1. Accounting in Action

Question 1

3 activities of accounting (in order)

Answer 1

1. Identification (select “economic events” - transactions)
2. Recording (record, classify, summarize -> “diary of events”)
3. Communication (prepare “accounting reports”)

Question 2

Who uses accounting data

Answer 2

1. Internal users: Marketing, Management, Finance, Human Resources
2. External users: Creditors (chủ nợ), Investors

Question 3

Measurement Principles

Answer 3

1. (Historical) cost principle: dictates that companies “record assets” at their “cost”
2. Fair value principle: states that “assets and liabilities should be reported” at “fair value” (the price received to “sell” an asset or settle a liability)

Question 4

Selection of which principle to follow generally relates to

Answer 4

“trade-offs” between “relevance” and “faithful” representation

Question 5

Assumptions

Answer 5

1. Monetary unit assumption

2. Economic entity assumption

Question 6

Monetary unit assumption

Answer 6

only transaction data that can be “expressed in terms of money”

Question 7

Economic entity assumption

Answer 7

the entity be kept “separate and distinct from the activities of its owner”

Question 8

Assets =

Answer 8

Liabilities + Owner’s Equity (A= L + E)

Question 9

a unique and important service of “public accountants”

Answer 9

“Auditing” (sự kiểm tra sổ sách kế toán (hằng năm))

Question 10

The primary private sector agency that oversees external “financial reporting standards” is the

Answer 10

Financial Accounting Standards Board.

Question 11

The Dulce Company has five plants nationwide that cost a total of $200 million. The current fair value of the plants is $600 million. The plants will be recorded and “reported as assets” at

Answer 11

$200 million
“Historical cost principle” -> record assets
Fair value principle -> assets and liabilities should be reported

Question 12

The assumption that the unit of measure remains sufficiently “constant over time” is part of the

Answer 12

“monetary” unit assumption

Question 13

If expenses are paid in cash, then

Answer 13

assets will decrease (cash decreases cash in assets)

Question 14

“Bookkeeping” (kế toán) differs from accounting in that bookkeeping primarily involves which part of the accounting process?

Answer 14

“Recording”

Question 15

Accountants refer to an “economic event as a”

Answer 15

“transactions” (are a business’s event recorded by account)

Question 16

Which of the following is an external user of accounting information?

a. Finance directors.
b. Managers.
c. Company officers.
d. Labor unions.

Answer 16

d. Labor unions

Question 17

“Communication” of economic events is the part of the accounting process that involves

a. quantifying transactions into dollars and cents.
b. identifying economic events.
c. recording and classifying information.
d. preparing accounting reports.

Answer 17

d. “preparing” accounting “reports”.

Question 18

Which of the following events cannot be quantified into dollars and cents and recorded as an accounting transaction?

a. The appointment of a new CPA firm to perform an audit.
b. Payment of income taxes.
c. The sale of store equipment.
d. The purchase of a new computer.

Answer 18

a. The appointment of a new CPA firm to perform an audit.

Question 19

Foxes Service Shop started the year with total assets of $320,000 and total liabilities of $240,000. During the year, the business recorded $630,000 in revenues, $450,000 in expenses, and owner drawings of $60,000. Owner’s equity at the end of the year was

a. $370,000.
b. $200,000.
c. $310,000.
d. $80,000.

Answer 19

b. $200,000.
1. start of the year: O/E (s) = 320-240 = 80
2. end: O/E (e) = O/E (s) + 630 - 450 - 60

Question 20

The basic accounting equation may be expressed as
Select one:
a. Assets - Liabilities = Owner’s Equity.
b. All of these answer choices are correct.
c. Assets = Equities.
d. Assets = Liabilities + Owner’s Equity.

Answer 20

b. All of these answer choices are correct.

note: c. Assets = Equities -> correct.

Question 21

The common characteristic possessed by all assets is

a. long life.
b. great monetary value.
c. future economic benefit.
d. tangible nature.

Answer 21

c. future economic benefit.

assets -> future benefit, control

Question 22

The accounting process is correctly sequenced as

a. communication, recording, identification.
b. recording, communication, identification.
c. identification, recording, communication.
d. identification, communication, recording

Answer 22

c. identification -> recording ->communication.

Question 23

Which one of the following is not an external user of accounting information?

a. Regulatory agencies.
b. Investors.
c. Customers.
d. All of these answers choices are external users.

Answer 23

d. All of these answers choices are external users.

Question 24

Which of the following events is not a business transaction?

a. Earned revenue for services provided.
b. Incurred utility expenses for the month.
c. Investment of cash by the owner.
d. Hired employees.

