chapter 1: uses of accounting information and the financial
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Classroom Response System Content
to accompany
Needles/Powers, Financial Accounting, Ninth Edition
CHAPTER 1
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Question 1
A management information system deals not only with
accounting, but with other activities of a business as well.
1. T
2. F
Question 1
A management information system deals not only with
accounting, but with other activities of a business as well.
1. T *Correct Answer
2. F
Question 2
Responsibility for ethical financial reporting rests solely
with the accountant.
1. T
2. F
Question 2
Responsibility for ethical financial reporting rests solely
with the accountant.
1. T
2. F *Correct Answer
Question 3
The intentional preparation of fraudulent financial
statements can result from all of the following except
1. fictitious sales or order.
2. the manipulation of inventory records.
3. recording an expense that has been incurred but not
yet paid.
4. the misapplication of accounting principles.
Question 3
The intentional preparation of fraudulent financial
statements can result from all of the following except
1. fictitious sales or order.
2. the manipulation of inventory records.
3. recording an expense that has been incurred but not
yet paid. *Correct Answer
4. the misapplication of accounting principles.
Question 4
The Sarbanes-Oxley Act orders the FASB to hold chief
executives and CFO’s responsible for the accuracy of
their company’s financial statements.
1. T
2. F
Question 4
The Sarbanes-Oxley Act orders the FASB to hold chief
executives and CFO’s responsible for the accuracy of
their company’s financial statements.
1. T
2. F *Correct Answer
Question 5
Earned income is a measure of profitability.
1. T
2. F
Question 5
Earned income is a measure of profitability.
1. T *Correct Answer
2. F
Question 6
The purchase of land is an example of a(n)
1. investing activity.
2. operating activity.
3. capital activity
4. financing activity
Question 6
The purchase of land is an example of a(n)
1. investing activity. *Correct Answer
2. operating activity.
3. capital activity
4. financing activity
Question 7
Cash flow is a measure of profitability.
1. T
2. F
Question 7
Cash flow is a measure of profitability.
1. T
2. F *Correct Answer
Hint: Cash flow is a measure of liquidity.
Question 8
Violation of the Sarbanes-Oxley Act can result in
criminal penalties.
1. T
2. F
Question 8
Violation of the Sarbanes-Oxley Act can result in
criminal penalties.
1. T *Correct Answer
2. F
Question 9
Which of the following groups uses accounting
information for planning a company’s profitability
and liquidity?
1. Management
2. Investors
3. Creditors
4. Economic Planners
Question 9
Which of the following groups uses accounting
information for planning a company’s profitability
and liquidity?
1. Management *Correct Answer
2. Investors
3. Creditors
4. Economic Planners
Question 10
Which of the following groups uses accounting
information primarily to help protect the public?
1. Management
2. Regulatory Agencies
3. Taxing Authorities
4. Economic Planners
Question 10
Which of the following groups uses accounting
information primarily to help protect the public?
1. Management
2. Regulatory Agencies *Correct Answer
3. Taxing Authorities
4. Economic Planners
Question 11
Economic planners are accounting information users
with a direct financial interest.
1. T
2. F
Question 11
Economic planners are accounting information users
with a direct financial interest.
1. T
2. F *Correct Answer
Hint: Economic planners have an indirect financial
interest in accounting information.
Question 12
All of the following are considered basic management
functions except
1. Producing goods and services
2. Financing the business
3. Managing employees
4. Electing the board of directors
Question 12
All of the following are considered basic management
functions except
1. Producing goods and services
2. Financing the business
3. Managing employees
4. Electing the board of directors *Correct Answer
Question 13
Which of the following transactions does not involve an
exchange of value?
1. Payment of a debt
2. Purchase of a building on credit
3. Borrowing money
4. Loss from theft
Question 13
Which of the following transactions does not involve an
exchange of value?
1. Payment of a debt
2. Purchase of a building on credit
3. Borrowing money
4. Loss from theft *Correct Answer
Question 14
Which of the following is an example of an exchange of
value?
1. Collection from a customer
2. Loss from fire
3. Accumulation of interest
4. Loss from theft
Question 14
Which of the following is an example of an exchange of
value?
