Accounting Final Prt 1

Question 1

Accounting is an information and measurement system that identifies, records, and communicates relevant, reliable, and comparable information about an organization’s business activities

Answer 1

True

Question 2

Accounting is an information and measurement system that identifies, records, and communicates relevant, reliable, and comparable information about an organization’s business activities

Answer 2

True

Question 3

Bookkeeping is the recording of transactions and events and is only part of accounting.

Answer 3

True

Question 4

An accounting information system communicates data to help businesses make better decisions

Answer 4

True

Question 5

Managerial accounting is the area of accounting that provides internal reports to assist the decision making needs of internal users.

Answer 5

True

Question 6

Internal operating activities include research and development, distribution, and human resources.

Answer 6

True

Question 7

The primary objective of financial accounting is to provide general purpose financial statements to help external users analyze and interpret an organization’s activities.

Answer 7

True

Question 8

External auditors examine financial statements to verify that they are prepared according to generally accepted accounting principles.

Answer 8

True

Question 9

External users include lenders, shareholders, customers, and regulators.

Answer 9

True

Question 10

Regulators often have legal authority over certain activities of organizations.

Answer 10

True

Question 11

Internal users include lenders, shareholders, brokers and managers.

Answer 11

False

Managers, officers, internal auditors, sales staff, budget officers, and controllers

Question 12

Opportunities in accounting include auditing, consulting, market research, and tax planning.

Answer 12

True

Question 13

Identifying the proper ethical path is easy.

Answer 13

False.

You have to use your own personal ethics to recognize the problem, analyze options and choose the best option. This can be very hard.

Question 14

Good ethics are good business.

Answer 14

True

Question 15

A partnership is a business owned by two or more people.

Answer 15

True

Question 16

Owners of a corporation are called shareholders or stockholders.

Answer 16

True

Question 17

In the partnership form of business, the owners are called shareholders.

Answer 17

False

They are called Partners

Question 18

The statement of financial position shows a company’s net income or loss due to earnings activities over a period of time.

Answer 18

False

also referred to as a balance sheet, reports on a company’s assets, liabilities, and ownership equity at a given point in time.

Question 19

The International Accounting Standards Board (IASB) is an independent group which issues International Financial Reporting Standards (IFRS).

Answer 19

True

Question 20

The business entity principle means that a business will continue operating for an indefinite period of time

Answer 20

False

is where the business is seen as an entity separate from its owner(s) that keeps and presents financial records and prepares the final accounts and financial statements. The accounting is kept for each entity as a whole (groups of companies must present consolidated accounts and consolidated financial statements).

Question 21

Generally accepted accounting principles are the basic assumptions, concepts, and guidelines for preparing financial statements.

Answer 21

True

Question 22

The business entity assumption means that a business is accounted for separately from other business entities, including its owner or owners.

Answer 22

True

Question 23

As a general rule, revenues should not be recognized in the accounting records until it is received in cash.

Answer 23

Fasle

Question 24

Specific accounting principles are basic assumptions, concepts, and guidelines for preparing financial statements and arise out of long-used accounting practice.

Answer 24

False

Specific principles are the basic principles or detailed rules used in reporting business transactions and events.

Question 25

General accounting principles arise from long-used accounting practices.

Answer 25

True

Question 26

A sole proprietorship is a business owned by one or more persons.

Answer 26

False

It is owned by a single owner.

Question 27

Unlimited liability is an advantage of a sole proprietorship

Answer 27

False

Question 28

Understanding generally accepted accounting principles is not necessary to use and interpret financial statements.

Answer 28

False

Question 29

The International Accounting Standards board (IASB) has the authority to impose its standards on companies around the world.

Answer 29

False

The IASB does not have that authority.

Question 30

Objectivity means that financial information is supported by independent unbiased evidence.

Answer 30

True

Question 31

The idea that a business will continue to operate instead of being closed or sold underlies the going-concern assumption.

Answer 31

True

Question 32

According to the cost principle, it is preferable for managers to report an estimate of an asset’s value.

Answer 32

False

Question 33

The monetary unit assumption means that all international transactions must be expressed in dollars.

Answer 33

False

Question 34

The International Accounting Standards Board (IASB) is the government group that establishes reporting requirements for companies that issue shares to the public.

Answer 34

False

Question 35

Limited liability is the main advantage of partnerships.

Answer 35

False

Question 36

In the U.S., the Securities and Exchange Commission (SEC) is a government agency that has legal authority to establish GAAP.

Answer 36

True

Question 37

The three common forms of business ownership include sole proprietorship, partnership, and non-profit

Answer 37

False

Question 38

The three major types of business activities are operating, financing, and investing.

Answer 38

True

Question 39

Planning is defining an organization’s ideas, goals, and actions.

Answer 39

True

Question 40

Strategic management is the process of determining the right mix of operating activities for the type of organization, its plans, and its markets.

Answer 40

True

Question 41

Planning activities are the means an organization uses to pay for resources like land, buildings, and equipment to carry out its plans.

Answer 41

False

Question 42

Investing activities are the acquiring and disposing of resources that an organization uses to acquire and sell its products or services.

Answer 42

True

Question 43

Owner financing refers to resources contributed by creditors or lenders.

Answer 43

False

Question 44

Revenues are increases in equity from a company’s earning activities.

