Sophia University - IBE 305

Unit 1 Challenge 1

1)Which of the following statements is true regarding the regulation of ethics in accounting?

 

 

a.)

 

The Sarbanes-Oxley Act determines the standards of financial reporting for state and local government.

b.)

The private sector proposed the Sarbanes-Oxley Act as a way to regulate competition within industries.

c.)

The IRS created the Sarbanes-Oxley Act in order to prosecute companies who did not pay taxes.

 

Unethical behavior by major companies prompted the government to create the Sarbanes-Oxley Act.

d.)

•

 

 

 

2. Which of the following statements is true regarding the purpose of the Sarbanes Oxley-Act?

 

 

 

 

 

 

 

 

The Sarbanes-Oxley Act regulates financial reporting to prevent fraud or misconduct.

 

 

b.)

The Sarbanes-Oxley Act standardizes accounting practices across all nations.

c.)

The Sarbanes-Oxley Act develops and enforces securities laws.

 

d.)

The Sarbanes-Oxley Act requires financial statements to be relevant, reliable and comparable.

 

3. Which of the following was created by the government in response to unethical behavior by companies such as Enron and WorldCom?

 

 

a.)

Generally Accepted Accounting Principles

b.)

International Financial Reporting Standards

 

The Sarbanes-Oxley Act

c.)

•

 

 

 

d.)

The Financial Accounting Standards Board

 

4. Financial reporting standards for state and local government are determined by the governing body known as                                             , while international standards are compiled in the governing principles known as                                     .

 

 

a.)

FASB; GAO

 

b.)

SEC; GAAP

 

c.)

AICPA; IRS

 

d.)

GASB; IFRS

 

5. The governing body                           is responsible for developing the US governing principles known as                                 .

 

 

a.)

SEC; GAO

 

b.)

IRS; IFRS

 

FASB; GAAP

c.)

•

 

 

 

d.)

GASB; AICPA

 

6. The                      is the governing body which investigates and reports on the use of public funds while the                                 is the governing body responsible for collecting taxes.

 

 

a.)

GAO; IRS

 

b.)

IFRS; FASB

 

c.)

AICPA; GAAP

 

d.)

SEC; GASB

 

investor

7. Frank and Laura's role is that of a(n)                             . a.)

Frank and Laura dedicated $250,000 to one of their clients, hoping to receive returns in addition to that $250,000.

 

 

 

b.)

controller

 

c.)

shareholder

 

d.)

auditor

 

Fred is responsible for completing an objective analysis of the accounting processes and financial information for a company.   8. Fred's role is that of a(n)                          .

 

 

a.)

controller

 

auditor

b.)

•

 

 

 

c.)

bookkeeper

 

d.)

accountant

 

 

 

 

Janice works part-time and her sole responsibility is to document all of the accounting events that take place.   9. Janice's role is that of a(n)                           .

 

a.)

accountant

 

b.)

controller

 

c.)

auditor

 

bookkeeper

d.)

•

 

 

 

 

 

10. Which of the following scenarios correctly describes a LLC?     

a.)

Kim is not held personally responsible for the liabilities of her bakery.

 

b.)

Jeff uses a 990 form when filing taxes for his employer's organization.

 

c.)

When filing taxes for his gardening business, Pierre uses an 1120S form.

 

d.)

Shares of Jose's retail business cannot be purchased or traded publicly.

 

 

 

11. Which of the following scenarios correctly describes a non-profit organization?

 

 

a.)

Mike's shoe store does not sell stocks that are publicly traded.

 

Lonnie uses the profits of his organization to advance its mission.

b.)

•

 

 

c.)

Sally and her salon are treated the same from a legal perspective.

 

d.)

Bernie is protected from liability for anything beyond his $5,000 investment.

 

12. Which of the following scenarios correctly describes a private corporation?   

a.)

Jessica is liable for the total $10,000 invested in her company, but she is not accountable for her partner's behavior.

b.)