1. Collection from a customer * Correct Answer
2. Loss from fire
3. Accumulation of interest
4. Loss from theft
Question 15
The number of outstanding shares of stock cannot
exceed the number of authorized shares.
1. True
2. False
Question 15
The number of outstanding shares of stock cannot
exceed the number of authorized shares.
1. True *Correct Answer
2. False
Question 16For legal purposes, which of the following forms of
business organization is (are) treated as a separate
economic unit from its owner(s)?
1. Sole proprietorship
2. Corporation
3. Partnership
4. All of the above
Question 16For legal purposes, which of the following forms of
business organization is (are) treated as a separate
economic unit from its owner(s)?
1. Sole proprietorship
2. Corporation *Correct Answer
3. Partnership
4. All of the above
Question 17
Corporations represent the largest number of businesses
in the United States.
1. True
2. False
Question 17
Corporations represent the largest number of businesses
in the United States.
1. True
2. False *Correct Answer
Question 18
Which of the following is considered by accountants to
be a separate entity from its owner(s)?
1. Partnership only
2. Sole Proprietorship only
3. Corporation only
4. Sole proprietorship, partnership, and corporation
Question 18
Which of the following is considered by accountants to
be a separate entity from its owner(s)?
1. Partnership only
2. Sole Proprietorship only
3. Corporation only
4. Sole proprietorship, partnership, and corporation
*Correct Answer
Question 19
Dividends of a corporation are declared by its
1. board of directors.
2. officers.
3. stockholders.
4. creditors.
Question 19
Dividends of a corporation are declared by its
1. board of directors. *Correct Answer
2. officers.
3. stockholders.
4. creditors.
Question 20
Which of the following is not a satisfactory statement of the
accounting equation?
1. Assets = Liabilities + Stockholders’ Equity
2. Assets - Stockholders’ Equity = Liabilities
3. Assets = Liabilities - Stockholders’ Equity
4. Assets - Liabilities = Stockholders’ Equity
Question 20
Which of the following is not a satisfactory statement of the
accounting equation?
1. Assets = Liabilities + Stockholders’ Equity
2. Assets - Stockholders’ Equity = Liabilities
3. Assets = Liabilities - Stockholders’ Equity * Correct
Answer
4. Assets - Liabilities = Stockholders’ Equity
Question 21If a company has liabilities of $20,000 and
stockholders’ equity of $37,000, its assets are
1. $38,000
2. $76,000
3. $57,000
4. $19,000
Question 21If a company has liabilities of $20,000 and
stockholders’ equity of $37,000, its assets are
1. $38,000
2. $76,000
3. $57,000 *Correct Answer
4. $19,000
Question 22The best definition of assets is the
1. cash owned by the company.
2. resources belonging to a company having future
benefit to the company.
3. collection of resources belonging to the
company and the claims on these resources.
4. owners’ investment in the business.
Question 22The best definition of assets is the
1. cash owned by the company.
2. resources belonging to a company having future
benefit to the company. *Correct Answer
3. collection of resources belonging to the
company and the claims on these resources.
4. owners’ investment in the business.
Question 23
Revenues and dividends appear, respectively, on the
1. balance sheet and income statement.
2. income statement and balance sheet.
3. statement of retained earnings and balance sheet.
4. income statement and statement of retained
earnings.
Question 23
Revenues and dividends appear, respectively, on the
1. balance sheet and income statement.
2. income statement and balance sheet.
3. statement of retained earnings and balance sheet.
4. income statement and statement of retained
earnings. *Correct Answer
Question 24Generally accepted accounting principles
1. define accounting practice at a point in time.
2. are similar in nature to the principles of chemistry or
physics.
3. rarely change.
4. are not affected by changes in the ways businesses
operate.
Question 24Generally accepted accounting principles
1. define accounting practice at a point in time. *Correct
Answer
2. are similar in nature to the principles of chemistry or
physics.
3. rarely change.
4. are not affected by changes in the ways businesses operate.
Question 25
Companies whose securities are sold to the general
public must adhere to standards established by the
Securities and Exchange Commission.
1. T
2. F
Question 25
Companies whose securities are sold to the general
public must adhere to standards established by the
Securities and Exchange Commission.
1. T *Correct Answer
2. F