Answer 44

True

Question 45

A net loss occurs when revenues exceed expenses.

Answer 45

False

Question 46

Net income occurs when revenues exceed expenses.

Answer 46

True

Question 47

Liabilities are the owner’s claim on assets.

Answer 47

False

Question 48

Assets are the resources of a company and are expected to yield future benefits.

Answer 48

True

Question 49

Dividends are expenses.

Answer 49

False

Question 50

The accounting equation can be restated as: Assets - Equity = Liabilities.

Answer 50

True

Question 51

The accounting equation implies that: Assets + Liabilities = Equity

Answer 51

False

Assets = Liabilities + Equity

Question 52

Owner’s investments from receiving shares in their companies are increases in equity from a company’s earnings activities.

Answer 52

False

Question 53

Every business transaction leaves the accounting equation in balance.

Answer 53

True

Question 54

An external transaction is an exchange of value within an organization.

Answer 54

False

Question 55

From an accounting perspective, an event is a happening that affects the accounting equation, but cannot be measured.

Answer 55

False

Question 56

Equity is increased when cash is received from customers in payment of previously recorded accounts receivable.

Answer 56

False

Question 57

Receiving shares from investing in a business always creates an asset (cash), a liability (note payable), and equity (investment.)

Answer 57

False

Question 58

Return on assets is often stated in ratio form as the amount of average total assets divided by income.

Answer 58

False

Question 59

Return on assets is also known as return on investment.

Answer 59

True

Question 60

Return on assets is useful to decision makers for evaluating management, analyzing and forecasting profits, and in planning activities.

Answer 60

True

Question 61

Arrow’s net income of $117 million and average assets of $1,400 million results in a return on assets of 8.36%.

Answer 61

True

Question 62

Return on assets reflects the effectiveness of a company’s ability to generate profit through productive use of its assets.

Answer 62

True

Question 63

Risk is the uncertainty about the return we expect to earn.

Answer 63

True

Question 64

Generally the lower the risk, the lower the return that can be expected.

Answer 64

True

Question 65

Compared to shares, bonds generally provide higher return and lower risk to investors.

Answer 65

False

Question 66

The four basic financial statements include the income statement (statement of comprehensive income), statement of changes in equity, statement of financial position, and statement of cash flows.

Answer 66

True

Question 67

An income statement reports on investing and financing activities.

Answer 67

False

Question 68

A statement of financial position covers a period of time such as a month or year.

Answer 68

False

Question 69

The income statement displays revenues earned and expenses incurred over a specified period of time due to earnings activities.

Answer 69

True

Question 70

The statement of cash flows shows the net effect of revenues and expenses for a reporting period.

Answer 70

False

Question 71

The income statement shows the financial position of a business on a specific date.

Answer 71

False

Question 72

The first section of the income statement reports cash flows from operating activities.

Answer 72

False

Question 73

The statement of financial position is based on the accounting equation.

Answer 73

True

Question 74

Investing activities involve the buying and selling of assets such as land and equipment that are held for long-term use in the business.

Answer 74

True

Question 75

Operating activities include long-term borrowing and repaying cash from lenders, and cash investments

Answer 75

False

Question 76

The purchase of supplies appears on the statement of cash flows as an investing activity because it involves the purchase of assets.

Answer 76

False

Question 77

The income statement reports on operating activities at a point in time.

Answer 77

False

Question 78

The statement of cash flows identifies cash flows separated into operating, investing, and financing activities over a period of time.

Answer 78

True

Question 79

Ending equity reported on the statement of changes in equity is calculated by adding beginning equity and net losses and subtracting net incomes and dividends

Answer 79

False

Question 80

Accounting is an information and measurement system that does all of the following except:
A. Identifies business activities.
B. Records business activities.
C. Communicates business activities.
D. Does not use technology to improve accuracy in reporting.
E. Helps people make better decisions

Answer 80

D. Does not use technology to improve accuracy in reporting.

Question 81

Technology:
A. Has replaced accounting.
B. Has not changed the work that accountants do.
C. Has closely linked accounting with consulting, planning, and other financial services.
D. In accounting has replaced the need for decision makers.
E. In accounting is only available to large corporations.

Answer 81

C. Has closely linked accounting with consulting, planning, and other financial services.

Question 82

The primary objective of financial accounting is:
A. To serve the decision-making needs of internal users.
B. To provide financial statements to help external users analyze an organization’s activities.(Correct)
C. To monitor and control company activities.
D. To provide information on both the costs and benefits of looking after products and services.
E. To know what, when, and how much to produce

Answer 82

B. To provide financial statements to help external users analyze an organization’s activities.

Question 83

The area of accounting aimed at serving the decision making needs of internal users is:
A. Financial accounting.
B. Managerial accounting. 
C. External auditing.
D. IASB reporting.
E. Bookkeeping.

Answer 83

B. Managerial accounting.

Question 84

External users of accounting information include all of the following except: 
A. Shareholders.
B. Customers.
C. Purchasing managers. 
D. Government regulators.
E. Creditors.

Answer 84

C. Purchasing managers. (Correct)

Question 85

All of the following regarding a Certified Public Accountant are True except:
A. Must meet education and experience requirements.
B. Must pass an examination.
C. Must exhibit ethical character.
D. May also be a Certified Management Accountant.
E. Cannot hold any certificate other than a CPA.

