IOP3705 Assignment 2 (COMPLETE ANSWERS) Semester 2 2023 (674049) - DUE 20 September 2023
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Course
IOP 3705
Institution
IOP 3705
-52) What is the primary purpose of financial accounting?
A) Determine the amount of tax liability owed to the government.
B) Communicate business activities to internal management.
C) Measure business activities and communicate those measures to external users to make decisions.
D) Measure the...
IOP3705 Assignment 2 (COMPLETE ANSWERS)
Semester 2 2023 (674049) - DUE 20 September 2023
-52) What is the primary purpose of financial accounting?
A) Determine the amount of tax liability owed to the government.
B) Communicate business activities to internal management.
C) Measure business activities and communicate those measures to external users to make
decisions.
D) Measure the profitability of the company in order to assist employees with making decisions.
- - ch 1 Answer: C
-53) The primary purpose(s) of financial accounting is(are) to:
A) Measure and record business transactions.
B) Prepare federal and state tax returns.
C) Communicate financial results to investors and creditors.
D) Both measure and communicate financial information to external parties. - - ch 1 Answer: D
-54) Which definition below best describes financial accounting?
A) Process of measuring income taxes owed to the government.
B) System of maintaining communication with a company's customers and suppliers.
C) Procedures designed to enhance the company's image to potential investors.
D) Measuring business activities and communicating them to external parties. - - ch 1 Answer: D
-55) Financial accounting does not deal with which of the following?
A) Measuring a company's economic activity.
B) Providing information to internal users.
C) Preparing financial reports.
D) Communicating financial results to investors. - - ch 1 Answer: B
-2 Medium
Topic: Defining Accounting
Learning Objective: 01-01 Describe the two primary functions of financial accounting.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
56) Financial accounting:
A) Provides information primarily for external decision makers.
B) Provides information primarily for a company's employees.
C) Provides information primarily for the use of managers of the company.
D) Is primarily used to compute a company's tax obligation. - - ch 1 Answer: A
-57) The primary focus for financial accounting information is to provide information useful for:
, Investing decisions Credit decisions
a. Yes Yes
b. Yes No
c. No Yes
d. No No
A) Investing decisions and credit decisions.
B) Investing decisions but not credit decisions.
C) Credit decisions but not investing decisions.
D) Neither investing decisions nor credit decisions. - - ch 1 Answer: A
-58) Which of the following groups is not among the external users for whom financial
statements are prepared?
A) Creditors.
B) Regulators.
C) Investors.
D) Managers. - - ch 1 Answer: D
-59) Which of the following groups is not among the external users for whom financial
statements are prepared?
A) Customers.
B) Suppliers.
C) Employees.
D) Customers, suppliers, and employees are all external users of financial statements. - - ch 1
Answer: D
-60) The form of business organization that is legally separate from its owners is a:
A) Partnership.
B) Sole proprietorship.
C) Corporation.
D) Separation entity. - - ch 1 Answer: C
-61) Which business form has the advantage of limited liability?
A) Corporation.
B) Sole proprietorship.
C) Partnership.
D) All business forms share equal limited liability. - - ch 1 Answer: A
-62) Limited liability means:
A) Stockholders of a corporation are not obligated to pay the corporation's debts out of their own
pocket.
B) Liabilities of a company cannot exceed its assets.
C) Companies are not allowed to borrow unless they are profitable.
D) Companies are less likely to be sued if they are formed as a corporation. - - ch 1 Answer: A
-63) One disadvantage of the corporate form of business is:
,A) Limited liability.
B) Access to more capital.
C) Smaller in size.
D) Double taxation. - - ch 1 Answer: D
-64) Which of the following is an operating activity?
A) Issuing common stock.
B) Paying dividends.
C) Borrowing cash from a bank to acquire a building.
D) Paying electricity bills for the month. - - ch 1 Answer: D
-65) How many of the following transactions are operating activities?
Borrow $50,000 from the bank.
Purchase $12,000 in supplies.
Provide services to customers for $27,000.
Pay the utility bill of $750.
Purchase a delivery truck for $12,000.
Receive $25,000 from issuing common stock.
A) One.
B) Two.
C) Three.
D) Four. - - ch 1 Answer: C
Explanation: (1) Purchase supplies, (2) Provide services to customers, and (3) Pay utility bill.
-66) Transactions related to the primary business activities of the company, such as selling
goods and services to customers, are referred to as:
A) Investing activities.
B) Operating activities.
C) Management activities.
D) Financing activities. - - ch 1 Answer: B
-67) Stimpleton Company engages in the following cash payments:
Purchase equipment $ 2,000
Pay rent 500
Repay loan to the bank 5,000
Pay workers' salaries 1,000
What is the total amount of cash paid for operating activities?
A) $6,000.
B) $2,000.
C) $7,000.
D) $1,500. - - ch 1 Answer: D
Explanation: $500 + $1,000 = $1,500.
, -68) Accountants are responsible for measuring various operating, investing and financing
activities. Which of the following correctly matches the activity with its type?
A) Investing - paying utilities for the month.
B) Investing - purchasing land.
C) Operating - paying dividends to stockholders.
D) Financing - selling equipment for cash. - - ch 1 Answer: B
-69) Transactions of a company that include the purchase and sale of long-term assets are
referred to as:
A) Investing activities.
B) Financing activities.
C) Expenditure activities.
D) Operating activities. - - ch 1 Answer: A
-70) McGill purchases additional office equipment to better serve its customers. This purchase is
classified as what type of activity?
A) Company activity.
B) Financing activity.
C) Investing activity.
D) Operating activity. - - ch 1 Answer: C
-71) Transactions of a company involving external sources of funding are referred to as:
A) Investing activities.
B) Financing activities.
C) External activities.
D) Operating activities. - - ch 1 Answer: B
-72) Financing activities include:
A) Primary operations such as selling goods to customers.
B) Transactions with company employees.
C) Transactions involving external sources of funding.
D) The purchase and sale of long-term assets. - - ch 1 Answer: C
-73) Financing activities include:
A) The purchase of a building.
B) Issuing common stock to stockholders.
C) Transactions with company employees.
D) Selling goods or services to customers. - - ch 1 Answer: B
-74) The accounting equation is defined as:
A) Assets = Liabilities + Stockholders' Equity.
B) Assets = Liabilities − Stockholders' Equity.
C) Net Income = Revenues − Expenses.
D) Liabilities + Revenues = Assets. - - ch 1 Answer: A
-75) Which statement below best describes the accounting equation?
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