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The Sarbanes-Oxley Act: (Points : 2)       

was prompted by corporate bankruptcies and audit failures.

       limits an auditor’s ability to provide non-audit services to a client.

       clarifies the responsibility of a company’s management for its financial statements.

       all of the above.

 

2. An element that is often present when fraud occurs is: (Points : 2)

       the availability of an opportunity.

       the existence of some form of pressure.

       the ability to rationalize.

       all of the above. 

3. Recognition of revenue may result in which of the following? (Points : 2)

       A decrease in a liability

       An increase in a liability

       An increase in assets

       Both A and C

 

4. Ohio Company provided services to a customer for $1,700 cash. As a result of this event: (Points : 2)

       total assets decreased.

       total liabilities increased.

       retained earnings increased.

       cash flows from financing activities increased.

 

5. Rowena Company spent cash to purchase equipment. As a result of this event: (Points : 2)

       total liabilities increased.

       total assets increased.

       net income increased.

       total assets were unchanged.

 

6. October 1, 2010, the company paid $3,600 in advance for a 12-month insurance policy that became effective on October 1. The amount of insurance expense reported on the income statement for calendar year 2010 would be: (Points : 2)

       $900

       $2,400

       $300

       $600

 

7. Hardin Company began operations in 2010. During the year, the following cash transactions

occurred:

Issued stock for $40,000

Borrowed $24,000 from bank

Provided services to customers for $53,000 cash

Paid back $8,000 of the loan from the bank

Paid rent expense, $9,000

Paid operating expenses, $29,000

   

Assuming that
Hardin engaged in no transactions during the year other than those listed above, what was the amount of net income or loss for the year? (Points : 2)

       $19,000 net income

       $15,000 net income

       $12,000 net income

       $11,000 net loss

  

8. Liabilities are shown on the: (Points : 2)

       income statement.

       statement of changes in stockholders’ equity.

       statement of cash flows.

       balance sheet.

 

9. As of December 31, 2009, Bueno Company had $1,000 in liabilities, $8,000 in common stock, and $2,500 in retained earnings. The total amount of assets on that date is: (Points : 2)

       $10,000

       $12,500

       $11,500

       $7,500

 

10. Which of the following statements about the Public Company Accounting Oversight Board (PCAOB) is not true? (Points : 2)

       The PCAOB was created by the Sarbanes-Oxley Act to regulate the accounting firms that audit financial statements of public companies.

       Independent auditors are required to register with the PCAOB.

       The PCAOB has the power to impose sanctions against a registered accounting firm.

       The PCAOB requires public accounting firms to conduct peer reviews of other such firms and make their report public.

 

11. Liabilities are: (Points : 2)

       claims of creditors.

       the owner’s interest in the company.

       claims of investors.

       both A and B.

 

12. The accounting equation may be written: (Points : 2)

       Revenues – Expenses = Net Income.

       Assets = Liabilities.

       Liabilities = Equity.

       Assets = Claims on Assets.

 

13. A creditor: (Points : 2)

       provides financial resources to a business in exchange for an ownership interest.

       provides labor resources to a business.

       lends financial resources to a business.

       is a resource user.

 

14. The amount of land owned by a business appears on which financial statement? (Points : 2)

       Income statement

       Statement of changes in stockholders’ equity

       Statement of cash flows

       Balance sheet

 

15. Accounting information is said to be reliable if: (Points : 2)

       it is based on recent (not longer than 6 months) information.

       it was prepared by someone with good credentials in accounting, such as a certified public accountant.

       it can be independently verified.

       it complies with rules and standards of the Internal Revenue Service.

 

16. An asset use transaction: (Points : 2)

       increases one asset and decreases another.

       decreases an asset and decreases a liability or equity.

       increases an asset and decreases a liability or equity.

       increases an asset and increases a liability or equity.

 

17. The result of the matching process is reported on which financial statement? (Points : 2)

       Balance Sheet

       Income Statement

       Statement of Changes in Stockholders’ Equity

       Statement of Cash Flows

 

18. Which of the following would be included in the “cash flows from financing activities” section of the statement of cash flows? (Points : 2)

       Collected cash from accounts receivable

       Finance Company loaned cash to another company

       Paid cash dividend to stockholders

       Purchased business insurance

 

19. Which of the following lists represents the correct sequence of stages in an accounting cycle? (Points : 2)

       Record transactions, prepare statements, adjust accounts, and close temporary accounts

       Prepare statements, close temporary accounts, record transactions, and adjust accounts

       Close temporary accounts, record transactions, prepare statements, and adjust accounts

       Record transactions, adjust accounts, prepare statements, and close temporary accounts

 

20. Which of the following accounts is a permanent account (an account that is not closed)? (Points : 2)

       Prepaid Insurance

       Service Revenue

       Salaries Expense

       Rent Expense