Exercises for Unit TwoMultiple Choices1. Which of the following users are not external users of accounting information?A. ManagersB. CreditorsC. InvestorsD. Analysts2. Which of the following is not an accounting standard-setting organization?A. FASBB. IASBC. MOFD. GAAP3. The diversity of interested parties leads to a logical division in the discipline of accounting: financial accounting and _______.A. cost accountingB. financial managementC. managerial accountingD. tax accounting4. CPAs provide services of the following except ________.A. auditB. consultingC. taxD. holding examination5. Which of the following service involves providing an independent report on the appropriateness of financial statements?A. AuditB. TaxC. ConsultingD. Budgeting6. Accountants employed by large corporations may work in the areas of the following except _______.A. product costing and pricingB. budgetingC. internal auditingD. product producing7. ______ information is trusted by users. ______ information is helpful in contrasting organizations.A. RelevantB. ReliableC. ComparableD. Separate8. The ______ assumption assumes that a business will continue in the same lines of the business as those in which it is currently involved.A. Going-concernB. accounting periodC. accounting entityD. monetary unit9. The ______ assumption assures that accounting information is reported at regular intervals.A. Going-concernB. accounting periodC. accounting entityD. monetary unit10. The purpose of ______ principle is to allow meaningful inter-period comparison of an entity.A. matchingB. consistencyC. materialityD. conservatismTrue-False1. Accounting is a set of concepts and techniques that are used to measure and report financial information about an legal unit.2. Business managers need accounting information to make sound leadership decisions.3. Managerial accounting is primarily concerned with providing information to parties outside the firm.4. External users control the actual preparation of financial reports and do not rely on CPA’s opinion on financial reports.5. Investors and creditors place great reliance on financial statements in making their investment and credit decisions.6. Code of ethics can resolve all problems of accounting ethics.7. If a department in one store has its own accounting system and records transactions with other department, then it is an accounting entity.8. Financial statements are presented in the currency of the country where an entity operates.9. The value of money is constant over time.10. The historical cost has an important advantage over other valuations: it is reliable.11. Companies account for liabilities on a cost basis.12. If accounting procedures are changed, the fact of the change and its effect on reported result are supposed to be disclosed in the financial statements.13. In general, expenses are not recorded as soon as they become probable.After several months of planning, Jasmine Worthy started s haircutting business called Expressions. The following events (next page) occurred during its first month of business.Indicate the effect of each transaction on the accounting equation, using the following tabular headings.a. On August 1, Worthy invested $3,000 cash and $15,000 of equipment in Expressions.b. On August 2, Expressions paid $600 cash for furniture for the shop.c. On August 3, Expressions paid $500 cash to rent space in a strip mall for August.d. On August 4, it purchased $1,200 of equipment on credit for the shop (using a long-term note payable).e. On August 5, Expressions opened for business. Cash received from haircutting services in the first week and a half of business (ended August 15) was $825.f. On August 15, it provided $100 of haircutting services on account.g. On August 17, it received $100 check for services previously rendered on account.h. On August 17, it paid $125 cash to an assistant for hours worked during the grand opening. i. Cash received from services provided during the second half of August was $930.j. On August 31, it paid a $400 installment toward principal on the note payable entered into on August 4.k. On August 31, Worthy made a $900 cash withdrawal from the company for personal use.Cash Furniture J. Worthy, + == + Explanation of change in equity Equipment + + Note Payable Assets Liabilities Owner’ s Equity。