 Completing the Accounting Cycle
5 Accounting for Merchandising Operations
6 Inventories
7 Accounting Information Systems
8 Fraud, Internal Control, and Cash
9 Accounting for Receivables
10 Plant Assets, Natural Resources, and Intangible Assets
11 Current Liabilities and Payroll Accounting
12 Accounting for Partnerships
13 Corporations: Organization and Capital Stock
Transactions
14 Corporations: Dividends, Retained Earnings, and
Income Reporting
15 Long-Term Liabilities
,16 Investments
17 Statement of Cash Flows
18 Financial Analysis: The Big Picture
19 Managerial Accounting
20 Job Order Costing
21 Process Costing
22 Cost-Volume-Profit
23 Incremental Analysis
24 Budgetary Planning
25 Budgetary Control and Responsibility Accounting
26 Standard Costs and Balanced Scorecar d
27 Planning for Capital Investments
,CHAPTER 1
ACCOUNTING IN ACTION
CHAPTER LEARNING OBJECTIVES
1. Identify the activities and users associated with accounting. Accounting is an information system that
identifies, records, and communicates the economic events of an organization to interested users. The
major users and uses of accounting are as follows: (a) Management uses accounting information to plan,
organize, and run the business. (b) Investors (owners) decide whether to buy, hold, or sell their financial
interests on the basis of accounting data. (c) Creditors (suppliers and bankers) evaluate the risks of granting
credit or lending money on the basis of accounting information. Other groups that use accounting
information are taxing authorities, regulatory agencies, customers, and labor unions.
2. Explain the building blocks of accounting: ethics, principles, and assumptions. Ethics are the
standards of conduct by which actions are judged as right or wrong. Effective financial reporting depends
on sound ethical behavior.
Generally accepted accounting principles are a common set of standards used by accountants. The primary
accounting standard-setting body in the United States is the Financial Accounting Standards Board.
3. State the accounting equation, and define its components. The basic accounting equation is:
Assets = Liabilities + Owner's Equity
Assets are resources a business owns. Liabilities are creditorship claims on total assets.Owner's equity is
the ownership claim on total assets.
The expanded accounting equation is:
Liabilities + Owner's Capital Owner's Drawings + Revenues
Expenses
Investments by owners (assets the owner puts into the business) are recorded in a category called owner‘s
capital. Owner‘s drawings are the withdrawal of assets by the owner for personal use. Revenues are the
gross increase in owner‘s equity from business activities for the purpose of earning income. Expenses are
the costs of assets consumed or services used in the process of earning revenue. Owner‘s equity is
increased by an owner‘s investments and by revenues from business operations. Owner‘s equity is
decreased by an owner‘s withdrawals of assets and by expenses.
4. Analyze the effects of business transactions on the accounting equation. Each business transaction
must have a dual effect on the accounting equation. For example, if an individual asset increases, there
must be a corresponding (1) decrease in another asset, or (2) increase in a specific liability, or (3) increase in
owner's equity.
5. Describe the four financial statements and how they are prepared. An income statement presents the
revenues and expenses, and resulting net income or net loss for a specific period of time. An owner's
equity statement summarizes the changes in owner's equity for a specific period of time. A balance sheet
reports the assets, liabilities, and owner's equity at a specific date. A statement of cash flows summarizes
information about the cash inflows (receipts) and outflows (payments) for a specific period of time.
,
,21A - 2 Test Bank for Accounting Principles, Fourteenth Edition
a6. Explain the career opportunities in accounting. Accounting offers many different jobs in fields such as
public and private accounting, governmental, and forensic accounting. Accounting is a popular major
because there are many different types of jobs, with unlimited potential for career advancement.
, Process Costing21A - 3
TRUE-FALSE STATEMENTS
1. Owners of business firms are the only people who need accounting information.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Governance Perspective, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
2. Transactions that can be measured in dollars and cents are recorded in the financialinformation
system.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Governance Perspective, AICPA FC: Measurement Analysis and Interpretation, AICPA
PC: None, IMA: Reporting
3. The hiring of a new company president is an economic event recorded by the financialinformation
system.
Ans: F, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Governance Perspective, AICPA FC: Measurement Analysis and Interpretation, AICPA
PC: None, IMA: Reporting
4. Management of a business enterprise is the major external user of information.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Governance Perspective, AICPA FC: Measurement Analysis and Interpretation, AICPA
PC: None, IMA: Reporting
5. Accounting communicates financial information about a business enterprise to bothinternal and
external users.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Governance Perspective, AICPA FC: Measurement Analysis and Interpretation, AICPA
PC: None, IMA: Reporting
6. Accounting information is used only by external users with a financial interest in abusiness enterprise.
Ans: F, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Governance Perspective, AICPA FC: Measurement Analysis and Interpretation, AICPA
PC: None, IMA: Reporting
7. Financial statements are the major means of communicating accounting information tointerested
parties.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Governance Perspective, AICPA FC: Measurement Analysis and Interpretation, AICPA
PC: None, IMA: Reporting
8. Bookkeeping and accounting are one and the same because the bookkeeping functionincludes the
accounting process.
