Question 1

Regina owns and operates her own bakery and coffee shop. Regina has no accounting training and has only three employees. How does she most likely handle the necessary accounting for her business?

Accepted Answer

As Regina has no accounting training and only a few employees, it would be best for her to outsource her accounting functions to a public accountant. This will ensure that her books are kept accurately and in compliance with tax laws, while also allowing her to focus on running her business.

Question 2

According to the accountant for Michael's Floral Supply, the firm's assets are $124,000 and its liabilities are $31,000. Which of the following statements is true?

Accepted Answer

The accounting equation states that Assets = Liabilities + Owner's Equity. Therefore, Owner's Equity can be calculated as follows:

Owner's Equity = Assets - Liabilities 
Owner's Equity = $124,000 - $31,000 
Owner's Equity = $93,000

Therefore, option B is the correct answer. Option A, C, D, and E are incorrect.

Question 3

Which of the following is true about CPAs?

Accepted Answer

CPAs must participate in continuing education programs to maintain their certification. These programs ensure that CPAs stay up-to-date on the latest accounting practices and regulations, and take place on a regular basis throughout a CPA's career.

Question 4

If the assets of Martin's Pet Store are $107,000 and the owners' equity is $75,000, which of the following is a true statement?

Accepted Answer

The correct answer is derived from the accounting equation: Assets = Liabilities + Owners' Equity. Given that Assets are $107,000 and Owners' Equity is $75,000, we can solve for Liabilities as $107,000 - $75,000 = $32,000.

Question 5

An airplane that FedEx owns and uses to deliver packages is a(n) ____ of FedEx.

Accepted Answer

An airplane that FedEx owns and uses to deliver packages is considered an asset of the company, as it has value and can generate economic benefits for the company in the future.

Question 6

If total liabilities were subtracted from total assets, the residual value would be

Accepted Answer

Subtracting total liabilities from total assets results in the residual value, also known as the shareholders' equity or owners' equity. This represents the portion of the assets that the owners of the company own outright, after all external liabilities are paid off.

Question 7

Resources that a firm owns are called

Accepted Answer

Resources that a firm owns are called assets. Liabilities are what a company owes to others, owner's equity is the residual interest in the assets of a company after deducting liabilities, and revenue and expenses are a company's income and expenses, respectively.

Question 8

After the Sarbanes-Oxley Act was signed by the president, auditors and accountants can be imprisoned for up to ____ years for destroying financial documents and willful violations of the securities laws.

Accepted Answer

The Sarbanes-Oxley Act, enacted in response to major corporate and accounting scandals, includes provisions for up to twenty years of imprisonment for the destruction of financial documents and willful violations of securities laws, aiming to enhance corporate accountability.

Question 9

Ernst & Young, KPMG, and PricewaterhouseCoopers are all

Accepted Answer

Ernst & Young, KPMG, and PricewaterhouseCoopers are all examples of public accounting firms that provide auditing, tax, and consulting services to companies and individuals.

Question 10

Emiliano Garza spent five years in an accounting educational program and successfully completed a rigorous accounting examination five years ago. Since then, he has worked for several accounting firms. Currently he is a senior partner in a huge international accounting firm. By profession, Emiliano is probably a

Accepted Answer

Emiliano Garza completed a rigorous accounting examination five years ago and is currently a senior partner in an international accounting firm, indicating that he is most likely a certified public accountant.

Question 11

Because of the Sarbanes-Oxley Act, accountants must maintain financial documents and audit work for

Accepted Answer

The Sarbanes-Oxley Act requires accountants to maintain financial documents and audit work for a minimum of 5 years.

Question 12

Jane Cook started a small manufacturing firm two years ago. Now, after two years, she decides it is time to hire an accountant to work in the office and process all her financial data. This accountant will be a

Accepted Answer

A private accountant is hired by a business to handle its internal financial matters, such as processing financial data, which aligns with the needs of Jane Cook's manufacturing firm.

Question 13

The ___ created the IFRS, accounting standards used in more than 100 countries.

Accepted Answer

International Accounting Standards Board (IASB) is the organization that created the International Financial Reporting Standards (IFRS), which are used in more than 100 countries as accounting standards. The other options are not responsible for the creation of IFRS.

Question 14

Which of the following statements about the Sarbanes-Oxley Act is incorrect?

Accepted Answer

The Sarbanes-Oxley Act was not passed in 1996, but in 2002, as a response to the accounting scandals of Enron and WorldCom.

Question 15

A public corporation must change its lead auditing firm

Accepted Answer

According to the Sarbanes-Oxley Act, a public corporation must change its lead auditing firm at least once every five years. This is done to promote auditor independence and reduce the risk of conflicts of interest between the auditor and the corporation.

Question 16

In order for The Gift Market, a local specialty store, to purchase Christmas merchandise for selling in its store, it had to borrow money from a local bank. This debt owed to the bank is a(n)

Accepted Answer

The debt owed to the local bank represents a financial obligation that The Gift Market owes to the bank. This obligation is considered a liability on their balance sheet.

Question 17

Chase invests $5,000 of his own money in his new auto detailing business. He then obtains a loan and builds a small workshop in his backyard for $10,000. At this point assets are ____, liabilities are ____, and owners' equity is ____.

Accepted Answer

Assets equal the total value of what the business owns ($5,000 + $10,000 = $15,000), liabilities are the amount owed from the loan ($10,000), and owner's equity is the amount invested by the owner ($5,000).

Question 18

Ebony Jones is hired by Ruby Tuesday to help with budgeting, determining the costs of the firm's meal services, and recording transactions and creating financial statements. Ebony is a

Accepted Answer

Private accountants work within a single organization, like Ruby Tuesday, to help with various financial tasks, such as budgeting, recording transactions, and creating financial statements. Choosing option A) is the best fit for the job description given.

Question 19

The resources owned by David's Spa and Salon total $148,000. The total amount of debt that it owes to others is $87,000. Which of the following about David's Spa and Salon is true?

Accepted Answer

The assets of David's Spa and Salon total $148,000 and the total amount of debt owed to others is $87,000. To find the owners' equity, we subtract the total liabilities from the total assets: 
Owners' equity = Total assets - Total liabilities 
Owners' equity = $148,000 - $87,000 
Owners' equity = $61,000 
Therefore, the correct choice is B: Owners' equity is $61,000.

Question 20

Debts owed by a business are called

Accepted Answer

Debts owed by a business are considered as liabilities.

Quiz 17: Using Management and Accounting Information