Answer 85

E. Cannot hold any certificate other than a CPA.

Question 86

Ethical behavior requires:
A. That auditors’ pay not depend on the success of the client’s business.
B. Auditors to invest in businesses they audit.
C. Analysts to report information favorable to their companies.
D. Managers to use accounting information to benefit themselves.
E. That auditors’ pay depend on the success of the client’s business.

Answer 86

A. That auditors’ pay not depend on the success of the client’s business. (Correct)

Question 87

Social responsibility:
A. Is a concern for the impact of our actions on society.
B. Is a code that helps in dealing with confidential information.
C. Is required by the SEC.
D. Requires that all businesses conduct social audits.
E. Is limited to large companies.

Answer 87

A. Is a concern for the impact of our actions on society. (Correct)

Question 88

All of the following are True regarding ethics except:
A. Ethics are beliefs that separate right from wrong.
B. Ethics rules are often set for CPAs.
C. Ethics do not affect the operations or outcome of a company.
D. Are critical in accounting.
E. Ethics can be hard to apply.

Answer 88

C. Ethics do not affect the operations or outcome of a company..

Question 89

The accounting concept that requires financial statement information to be supported by independent, unbiased evidence other than someone's belief or opinion is: 
A. Business entity assumption.
B. Monetary unit assumption.
C. Going-concern assumption.
D. Time-period assumption.
E. Objectivity.

Answer 89

E. Objectivity. (Correct)

Question 90

89. A corporation
    : A. Is a business legally separate from its owners.
    B. Is controlled by the IASB.
    C. Has shareholders who have unlimited liability for the acts of the corporation.
    D. Is the same as a limited liability partnership.
    E. Is not subject to double taxation.

Answer 90

A. Is a business legally separate from its owners.

Question 91

90. The group that attempts to create more harmony among the accounting practices of different countries is the: 
A. AICPA.
B. IASB.
C. CAP.
D. SEC.
E. FASB.

Answer 91

B. IASB

Question 92

91. The private group that currently has the authority to establish generally accepted accounting principles in the United States is the: 
A. APB.
B. FASB.
C. AAA.
D. AICPA.
E. SEC.

Answer 92

B. FASB.

Question 93

92. The accounting assumption that requires every business to be accounted for separately from other business entities, including its owner or owners is known as the: 
A. Time-period assumption.
B. Business entity assumption.
C. Going-concern assumption.
D. Revenue recognition principle.
E. Cost principle.

Answer 93

B. Business entity assumption.

Question 94

93. The rule that requires financial statements to reflect the assumption that the business will continue operating instead of being closed or sold, unless evidence shows that it will not continue, is the: 
A. Going-concern assumption.
B. Business entity assumption.
C. Objectivity principle.
D. Cost Principle.
E. Monetary unit assumption.

Answer 94

A. Going-concern assumption.

Question 95

94. If a parcel of land that was originally acquired for $85,000 is offered for sale at $150,000, is assessed for tax purposes at $95,000, is recognized by its purchasers as easily being worth $140,000, and is sold for $137,000, the land should be recorded in the purchaser's books at: 
A. $95,000.
B. $137,000.
C. $138,500.
D. $140,000.
E. $150,000.

Answer 95

B. $137,000

Question 96

To include the personal assets and transactions of a business's owner in the records and reports of the business would be in conflict with the: 
A. Objectivity principle.
B. Monetary unit assumption.
C. Business entity assumption.
D. Going-concern assumption.
E. Revenue recognition principle.

Answer 96

C. Business entity assumption.

Question 97

The accounting principle that requires accounting information to be based on actual cost and requires assets and services to be recorded initially at the cash or cash-equivalent amount given in exchange, is the: 
A. Accounting equation.
B. Cost principle.
C. Going-concern assumption.
D. Realization principle.
E. Business entity assumption.

Answer 97

B. Cost principle.

Question 98

The rule that (1) requires revenue to be recognized at the time it is earned, (2) allows the inflow of assets associated with revenue to be in a form other than cash, and (3) measures the amount of revenue as the cash plus the cash equivalent value of any noncash assets received from customers in exchange for goods or services, is called the: 
A. Going-concern assumption.
B. Cost principle.
C. Revenue recognition principle.
D. Objectivity principle.
E. Business entity assumption.

Answer 98

C. Revenue recognition principle.

Question 99

The question of when revenue should be recognized on the income statement (according to GAAP) is addressed by the: 
A. Revenue recognition principle.
B. Going-concern assumption.
C. Objectivity principle.
D. Business entity assumption.
E. Cost principle.

Answer 99

A. Revenue recognition principle.

Question 100

The International Accounting Standards Board (IASB)
A. Hopes to create harmony among accounting practices of different countries.
B. Is the government group that establishes reporting requirements for companies that issue shares to the public.
C. Has the authority to impose its standards on companies.
D. Is the only source of generally accepted accounting principles (GAAP).
E. Only applies to companies that are members of the European Union.

Answer 100

A. Hopes to create harmony among accounting practices of different countries.

Question 101

The Maxim Company acquired a building for $500,000. Maxim had the building appraised, and found that the building was easily worth $575,000. The seller had paid $300,000 for the building 6 years ago. Which accounting principle would require Maxim to record the building on its records at $500,000? 
A. Monetary unit assumption.
B. Going-concern assumption.
C. Cost principle.
D. Business entity assumption.
E. Revenue recognition principle.