Ans: F, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Governance Perspective, AICPA FC: Measurement Analysis and Interpretation, AICPA
PC: None, IMA: Reporting
9. The origins of accounting are attributed to Luca Pacioli, a famous mathematician.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Governance Perspective, AICPA FC: Measurement Analysis and Interpretation, AICPA
PC: None, IMA: Reporting
,21A - 4 Test Bank for Accounting Principles, Fourteenth Edition
10. The study of accounting is not useful for a business career unless your career objective isto become an
accountant.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Governance Perspective, AICPA FC: Measurement Analysis and Interpretation, AICPA
PC: None, IMA: Reporting
11. A working knowledge of accounting is not relevant to a lawyer or an architect.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Governance Perspective, AICPA FC: Measurement Analysis and Interpretation, AICPA
PC: None, IMA: Reporting
12. Identifying is the process of keeping a chronological diary of events measured in dollarsand cents.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Governance Perspective, AICPA FC: Measurement Analysis and Interpretation, AICPA
PC: None, IMA: Reporting
13. Management consulting includes examining the financial statements of companies andexpressing
an opinion as to the fairness of their presentation.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Governance Perspective, AICPA FC: Measurement Analysis and Interpretation, AICPA
PC: None, IMA: Reporting
14. A partnership must have more than one owner.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Governance Perspective, AICPA FC: Measurement Analysis and Interpretation, AICPA
PC: None, IMA: Reporting
, Process Costing21A - 5
15. The economic entity assumption requires that the activities of an entity be kept separateand distinct
from the activities of its owner and all other economic entities.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Governance Perspective, AICPA FC: Measurement Analysis and Interpretation, AICPA
PC: None, IMA: Reporting
16. The monetary unit assumption states that transactions that can be measured in terms ofmoney
should be recorded in the accounting records.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Governance Perspective, AICPA FC: Measurement Analysis and Interpretation, AICPA
PC: None, IMA: Reporting
17. Accountants rely on a fundamental business concept—ethical behavior—in reportingfinancial
information.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Governance Perspective, AICPA FC: Measurement Analysis and Interpretation, AICPA
PC: None, IMA: Reporting
18. The primary accounting standard-setting body in the United States is the InternationalAccounting
Standards Board.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Governance Perspective, AICPA FC: Measurement Analysis and Interpretation, AICPA
PC: None, IMA: Reporting
19. The Financial Accounting Standards Board is a part of the Securities and Exchange
Commission.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Governance Perspective, AICPA FC: Measurement Analysis and Interpretation, AICPA
PC: None, IMA: Reporting
20. The Securities and Exchange Commission oversees U.S. financial markets andaccounting standard-
setting bodies.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Governance Perspective, AICPA FC: Measurement Analysis and Interpretation, AICPA
PC: None, IMA: Reporting
21. The cost and fair market value of an asset are the same at the time of acquisition and inall
subsequent periods.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Governance Perspective, AICPA FC: Measurement Analysis and Interpretation, AICPA
PC: None, IMA: Reporting
22. Even though a partnership is not a separate legal entity, for accounting purposes thepartnership
affairs should be kept separate from the personal activities of the owners.
Ans: T, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Governance Perspective, AICPA FC: Measurement
Analysis and Interpretation, AICPA PC: None, IMA: Reporting
23. Accountants do not have to worry about issues of ethics.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Ethics, AICPA BB: Governance Perspective, AICPA FC: Measurement Analysis and Interpretation, AICPA
PC: Professional Behavior, IMA: Reporting
24. At the time an asset is acquired, cost and fair value should be the same.
, 21A - 6 Test Bank for Accounting Principles, Fourteenth Edition
Ans: T, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Governance Perspective, AICPA FC: Measurement Analysis and Interpretation, AICPA
PC: None, IMA: Reporting
25. The monetary unit assumption requires that all dollar amounts be rounded to the nearestdollar.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Governance Perspective, AICPA FC: Measurement Analysis and Interpretation, AICPA
PC: None, IMA: Reporting
26. In order to possess future service potential, an asset must have physical substance.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Governance Perspective, AICPA FC: Measurement Analysis and Interpretation, AICPA
PC: None, IMA: Reporting
27. Owners' claims to total business assets take precedence over the claims of creditorsbecause
owners invest assets in the business and are liable for losses.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Governance Perspective, AICPA FC: Measurement Analysis and Interpretation, AICPA
PC: None, IMA: Reporting
28. The basic accounting equation states that Assets = Liabilities.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Governance Perspective, AICPA FC: Measurement Analysis and Interpretation, AICPA
PC: None, IMA: Reporting
