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Financial Accounting An Introduction to Concepts Methods and Uses 14th Edition - Test Bank
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Chapter 1: Introduction to Business Activities and Overview of Financial Statements and the Reporting Process TRUE/FALSE 1. The activities of a business include establishing goals and strategies, obtaining financing, making investments and conducting operations. ANS: T PTS: 1 DIF: 1 REF: pp. 3-6...

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  • September 16, 2023
  • 890
  • 2022/2023
  • Exam (elaborations)
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  • complete test bank
  • all chapters included
  • financial accounting an introduction to concepts m

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  • Accounting - Test Bank
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,Chapter 1: Introduction to Business Activities and Overview of Financial Statements
and the Reporting Process


TRUE/FALSE

1. The activities of a business include establishing goals and strategies, obtaining financing, making
investments and conducting operations.

ANS: T PTS: 1 DIF: 1 REF: pp. 3-6
OBJ: LO: 1-01 NAT: BUSPROG: Analytic
STA: AICPA: FN-Reporting | ACBSP: APC-09-Financial Statements
KEY: Bloom's: Knowledge

2. Goals are the end results toward which the firm directs its energies, and strategies are the
means for achieving those results.

ANS: T PTS: 1 DIF: 1 REF: pp. 3-6
OBJ: LO: 1-01 NAT: BUSPROG: Analytic
STA: AICPA: FN-Reporting | ACBSP: APC-09-Financial Statements
KEY: Bloom's: Knowledge

3. Each firm makes financing decisions about the proportion of funds to obtain from owners,
long-term creditors, and short-term creditors.

ANS: T PTS: 1 DIF: 1 REF: pp. 3-6
OBJ: LO: 1-01 NAT: BUSPROG: Analytic
STA: AICPA: FN-Reporting | ACBSP: APC-09-Financial Statements
KEY: Bloom's: Knowledge

4. A firm makes investments to obtain productive capacity to carry out its business activities.

ANS: T PTS: 1 DIF: 1 REF: pp. 3-6
OBJ: LO: 1-01 NAT: BUSPROG: Analytic
STA: AICPA: FN-Reporting | ACBSP: APC-09-Financial Statements
KEY: Bloom's: Knowledge

5. Patents, licenses, and other contractual rights are tangible, in the sense that the rights have a physical
existence.

ANS: F PTS: 1 DIF: 1 REF: pp. 3-6
OBJ: LO: 1-01 NAT: BUSPROG: Analytic
STA: AICPA: FN-Reporting | ACBSP: APC-09-Financial Statements
KEY: Bloom's: Knowledge

6. Firms communicate the results of their business activities in the annual report to shareholders.

ANS: T PTS: 1 DIF: 1 REF: pp. 6-19
OBJ: LO: 1-02 NAT: BUSPROG: Analytic
STA: AICPA: FN-Reporting | ACBSP: APC-09-Financial Statements
KEY: Bloom's: Knowledge

7. Assets are economic resources with the potential to provide future economic benefits to

, a firm.

ANS: T PTS: 1 DIF: 1 REF: pp. 6-19
OBJ: LO: 1-02 NAT: BUSPROG: Analytic
STA: AICPA: FN-Reporting | ACBSP: APC-09-Financial Statements
KEY: Bloom's: Knowledge

8. Liabilities are creditors’ claims for funds, usually because they have provided funds, or
goods and services, to the firm.

ANS: T PTS: 1 DIF: 1 REF: pp. 6-19
OBJ: LO: 1-02 NAT: BUSPROG: Analytic
STA: AICPA: FN-Reporting | ACBSP: APC-09-Financial Statements
KEY: Bloom's: Knowledge

9. Retained earnings represent the net assets (total assets - total liabilities) a firm derives
from its earnings that exceed the dividends.

ANS: F PTS: 1 DIF: 1 REF: pp. 6-19
OBJ: LO: 1-02 NAT: BUSPROG: Analytic
STA: AICPA: FN-Reporting | ACBSP: APC-09-Financial Statements
KEY: Bloom's: Knowledge

10. The amounts of individual assets that make up total assets, represented by accounts receivable,
inventories, equipment, and other assets, reflect a firm’s financing decisions, each measured at the
balance sheet date.