Answer 101

C. Cost principle.

Question 102

On December 15 of the current year, Myers Legal Services signed a $50,000 contract with a client to provide legal services to the client in the following year. Which accounting principle would require Myers Legal Services to record the legal fees revenue in the following year and not the year the cash was received? 
A. Monetary unit assumption.
B. Going-concern assumption.
C. Cost principle.
D. Business entity assumption.
E. Revenue recognition principle.

Answer 102

E. Revenue recognition principle.

Question 103

Marian Mosely is the owner of Mosely Accounting Services. Which accounting principle requires Marian to keep her personal financial information separate from the financial information of Mosely Accounting Services? 
A. Monetary unit assumption.
B. Going-concern assumption.
C. Cost principle.
D. Business entity assumption.
E. Matching principle.

Answer 103

D. Business entity assumption.

Question 104

A partnership: 
A. are usually managed by the partners themselves.
B. Is subject to double taxation.
C. Has owners called shareholders.
D. Is the same as a corporation.
E. May only have two partners.

Answer 104

A. are usually managed by the partners themselves.

Question 105

104. A partnership:
     A. Is also called a sole proprietorship.
     B. Can have two or more people as partners.
     C. Has to have a written agreement in order to be legal.
     D. Is a legal organization separate from its owners.
     E. Has owners called shareholders.

Answer 105

B. Can have two or more people as partners.

Question 106

Which of the following accounting principles would require that all goods and services purchased be recorded at cost? 
A. Going-concern assumption.
B. Matching principle.
C. Cost principle.
D. Business entity assumption.
E. Consideration assumption.

Answer 106

C. Cost principle.

Question 107

Which of the following accounting principles prescribes that a company record its expenses incurred to generate the revenue reported? 
A. Going-concern assumption.
B. Matching principle.
C. Cost principle.
D. Business entity assumption.
E. Consideration assumption.

Answer 107

B. Matching principle

Question 108

Revenue is properly recognized:
A. When the customer’s order is received.
B. Only if the transaction creates an account receivable.
C. At the end of the accounting period.
D. Upon completion of the sale or when services have been performed and the business obtains the right to collect the sales price.
E. When cash from a sale is received.

Answer 108

D. Upon completion of the sale or when services have been performed and the business obtains the right to collect the sales price

Question 109

If a parcel of land that was originally purchased for $85,000 is offered for sale at $150,000, is assessed for tax purposes at $95,000, is recognized by its purchasers as easily being worth $140,000, and is sold for $137,000, the land account transaction amount to handle the sale of the land in the seller's books is: 
A. $85,000 increase.
B. $85,000 decrease.
C. $137,000 increase.
D. $137,000 decrease.
E. $140,000 decrease.

Answer 109

B. $85,000 decrease.

Question 110

If a parcel of land that was originally purchased for $85,000 is offered for sale at $150,000, is assessed for tax purposes at $95,000, is recognized by its purchasers as easily being worth $140,000, and is sold for $137,000. What is the effect of the sale on the accounting equation for the seller?
A. Assets increase $52,000; equity increases $52,000.
B. Assets increase $85,000; equity increases $85,000.
C. Assets increase $137,000; equity increases $137,000.
D. Assets increase $140,000; equity increases $140,000.
E. Assets decrease $85,000; equity decreases $85,000.

Answer 110

A. Assets increase $52,000; equity increases $52,000.

*Price sold - Original cost = Assets increase/decrease; Equity increase/decrease
$137,000 - $85,000 = $52,000

Question 111

110. If a parcel of land that was originally purchased for $85,000 is offered for sale at $150,000, is assessed for tax purposes at $95,000, is recognized by its purchasers as easily being worth $140,000, and is sold for $137,000. At the time of the sale, assume that the seller still owed $30,000 to TrustOne Bank on the land that was purchased for $85,000. Immediately after the sale, the seller paid off the loan to TrustOne Bank. What is the effect of the sale and the payoff of the loan on the accounting equation?
     A. Assets increase $52,000; equity increases $22,000; liabilities decrease $30,000
     B. Assets increase $52,000; equity increases $30,000; liabilities decrease $30,000
     C. Assets increase $22,000; equity increases $52,000; liabilities decrease $30,000
     D. Assets decrease $30,000; equity decreases $30,000; liabilities decrease $30,000
     E. Assets decrease $55,000; equity decreases $55,000; liabilities decrease $30,000
     $137,000 - $85,000 - 30,000 = 22,000

Answer 111

C. Assets increase $22,000; equity increases $52,000; liabilities decrease $30,000

$137,000 - $85,000 - 30,000 = 22,000

22,000 is your asset because of the 30,000 owed.
Equity will increase by 52,000 because that is your profit from the sale and your liability decreases because you no longer owe the 30,000.

Question 112

An example of a financing activity is: 
A. Buying office supplies.
B. Obtaining a long-term loan.
C. Buying office equipment.
D. Selling inventory.
E. Buying land.

Answer 112

B. Obtaining a long-term loan.

Question 113

An example of an operating activity is: 
A. Paying wages.
B. Purchasing office equipment.
C. Borrowing money from a bank.
D. Selling shares.
E. Paying off a loan.

