Question 1

Following is a list of account balances of Wilson Mowing Service as of December 31 of the first year of operation:   Calculate the net income.

Accepted Answer

A) $21,200 
B) $11,900 
C) $12,200 
D) $24,100 
A) $21,200 
B) $11,900 
C) $12,200 
D) $24,100

Question 2

Martin Supply Service received $1,000 cash from a customer which was owed to the business from the previous month. What is the effect of the cash receipt on the accounts of the business?

Accepted Answer

A) Accounts Receivable decreases; Martin, Capital decreases. 
B) Cash account increases; Accounts receivable decreases. 
C) Accounts Payable increases; Martin, Capital decreases. 
D) Cash increases; Accounts Payable decreases. 
A) Accounts Receivable decreases; Martin, Capital decreases. 
B) Cash account increases; Accounts receivable decreases. 
C) Accounts Payable increases; Martin, Capital decreases. 
D) Cash increases; Accounts Payable decreases.

Question 3

Sharon Samson starts a plumbing service called Reliable Waterworks. Transactions of Reliable Waterworks during the first year of operations are given below:
A. Sharon deposited $14,000 into a new checking account for the business and recorded the capital contribution.
B. Paid $2,000 cash for equipment to be used for plumbing repairs.
C. Borrowed $15,000 from a local bank and deposited the money in the checking account.
D. Paid $600 rent for the year.
E. Purchased $900 of office supplies by cash.
F. Completed a plumbing repair project for a local lawyer and received $3,500 cash.
Calculate the amount of total liabilities at the end of the first year.

Accepted Answer

A)  $15,000 
B)  $14,000 
C)  $27,000 
D)  $3,500 
A)  $15,000 
B)  $14,000 
C)  $27,000 
D)  $3,500

Question 4

Which of the following is the correct accounting equation?

Accepted Answer

A) Assets + Liabilities = Equity 
B) Assets = Liabilities + Equity 
C) Assets + Revenues = Equity 
D) Assets + Revenues = Liabilities + Expenses 
A) Assets + Liabilities = Equity 
B) Assets = Liabilities + Equity 
C) Assets + Revenues = Equity 
D) Assets + Revenues = Liabilities + Expenses

Question 5

A creditor is a person who owes money to the business.

Accepted Answer

A) True 
 B)False

Question 6

Glorious Gloria, a florist, had the following transactions in August: Earned $2,000 as revenues on account; collected $4,000 from a customer for goods sold last month; incurred $600 of repair expense and paid cash; paid $200 to a supplier that it owed from the previous month. What is the net income in August?

Accepted Answer

A) $500 
B) $5,700 
C) $2,700 
D) $1,400 
A) $500 
B) $5,700 
C) $2,700 
D) $1,400

Question 7

The taxable income of a sole proprietorship is:

Accepted Answer

A) combined with the personal income of the proprietor. 
B) not combined with the proprietor's personal income. 
C) not taxable. 
D) handled similarly to that of a corporation. 
A) combined with the personal income of the proprietor. 
B) not combined with the proprietor's personal income. 
C) not taxable. 
D) handled similarly to that of a corporation.

Question 8

Which of the following is a characteristic of a corporation?

Accepted Answer

A) A corporation is owned by stockholders. 
B) Lenders of a corporation do not have the right to claim the corporation's assets to satisfy their obligations. 
C) All shares of a corporation must be held by a single individual. 
D) Each stockholder has the authority to commit the corporation to a binding contract through his actions. 
A) A corporation is owned by stockholders. 
B) Lenders of a corporation do not have the right to claim the corporation's assets to satisfy their obligations. 
C) All shares of a corporation must be held by a single individual. 
D) Each stockholder has the authority to commit the corporation to a binding contract through his actions.

Question 9

Hamilton Lawn Service incurred $800 as repair expense and paid the repair company in cash. This will:

Accepted Answer

A) decrease the Owner's capital. 
B) increase the assets of the business. 
C) increase the liabilities of the business. 
D) decrease the liabilities of the business. 
A) decrease the Owner's capital. 
B) increase the assets of the business. 
C) increase the liabilities of the business. 
D) decrease the liabilities of the business.

Question 10

Which of the following is a characteristic of a limited-liability company (LLC)?