ANS: F PTS: 1 DIF: 1 REF: pp. 6-19
OBJ: LO: 1-02 NAT: BUSPROG: Analytic
STA: AICPA: FN-Reporting | ACBSP: APC-09-Financial Statements
KEY: Bloom's: Knowledge

11. The mix of liabilities plus shareholders’ equity reflects a firm’s investing decisions, each measured at
the balance sheet date.

ANS: F PTS: 1 DIF: 1 REF: pp. 6-19
OBJ: LO: 1-02 NAT: BUSPROG: Analytic
STA: AICPA: FN-Reporting | ACBSP: APC-09-Financial Statements
KEY: Bloom's: Knowledge

12. Current liabilities represent obligations a firm expects to pay within one year.

ANS: T PTS: 1 DIF: 1 REF: pp. 6-19
OBJ: LO: 1-02 NAT: BUSPROG: Analytic
STA: AICPA: FN-Reporting | ACBSP: APC-09-Financial Statements
KEY: Bloom's: Knowledge

13. Current assets, typically held and used for several years, include land, buildings,
equipment, patents; and long-term investments in securities.

ANS: F PTS: 1 DIF: 1 REF: pp. 6-19
OBJ: LO: 1-02 NAT: BUSPROG: Analytic
STA: AICPA: FN-Reporting | ACBSP: APC-09-Financial Statements
KEY: Bloom's: Knowledge

, 14. Current liabilities and shareholders’ equity are sources of funds where the supplier of
funds does not expect to receive them all back within the next year.

ANS: F PTS: 1 DIF: 1 REF: pp. 6-19
OBJ: LO: 1-02 NAT: BUSPROG: Analytic
STA: AICPA: FN-Reporting | ACBSP: APC-09-Financial Statements
KEY: Bloom's: Knowledge

15. The current replacement cost of an asset is the amount a firm would have to pay to obtain another asset
with identical service potential; it is an entry value that reflects economic conditions at the
measurement date.

ANS: T PTS: 1 DIF: 1 REF: pp. 6-19
OBJ: LO: 1-02 NAT: BUSPROG: Analytic
STA: AICPA: FN-Reporting | ACBSP: APC-09-Financial Statements
KEY: Bloom's: Knowledge

16. The same asset can have different measurements for tax purposes, for financial reporting purposes, and
for internal managerial decision-making purposes.

ANS: T PTS: 1 DIF: 1 REF: pp. 6-19
OBJ: LO: 1-02 NAT: BUSPROG: Analytic
STA: AICPA: FN-Reporting | ACBSP: APC-09-Financial Statements
KEY: Bloom's: Knowledge

17. A natural business year ends when most activities in an operating cycle have been substantially
concluded.

ANS: T PTS: 1 DIF: 1 REF: pp. 6-19
OBJ: LO: 1-02 NAT: BUSPROG: Analytic
STA: AICPA: FN-Reporting | ACBSP: APC-09-Financial Statements
KEY: Bloom's: Knowledge

18. The managers of a business prepare financial statements to present meaningful information
about that business’s activities to external users.

ANS: T PTS: 1 DIF: 1 REF: p. 20 | p. 23
OBJ: LO: 1-03 NAT: BUSPROG: Analytic
STA: AICPA: FN-Reporting | ACBSP: APC-09-Financial Statements
KEY: Bloom's: Knowledge

19. The independent external auditors of a business prepare financial statements to present meaningful
information about that business’s activities to external users.

ANS: F PTS: 1 DIF: 1 REF: p. 20 | p. 23
OBJ: LO: 1-03 NAT: BUSPROG: Analytic
STA: AICPA: FN-Reporting | ACBSP: APC-09-Financial Statements
KEY: Bloom's: Knowledge

20. Management operates the productive capacity of the firm to generate earnings.

ANS: T PTS: 1 DIF: 1 REF: p. 20 | p. 23
OBJ: LO: 1-03 NAT: BUSPROG: Analytic

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