Answer 113

A. Paying wages

Question 114

Operating activities:
A. Are the means organizations use to pay for resources like land, buildings and equipment.
B. Involve using resources to research, develop, purchase, produce, distribute and market products and services.
C. Involve acquiring and disposing of resources that a business uses to acquire and sell its products or services.
D. Are also called asset management.
E. Are also called strategic management.

Answer 114

B. Involve using resources to research, develop, purchase, produce, distribute and market products and services.

Question 115

An example of an investing activity is: 
A. Paying wages of employees.
B. Dividends paid to shareholders.
C. Purchase of land.
D. Selling inventory.
E. Issuance of shares.

Answer 115

C. Purchase of land.

Question 116

Net Income:
A. Decreases equity.
B. Represents the amount of assets owners put into a business.
C. Equals assets minus liabilities.
D. Is the excess of revenues over expenses.
E. Represents owners’ claims against assets.

Answer 116

D. Is the excess of revenues over expenses.

Question 117

If equity is $300,000 and liabilities are $192,000, then assets equal: 
A. $108,000.
B. $192,000.
C. $300,000.
D. $492,000.
E. $792,000.
Assets = $192,000 + $300,000 = $492,000

Answer 117

D. $492,000.

Assets = Liabilities + Equity
Assets = $192,000 + $300,000 = $492,000

Question 118

Resources that are expected to yield future benefits are: 
A. Assets.
B. Revenues.
C. Liabilities.
D. Equity.
E. Expenses.

Answer 118

A. Assets.

Question 119

Increases in equity from a company's earnings activities are: 
A. Assets.
B. Revenues.
C. Liabilities.
D. Equity.
E. Expenses.

Answer 119

B. Revenues.

Question 120

The difference between a company's assets and its liabilities, or net assets is: 
A. Net income.
B. Expense.
C. Equity.
D. Revenue.
E. Net loss.

Answer 120

C. Equity.

Question 121

Creditors' claims on the assets of a company are called: 
A. Net losses.
B. Expenses.
C. Revenues.
D. Equity.
E. Liabilities.

Answer 121

E. Liabilities.

Question 122

121. Decreases in equity that represent costs of assets or services used to earn revenues are called: 
A. Liabilities.
B. Equity.
C. Dividends.
D. Expenses.
E. Share capital.

Answer 122

D. Expenses.

Question 123

The description of the relation between a company's assets, liabilities, and equity, which is expressed as Assets = Liabilities + Equity, is known as the: 
A. Income statement equation.
B. Accounting equation.
C. Business equation.
D. Return on equity ratio.
E. Net income.

Answer 123

B. Accounting equation

Question 124

Revenues are:
A. The same as net income.
B. The excess of expenses over assets.
C. Resources owned or controlled by a company.
D. The increase in equity from a company’s earning activities.
E. The costs of assets or services used.

Answer 124

D. The increase in equity from a company’s earning activities

Question 125

If assets are $99,000 and liabilities are $32,000, then equity equals: 
A. $32,000.
B. $67,000.
C. $99,000.
D. $131,000.
E. $198,000.
Equity = $99,000 - $32,000 = $67,000

Answer 125

B. $67,000.

Equity = $99,000 - $32,000 = $67,000

Question 126

Another name for equity is: 
A. Net income.
B. Expenses.
C. Net assets.
D. Revenue.
E. Net loss.

Answer 126

C. Net assets.

Question 127

The excess of expenses over revenues for a period is: 
A. Net assets.
B. Equity.
C. Net loss.
D. Net income.
E. A liability.

Answer 127

C. Net loss.

Question 128

Distribution of assets to shareholders is called a(n):: 
A. Liability.
B. Dividend.
C. Expense.
D. Contribution.
E. Investment.

Answer 128

B. Dividend.

Question 129

Distributions of assets by a company to its shareholders are called:
A. Dividends.
B. Expenses.
C. Assets.
D. Retained earnings.
E. Net Income.

Answer 129

A. Dividends.

Question 130

The assets of a company total $700,000; the liabilities, $200,000. What are the claims of the shareholders?
A. $900,000.
B. $700,000.
C. $500,000.
D. $200,000.
E. It is impossible to determine unless the amount of issuance of shares is known.

Answer 130

C. $500,000.

$700,000 - $200,000 = $500,000

Question 131

On June 30 of the current year, the assets and liabilities of Phoenix, Inc. are as follows: Cash $20,500; Accounts Receivable, $7,250; Supplies, $650; Equipment, $12,000; Accounts Payable, $9,300. What is the amount of equity as at July 1 of the current year? 
A. $8,300
B. $13,050
C. $20,500
D. $31,100
E. $40,400

Answer 131

D. $31,100

$20,500 + $7,250 + $650 + $12,000 - $9,300 = $31,100

Question 132

Assets created by selling goods and services on credit are: 
A. Accounts payable.
B. Accounts receivable.
C. Liabilities.
D. Expenses.
E. Equity.

Answer 132

B. Accounts receivable

Question 133

An exchange of value between two entities is called: 
A. The accounting equation.
B. Recordkeeping or bookkeeping.
C. An external transaction.
D. An asset.
E. Net Income.