Accepted Answer

A) An LLC's life is terminated at any member's choice or death. 
B) Each member of an LLC is liable only for his or her own actions. 
C) An LLC must have more than five members. 
D) The income of members from an LLC is not taxed. 
A) An LLC's life is terminated at any member's choice or death. 
B) Each member of an LLC is liable only for his or her own actions. 
C) An LLC must have more than five members. 
D) The income of members from an LLC is not taxed.

Question 11

Joshua Thomas is the owner of Nexus Inc., a manufacturer and retailer of computer hardware. Joshua recently bought a new car as a gift for his daughter. Since Joshua paid for the car from the earnings of the business, he recorded it in the books of Nexus as an asset. Which of the following concepts or principles of accounting is Joshua violating?

Accepted Answer

A) monetary unit assumption 
B) economic entity assumption 
C) cost principle 
D) going concern assumption 
A) monetary unit assumption 
B) economic entity assumption 
C) cost principle 
D) going concern assumption

Question 12

The total assets and the total liabilities of Samantha Financial Services, are shown below. There were no capital contributions and withdrawals during the year.   What was the amount of net income for the year?

Accepted Answer

A) $75,000 
B) $45,000 
C) $30,000 
D) $120,000 
A) $75,000 
B) $45,000 
C) $30,000 
D) $120,000

Question 13

Which of the following users would rely on management accounting information for decision-making purposes?

Accepted Answer

A) potential investors 
B) creditors 
C) customers 
D) company managers 
A) potential investors 
B) creditors 
C) customers 
D) company managers

Question 14

The balance sheet is a snapshot of the entity. Which of the following items are included on the balance sheet?

Accepted Answer

A) revenues 
B) expenses 
C) assets 
D) withdrawals 
A) revenues 
B) expenses 
C) assets 
D) withdrawals

Question 15

A debt that a business owes to an outside party is called:

Accepted Answer

A) an asset. 
B) a liability. 
C) stockholders' equity. 
D) revenue. 
A) an asset. 
B) a liability. 
C) stockholders' equity. 
D) revenue.

Question 16

The Sarbanes-Oxley Act (SOX)requires companies to review internal control and take responsibility for the accuracy and completeness of their financial reports.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following amounts appears on both the income statement and statement of owner's equity?

Accepted Answer

A) ending capital 
B) total revenues 
C) net income 
D) withdrawals 
A) ending capital 
B) total revenues 
C) net income 
D) withdrawals

Question 18

Different users of financial statements focus on the different parts of the financial statements for the information they need.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following organizations is responsible for the creation and governance of accounting standards in the United States?

Accepted Answer

A) Financial Accounting Standards Board 
B) Institute of Management Accountants 
C) American Institute of Certified Public Accountants 
D) Securities and Exchange Commission 
A) Financial Accounting Standards Board 
B) Institute of Management Accountants 
C) American Institute of Certified Public Accountants 
D) Securities and Exchange Commission

Question 20

An examination of a company's financial statements and records is called an audit.

Accepted Answer

A) True 
 B)False

Exam 1: Accounting and the Business Environment

Following is a list of account balances of Wilson Mowing Service as of December 31 of the first year of operation: Calculate the net income.

Martin Supply Service received $1,000 cash from a customer which was owed to the business from the previous month. What is the effect of the cash receipt on the accounts of the business?

Which of the following is the correct accounting equation?

A creditor is a person who owes money to the business.

The taxable income of a sole proprietorship is:

Which of the following is a characteristic of a corporation?

Hamilton Lawn Service incurred $800 as repair expense and paid the repair company in cash. This will:

Which of the following is a characteristic of a limited-liability company (LLC)?

The total assets and the total liabilities of Samantha Financial Services, are shown below. There were no capital contributions and withdrawals during the year. What was the amount of net income for the year?

Which of the following users would rely on management accounting information for decision-making purposes?

The balance sheet is a snapshot of the entity. Which of the following items are included on the balance sheet?

A debt that a business owes to an outside party is called:

The Sarbanes-Oxley Act (SOX)requires companies to review internal control and take responsibility for the accuracy and completeness of their financial reports.

Which of the following amounts appears on both the income statement and statement of owner's equity?

Different users of financial statements focus on the different parts of the financial statements for the information they need.

Which of the following organizations is responsible for the creation and governance of accounting standards in the United States?

An examination of a company's financial statements and records is called an audit.

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

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