Answer 24

d. Hired employees.

transaction -> “money, cash”

Question 25

Owner’s equity

Answer 25

1. Ownership claim on total assets
2. Referred to as residual (còn dư) equity
3. Investment by owners and revenues (+)
4. Drawings and expenses (-)

Question 26

increases in O/E

Answer 26

1. Investments by owner: assets the owner puts into the business
2. Revenues: “sales, fees, services”/”perform”

Question 27

decreases in O/E

Answer 27

1. Drawings: an owner may withdraw cash or other assets for personal use
2. Expenses: assets consumed or services used in the process of earning revenue/”office”

Question 28

Transactions

Answer 28

• are a business’s event recorded by accountants:
  + maybe external or internal
  + not all activities represent transactions
  + each transaction has a dual (đôi) effect on the accounting equation

Question 29

Wilson Company owns land that cost $100,000. If a “quick sale” of the land was necessary to generate cash, the company feels it would receive only $80,000. “The company continues to report the asset” on the balance sheet at $100,000. Which of the following concepts justifies this?

a. The historical-cost principle.
b. The value is tied to objective and verifiable past transactions.
c. Neither of the above.
d. Both “a” and “b”.

Answer 29

d. Both “a” and “b”.

• Both of these concepts justify the continued reporting at $100,000
• as this amount is an objective and verifiable historical-cost measurement.

Question 30

Retained earnings will change over time because of several factors. Which of the following factors would explain an increase in retained earnings (thu nhập giữ lại)?
A. Net loss.
B. Net income.
C. Dividends.
D. Investments by stockholders.

Answer 30

B. Net income

Question 31

Which of these items would be accounted for as an expense?
A. Repayment of a bank loan
B. Dividends (cổ tức) to stockholders.
C. The purchase of land.
D. Payment of the current period's rent.

Answer 31

D. Payment of the current period’s rent.

Question 32

Which of the following transactions would have no impact on stockholders’ equity (vốn cổ đông)?
A. Purchase of land from the proceeds of a bank loan.
B. Dividends (cổ tức) to stockholders.
C. Net loss.
D. Investments of cash by stockholders.

Answer 32

A. Purchase of land from the proceeds of a bank loan

Question 33

Which of the following would not be included on a balance sheet?
A. Accounts receivable.
B. Accounts payable.
C. Sales.
D. Cash.

Answer 33

C. Sales.

Question 34

Remington provided the following information about its balance sheet. Based on the information provided, how much are Remington’s liabilities?

Cash $100
Accounts Receivable $500
Stockholders' Equity $700
Accounts Payable $200
Bank Loans $1,000

Answer 34

C. $1,200

Liabilities = (Bank loans: $1,000) + (Accounts Payable: $200) = $1,200

Question 35

Gerald had beginning total stockholders’ equity of $160,000. During the year, total assets increased by $240,000 and total liabilities increased by $120,000. Gerald’s net income was $180,000. No additional investments were made; however, dividends did occur during the year. How much were the dividends?

link
https://www.clutchprep.com/accounting/practice-problems/55452/gerald-had-beginning-total-stockholders-39-160-equity-of-160-000-during-the-year

Answer 35

B. $60,000
Total assets - total lia. = 120
Dividend = net income - 120

($240,000-$120,000 = $120,000 then $180,000-$120,000 = $60,000)

Dividend, net income -> retained earning (Lợi nhuận giữ lại) -> equity

(~:change)
~A = ~L + ~E
240 = 120 + ~E
-> ~E = 120 (increase)

~E   = ~PIC + ~RE
120 =   0     +  ~RE
->  ~RE     = 120
->   NI - D = 120
-> 180 - D = 120
-> D = 60
E: equity (vốn sở hữu)
PIC: paid-in capital (vốn góp)
RE: retained earning (lợi nhuận giữ lại)
"No additional investments were made" -> didn't sell stocks -> PIC = 0
NI: net income
D: Dividend

Question 36

During the year 2016, Dallas Company earned revenues of $90,000, had expenses of $62,000, purchased assets with a cost of $10,000 and had owner drawings of $6,000. Net income for the year is

a. $22,000.
b. $28,000.
c. $18,000.
d. $32,000.

Answer 36

b. $28,000.
Net income = Revenues - Total expenses
(NI = Rev - Exp)

Question 37

Which of the following statements about basic assumptions is correct?
(a) Basic assumptions are the same as accounting
principles.
(b) The economic entity assumption states that there
should be a particular unit of accountability.
(c) The monetary unit assumption enables accounting to measure employee morale.
(d) Partnerships are not economic entities.

Answer 37

(b) The economic entity assumption states that there should be a particular unit of accountability.

(a) basic assumptions are not the same as accounting principles,
(c) the monetary unit assumption allows accounting to measure economic events,
(d) partnerships are economic entities.

Question 38

5. The three types of business entities (thực thể) are:
   (a) proprietorships, small businesses, and partnerships.
   (b) proprietorships, partnerships, and corporations.
   (c) proprietorships, partnerships, and large businesses.
   (d) financial, manufacturing, and service companies.