Answer 133

C. An external transaction

Question 134

Photometer Company paid off $30,000 of its accounts payable in cash. What would be the effects of this transaction on the accounting equation?
A. Assets, $30,000 increase; liabilities, no effect; equity, $30,000 increase.
B. Assets, $30,000 decrease; liabilities, $30,000 decrease; equity, no effect.
C. Assets, $30,000 decrease; liabilities, $30,000 increase; equity, no effect.
D. Assets, no effect; liabilities, $30,000 decrease; equity, $30,000 increase.
E. Assets, $30,000 decrease; liabilities, no effect; equity $30,000 decrease.

Answer 134

B. Assets, $30,000 decrease; liabilities, $30,000 decrease; equity, no effect.

Question 135

How would the accounting equation of Boston Company be affected by the billing of a client for $10,000 of consulting work completed?
A. +$10,000 accounts receivable, -$10,000 accounts payable.
B. +$10,000 accounts receivable, +$10,000 accounts payable.
C. +$10,000 accounts receivable, +$10,000 cash.
D. +$10,000 accounts receivable, +$10,000 revenue.
E. +$10,000 accounts receivable, -$10,000 revenue.

Answer 135

D. +$10,000 accounts receivable, +$10,000 revenue.

Question 136

Zion Company has assets of $600,000, liabilities of $250,000, and equity of $350,000. It buys office equipment on credit for $75,000. What would be the effects of this transaction on the accounting equation?
A. Assets increase by $75,000 and expenses increase by $75,000.
B. Assets increase by $75,000 and expenses decrease by $75,000.
C. Liabilities increase by $75,000 and expenses decrease by $75,000.
D. Assets decrease by $75,000 and expenses decrease by $75,000.
E. Assets increase by $75,000 and liabilities increase by $75,000.

Answer 136

E. Assets increase by $75,000 and liabilities increase by $75,000.

Question 137

Viscount Company collected $42,000 cash on its accounts receivable. The effects of this transaction as reflected in the accounting equation are:
A. Total assets decrease and equity increases.
B. Both total assets and total liabilities decrease.
C. Total assets, total liabilities, and equity are unchanged.
D. Both total assets and equity are unchanged and liabilities increase.
E. Total assets increase and equity decreases.

Answer 137

C. Total assets, total liabilities, and equity are unchanged.

Question 138

If the liabilities of a business increased $75,000 during a period of time and the equity in the business decreased $30,000 during the same period, the assets of the business must have:
A. Decreased $105,000.
B. Decreased $45,000.
C. Increased $30,000.
D. Increased $45,000.
E. Increased $105,000.
Change in Assets = Change in Liabilities + Change in Equity
Change in Assets = $75,000 + (-$30,000) = +$45,000

Answer 138

D. Increased $45,000.

Question 139

If the assets of a business increased $89,000 during a period of time and its liabilities increased $67,000 during the same period, equity in the business must have:
A. Increased $22,000.
B. Decreased $22,000.
C. Increased $89,000.
D. Decreased $156,000.
E. Increased $156,000.
Change in Assets = Change in Liabilities + Change in Equity
Change in Equity = + $89,000 - $67,000 = +$22,000

Answer 139

A. Increased $22,000.

Question 140

If the liabilities of a company increased $74,000 during a period of time and equity in the company decreased $19,000 during the same period, what was the effect on the assets? 
A. Assets would have increased $55,000.
B. Assets would have decreased $55,000.
C. Assets would have increased $19,000.
D. Assets would have decreased $19,000.
E. None of these.

Answer 140

A. Assets would have increased $55,000.

Assets = Liabilities + Equity
Assets = $74,000 + (-$19,000) = $55,000

Question 141

If a company paid $38,000 of its accounts payable in cash, what was the effect on the assets, liabilities, and equity?
A. Assets would decrease $38,000, liabilities would decrease $38,000, and equity would decrease $38,000.
B. Assets would decrease $38,000, liabilities would decrease $38,000, and equity would increase $38,000.
C. Assets would decrease $38,000, liabilities would decrease $38,000, and equity would not change.
D. There would be no effect on the accounts because the accounts are affected by the same amount.
E. None of these.

Answer 141

C. Assets would decrease $38,000, liabilities would decrease $38,000, and equity would not change.

Question 142

If assets are $365,000 and equity is $120,000, then liabilities are: 
A. $120,000.
B. $245,000.
C. $365,000.
D. $485,000.
E. $610,000.

Answer 142

B. $245,000

Liabilities = $365,000 - $120,000 = $245,000

Question 143

Reston had income of $150 million and average invested assets of $1,800 million. Its return on assets is: 
A. 8.3%.
B. 83.3%.
C. 12%.
D. 120%.
E. 16.7%.

Answer 143

A. 8.3%.

$150 million/$1,800 million = 8.3%

Question 144

Nick's had income of $350 million and average invested assets of $2,000 million. Its ROA is: 
A. 1.8%.
B. 35%.
C. 17.5%.
D. 5.7%.
E. 3.5%.

Answer 144

C. 17.5%

$350 million/$2,000 million = 17.5%

Question 145

FastLane has net income of $18,955, and assets at the beginning of the year of $200,000. Assets at the end of the year total $246,000. Compute its return on assets. 
A. 7.7%.
B. 8.5%.
C. 9.5%.
D. 11.8%.
E. 13.0%.