Craig's sporting goods store does not allow investors to purchase or publicly trade shares.

c.)

Brian's company does not pay taxes, but it reinvests income to meet its objectives.

d.)

LaShonda and her company are treated the same from a legal perspective.

 

13. Which of the following statements describes liabilities?

a.)

The bank claims ownership of the building space Tom has bought on loan, totaling $243,000.

b.)

Lauren can claim ownership of the restaurant equipment and delivery vehicles, totaling $28,000.

c.)

Barry spends $38,000 annually on advertising to increase profits.

 

d.)

The profits of all three of Karen's pizzerias total $162,000.

 

14. Which of the following statements describes assets?     

a.)

Business resources that are owned or can be claimed by others

 

Business resources that are owned or that can be claimed by the owner

b.)

•

 

 

c.)

The financial output incurred by a company to create profits

 

d.)

The net worth of the business, including profits and investments

 

15. Which of the following statements describes expenses?

a.)

Susan recorded $82,000 as profit last year.

 

b.)

Lori paid $12,500 to the bank for her business mortgage payment last year.

c.)

Terry recorded $64,000 in costs to operate his pizzerias last year.

 

d.)

Rob calculated the worth of his restaurant equipment to total $27,000.

 

16. Which of the following is true regarding temporary accounts? 

a.)

These accounts record the accumulated profits throughout the life of a business.

b.)

After determining which assets can be claimed by the owner, these accounts track resources that are owned by others.

c.)

After closing at the end of a period, these accounts are reopened at the beginning of the next period.

d.)

A rolling balance carries over from one accounting period to the next accounting period.

 

Kyle matched expenses with revenue earned in the current period.   17. Kyle was completing the                          phase of the accounting cycle.

 

a.)

journalizing

 

b.)

closing

 

c.)

adjusting

 

d.)

analyzing

 

18. Preparing financial statements is which phase of the accounting cycle?          

a.)

Reporting

 

b.)

Posting

 

c.)

Closing

 

d.)

Analyzing

 

Unit 1 Challenge 2

 

19. If liabilities are debited, which of the following situations occurred?    

a.)

The bakery earns interest on its investments.

 

The bakery pays back a bank loan.

b.)

•

 

 

 

c.)

The bakery buys five new standing mixers on account.

 

d.)

The bakery issues 100 shares of stock.

20. If equity is credited, which of the following situations occurred?          

a.)

The company pays cash to buy two new forklifts.

 

The owner invests $10,000 in the company to help it expand.

b.)

•

 

 

 

c.)

A client rents 10 storage units for three months on account.

 

d.)

The company downsizes by selling one building of storage units.

 

21. If revenues are credited, which of the following situations occurred?  

a.)

The company runs a promotion for $25 off your first rental.

 

b.)

The company has to pay $500 for repairs to its car lift.

 

c.)

The company takes out a $5,000 loan from the bank.

 

The company earns $1,000 in interest on its investments.

d.)

•

22.               decrease with credit and have a natural debit balance.

 

 

 

a.)

Liabilities

 

Assets

b.)

•

 

 

 

c.)

Revenues

 

d.)

Equity

 

23. Expenses have a natural               balance and increase with a debit. a.)

 

 

 

debit

 

b.)

zero

 

c.)

positive

 

d.)

credit

 

24. Revenues decrease with a debit and have a natural                     balance. a.)

 

 

 

credit

 

 

b.)

negative

 

c.)

debit

 

d.)

zero

 

 

 

25. Which of the following characteristics is associated with a general ledger?    

a.)

It is the initial documentation of a financial transaction as it originates.

 

b.)

It is categorized by account.

 

c.)

This is also known as the original book of entry.

 

d.)

If it is May, then the accounting transactions for February, March, April and May are listed.

 

26. Which of the following characteristics is NOT associated a general journal?   

a.)

Events are listed in chronological order.

 

b.)

It is used daily to record transactions.