Answer 38

3 types of business entities:

1. Proprietorships (doanh nghiệp tư nhân),
2. partnerships
3. corporations

(a) ,(c): small and large businesses -> size
(d) : financial, manufacturing, and service companies -> type

Question 39

Net income will result during a time period when:

(a) assets exceed liabilities.
(b) assets exceed revenues.
(c) expenses exceed revenues.
(d) revenues exceed expenses.

Answer 39

(d) Net income results when revenues exceed expenses.

(a) assets and liabilities are not used in the computation of net income;
(b) revenues, not assets, are included in the computation of net income;
(c) when expenses exceed revenues, a net loss results.

Question 40

Performing services on account will have the following effects on the components of the basic accounting equation:

(a) increase assets and decrease owner’s equity.
(b) increase assets and increase owner’s equity.
(c) increase assets and increase liabilities.
(d) increase liabilities and increase owner’s equity.

Answer 40

(b) When services are performed on account, assets are increased and owner’s equity is increased.

The other choices are incorrect because when services are performed on account
(a) owner’s equity is increased, not decreased;
(c) liabilities are not affected;
and (d) owner’s equity is increased and liabilities are not affected.

Question 41

10. During 2017, Bruske Company’s assets decreased $50,000 and its liabilities decreased $50,000. Its owner’s equity therefore:
    (a) increased $50,000. (c) decreased $100,000.
    (b) decreased $50,000. (d) did not change.

Answer 41

(d) In this situation, owner’s equity does not change because only assets and liabilities decreased $50,000. Therefore, the other choices are incorrect.

Question 42

Which of the following statements is false?

(a) A statement of cash flows summarizes information about the cash inflows (receipts) and outflows (payments) for a specific period of time.

(b) A balance sheet reports the assets, liabilities, and
owner’s equity at a specific date.

(c) An income statement presents the revenues,
expenses, changes in owner’s equity, and resulting
net income or net loss for a specific period of
time.

(d) An owner’s equity statement summarizes the
changes in owner’s equity for a specific period of
time.

Answer 42

(c) An income statement represents the revenues, expenses, and the resulting net income or net loss for a specific period of time but not the changes in owner’s equity. The other choices are true statements.

Question 43

On the last day of the period, Alan Cesska Company
buys a $900 machine on credit. This transaction will
affect the:
(a) income statement only.
(b) balance sheet only.
(c) income statement and owner’s equity statement only.
(d) income statement, owner’s equity statement, and
balance sheet.

Answer 43

(b) This transaction will cause
assets to increase by $900
liabilities to increase by $900.

The other choices are incorrect because this transaction

(a) will have no effect on the income statement,
(c) will have no effect on the income statement or the owner’s equity statement,
(d) will affect the balance sheet but not the income statement or the owner’s equity statement.

Question 44

The financial statement that reports assets, liabilities,
and owner’s equity is the:
(a) income statement.
(b) owner’s equity statement.
(c) balance sheet.
(d) statement of cash flows.

Answer 44

(c) The balance sheet is the statement that reports assets, liabilities and owner’s equity.

The other choices are incorrect because

(a) the income statement -> revenues, expenses,
(b) the owner’s equity statement -> details about owner’s equity,
(d) the statement of cash flows reports inflows and outflows of cash.

Question 45

Services performed by a public accountant include:

(a) auditing, taxation, and management consulting.
(b) auditing, budgeting, and management consulting.
(c) auditing, budgeting, and cost accounting.
(d) auditing, budgeting, and management consulting.

Answer 45

(a) services performed by public accountants:
1. Auditing
2. Taxation
3. Management consulting

Question 46

What is the main purpose of financial accounting?

Answer 46

provide useful information for outside investors, creditors, and others.

Question 47

Which financial statement uses the expanded accounting equation?

Answer 47

The balance sheet

uses the expanded accounting equation to list assets, liabilities, and equity in a report format.

Question 48

The accrual basis of accounting records revenues when they are:

Answer 48

earned

The accrual basis of accounting only records income when it is earned.

Question 49

According to accrual concept of accounting, financial or business transaction is recorded:

Answer 49

when transaction occurs

Question 50

The John Marketing Company provides advertising services to an investment company in year A but receives advertising fee in year B. The John Marketing Company recognizes this revenue in year A. This action of John Marketing Company is justified by:

Answer 50

revenue recognition principle

Question 51

Which of the following states that a transaction is not recorded in the books of accounts unless it is measurable in terms of money?

Answer 51

Monetary unit assumption

Question 52

The revenue is not recognized until it is earned and realized or at least realizable. To which accounting principle/concept this statement belongs?

Answer 52

Revenue recognition principle

Question 53

The Modern Enterprises reported all assets in the balance sheet at current market value. This action is a violation of:

Answer 53

cost principle or historical cost concept