Answer 145

B. 8.5%

$18,955/[($200,000 +$246,000)/2] = $18,955/$223,000 = 8.5%

Question 146

Harris Co. has a net income of $43,000, assets at the beginning of the year are $250,000 and assets at the end of the year are $300,000. Compute its return on assets. 
A. 8.4%
B. 17.2%
C. 14.3%
D. 15.6%
E. 1.5%

Answer 146

D. 15.6%

$43,000/(($250,000 + $300,000)/2) = 15.6%

Question 147

Government bonds are usually: 
A. High-risk and high-return investments.
B. Low-risk and low-return investments.
C. High-risk and low-return investments.
D. Low-risk and high-return investments.
E. High risk and no-return investments.

Answer 147

B. Low-risk and low-return investments.

Question 148

Risk is:
A. Net income divided by average total assets.
B. The reward for investment.
C. The uncertainty about the expected return to be earned.
D. Unrelated to expected return.
E. Derived from the idea of getting something back from an investment.

Answer 148

C. The uncertainty about the expected return to be earned.

Question 149

The statement of cash flows reports all of the following except:
A. Cash flows from operating activities.
B. Cash flows from investing activities.
C. Cash flows from financing activities.
D. The net increase or decrease in assets for the period reported.
E. The net increase or decrease in cash for the period reported.

Answer 149

D. The net increase or decrease in assets for the period reported.

Question 150

The basic financial statements include all of the following except:
A. Statement of Financial Position (Balance Sheet).
B. Income Statement (Statement of Comprehensive Income).
C. Statement of changes in equity.
D. Statement of Cash Flows.
E. Trial Balance.

Answer 150

E. Trial Balance.

Question 151

The statement of changes in equity:
A. Reports how equity changes at a point in time.
B. Reports how equity changes over a period of time.
C. Reports on cash flows for operating, financing, and investing activities over a period of time.
D. Reports on cash flows for operating, financing, and investing activities at a point in time.
E. Reports on amounts for assets, liabilities, and equity at a point in time.

Answer 151

B. Reports how equity changes over a period of time.

Question 152

The financial statement that reports whether the business earned a profit and also lists the revenues and expenses is called:
A. A Statement of financial position (Balance Sheet).
B. A Statement of changes in equity.
C. A Statement of cash flows.
D. An Income statement (Statement of Comprehensive Income).
E. A Statement of financial changes.

Answer 152

D. An Income statement (Statement of Comprehensive Income).

Question 153

A statement of financial position lists:
A. The types and amounts of the revenues and expenses of a business.
B. Only the information about what happened to equity during a time period.
C. The types and amounts of assets, liabilities, and equity of a business as at a specific date.
D. The inflows and outflows of cash during the period.
E. The assets and liabilities of a company but not the equity.

Answer 153

C. The types and amounts of assets, liabilities, and equity of a business as at a specific date.

Question 154

A financial statement providing information that helps users understand a company’s financial status, and which lists the types and amounts of assets, liabilities, and equity as at a specific date, is called a(n):
A. Balance sheet or statement of financial position.
B. Income statement or statement of comprehensive income.
C. Statement of cash flows.
D. Statement of changes in equity.
E. Financial Status Statement.

Answer 154

A. Balance sheet or statement of financial position.

Question 155

The financial statement that identifies where a company's cash came from and where it went during the period is the: 
A. Statement of financial position.
B. Statement of cash flows.
C. Balance sheet.
D. Income statement.
E. Statement of changes in equity.

Answer 155

B. Statement of cash flows.

Question 156

The financial statement that shows the beginning equity; the changes in equity that resulted from issuance of shares, net income (or net loss); dividends; and the ending equity, is the:
A. Statement of financial position.
B. Statement of cash flows.
C. Balance sheet.
D. Income statement.
E. Statement of changes in equity.

Answer 156

E. Statement of changes in equity.

Question 157

Issuance of shares for cash is listed on which of the following financial statements?
A. Balance sheet.
B. Income statement.
C. Statement of changes in equity only.
D. Statement of cash flows only.
E. Statement of changes in equity and statement of cash flows.

Answer 157

E. Statement of changes in equity and statement of cash flows.

Question 158

Accounts payable appear on which of the following statements? 
A. Balance sheet.
B. Income statement.
C. Statement of changes in equity.
D. Statement of cash flows.
E. Transaction statement.

Answer 158

A. Balance sheet

Question 159

The income statement reports all of the following except:
A. Revenues earned by a business.
B. Expenses incurred by a business.
C. Assets owned by a business.
D. Net income or loss earned by a business.
E. The time period over which the earnings occurred.

Answer 159

C. Assets owned by a business

Question 160

Use the following information as at December 31 to determine equity.
Liabilities........$141,000
Cash..............    57,000
Equipment......  206,000
Building..........  175,000
A. $57,000.
B. $141,000.
C. $297,000.
D. $438,000.
E. $579,000.

Answer 160

C. $297,000.

Assets = $57,000 (cash) + $206,000 (Equipment) + $175,000 (Building) = $438,000

Equity = $438,000 (Assets) - $141,000 (Liabilities) = $297,000

Question 161

Determine the net income of a company for which the following information is available for the month of May.
Employee salaries expense…..$180,000
Interest expenses………………. 10,000
Rent expense……………………. 20,000
Consulting revenue……………… 400,000

A. $190,000.
B. $210,000.
C. $230,000.
D. $400,000.
E. $610,000.

Answer 161

A. $190,000.

Expenses: $180,000 + $10,000 + $20,000 = $210,000
Net income = $400,000 - $210,000 = $190,000

Question 162

A company acquires equipment for $75,000 cash. This represents a(n) 
A. Operating activity.
B. Investing activity.
C. Financing activity.
D. Revenue activity.
E. Expense activity.

Answer 162

B. Investing activity.

Question 163

A company borrows $125,000 from the Eastside Bank and receives the loan proceeds in cash. This represents a(n): 
A. Revenue activity.
B. Operating activity.
C. Expense activity.
D. Investing activity.
E. Financing activity

Answer 163

E. Financing activity

Question 164

Flash had cash inflows from operations $62,500; cash outflows from investing activities of $47,000; and cash inflows from financing of $25,000. The net change in cash was: 
A. $40,500 increase.
B. $40,500 decrease.
C. $134,500 decrease.
D. $134,000 increase.
E. $9,500 increase.

Answer 164

A. $40,500 increase

$62,500 - $47,000 + $25,000 = $40,500 increase

Question 165

Flash has beginning equity of $0, issuance of shares of $263,000, net income of $51,000, and dividends of $40,000. Its ending equity is: 
A. $223,000.
B. $240,000.
C. $268,000.
D. $274,000.
E. $208,000.

Answer 165

D. $274,000.

$263,000 + $51,000 - $40,000 = $274,000

Question 166

Rent expense that is paid with cash appears on which of the following statements?
A. Statement of financial position.
B. Income statement.
C. Statement of changes in equity.
D. Income statement and statement of cash flows.
E. Statement of cash flows only.

Answer 166

D. Income statement and statement of cash flows.

Question 167

A company's statement of financial position shows: cash $22,000, accounts receivable $16,000, office equipment $50,000, and accounts payable $17,000. What is the amount of equity? 
A. $17,000.
B. $29,000.
C. $71,000.
D. $88,000.
E. $105,000.

Answer 167

C. $71,000.

Assets = $22,000 + $16,000 + $50,000 = $88,000
Liabilities = $17,000
Equity = $88,000 - $17,000 = $71,000

Question 168

A company reported total equity of $145,000 at the beginning of the year. The company reported $210,000 in revenues and $165,000 in expenses for the year. Liabilities at the end of the year totaled $92,000. What are the total assets of the company at the end of the year? 
A. $45,000.
B. $92,000.
C. $98,000.
D. $210,000.
E. $282,000.

Answer 168

E. $282,000.

Net income = $210,000 - $165,000 = $45,000
Equity at the end of the year = $145,000 + $45,000 = $190,000
Assets at the end of the year = $190,000 + $92,000 = $282,000

Question 169

Flash reported net income of $17,500 for the past year. At the beginning of the year the company had $200,000 in assets and $50,000 in liabilities. By the end of the year, assets had increased to $300,000 and liabilities were $75,000. Calculate its return on assets: 
A. 8.8%
B. 7.0%
C. 5.8%
D. 35.0%
E. 23.3%

Answer 169

B. 7.0%

$17,500/[(200,000 + $300,000)/2] = $17,500/$250,000 = 7%

Question 170

Quick Computer Service had revenues of $80,000 and expenses of $50,000 for the year. Its assets at the beginning of the year were $400,000. At the end of the year assets were worth $450,000. Calculate its return on assets. 
A. 7.1%
B. 7.5%
C. 6.7%
D. 20.0%
E. 18.8%

Answer 170

A. 7.1%

$30,000/[($400,000 + $450,000)/2] = $30,000/$425,000 = 7.1%

Question 171

Della's Donuts had cash inflows from operating activities of $27,000; cash outflows from investing activities of $22,000, and cash outflows from financing activities of $12,000. Calculate the net increase or decrease in cash. 
A. $61,000 increase.
B. $37,000 increase.
C. $7,000 decrease.
D. $7,000 increase.
E. $34,000 decrease.

Answer 171

C. $7,000 decrease.

$27,000 - $22,000 - $12,000 = $7,000 decrease.

Question 172

For the 1st year of its business, a company issued shares for $50,000, paid dividends of $20,000, earned revenues of $83,000 and incurred expenses of $64,000. Calculate its net income. 
A. $30,000.
B. $83,000.
C. $64,000.
D. $19,000.
E. $49,000.

Answer 172

D. $19,000.

$83,000 - $64,000 = $19,000.

Question 173

Cool Tours had beginning equity of $72,000; revenues of $90,000, expenses of $65,000, and dividends of $9,000. Calculate the ending equity. 
A. $88,000.
B. $25,000.
C. $97,000.
D. $38,000.
E. $47,000.

Answer 173

A. $88,000.

$72,000 + $25,000 - $9,000 = $88,000.

Question 174

A company's statement of financial position shows: cash $24,000, accounts receivable $30,000, equipment $50,000, and equity $72,000. What is the amount of liabilities? 
A. $104,000.
B. $76,000.
C. $32,000.
D. $68,000.
E. $176,000.
Assets = $24,000 + $30,000 + $50,000 = $104,000
Equity = $72,000
Liabilities = $104,000-$72,000=$32,000

Answer 174

C. $32,000.

Assets = $24,000 + $30,000 + $50,000 = $104,000
Equity = $72,000
Liabilities = $104,000-$72,000=$32,000