Question 1

Which of the following purposes would financial statements serve for external users?

Accepted Answer

A)  To determine purchasing needs. 
B)  To fulfill regulatory requirements for companies whose stock is sold to the public. 
C)  To assess employee performance and compensation. 
D)  To find information about projected costs and revenues of proposed products. 
E)  To assist in monitoring consumer needs and price concerns. 
A)  To determine purchasing needs. 
B)  To fulfill regulatory requirements for companies whose stock is sold to the public. 
C)  To assess employee performance and compensation. 
D)  To find information about projected costs and revenues of proposed products. 
E)  To assist in monitoring consumer needs and price concerns.

Question 2

A company's balance sheet shows: cash $24,000, accounts receivable $30,000, equipment $50,000, and equity $72,000. What is the amount of liabilities?

Accepted Answer

A)  $176,000. 
B)  $68,000. 
C)  $32,000. 
D)  $76,000. 
E)  $104,000. 
A)  $176,000. 
B)  $68,000. 
C)  $32,000. 
D)  $76,000. 
E)  $104,000.

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

A limited liability company offers the limited liability of a partnership or proprietorship and the tax treatment of a corporation.

Accepted Answer

A) True 
 B)False

Question 5

Use the following information for Meeker Corp. to determine the amount of equity to report. $$\begin{array} { l r } 
\text { Cash } & \$ 70,000 \
\text { Buildings } & 125,000 \
\text { Land } & 205,000 \
\text { Liabilities } & 130,000
\end{array}$$

Accepted Answer

A)  $530,000. 
B)  $140,000. 
C)  $20,000. 
D)  $270,000. 
E)  $390,000. 
A)  $530,000. 
B)  $140,000. 
C)  $20,000. 
D)  $270,000. 
E)  $390,000.

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Cornelia's Closet has the following account balances for the dates given:
$\begin{array}{llr}
&\underline{\text { October }} 1 & \underline{\text { October } 31}\
  \text {  Cash.} &\$40,000&60,000\
 \text {Accounts Receivable  } &40,000&38,000\
 \text {Accounts payable  } &6,000&?
\end{array}$

Also, its net income, for October 1 through October 31 was $20,000 and there were no investments or withdrawals by the owner. Determine the equity at both October 1 and October 31.

Accepted Answer

October 1^stEquity = $7

Question 8

The financial statement that identifies a company's cash receipts and cash payments over a period of time is the:

Accepted Answer

A)  Balance sheet. 
B)  Statement of cash flows. 
C)  Statement of financial position. 
D)  Statement of changes in owner's equity. 
E)  Income statement. 
A)  Balance sheet. 
B)  Statement of cash flows. 
C)  Statement of financial position. 
D)  Statement of changes in owner's equity. 
E)  Income statement.

Question 9

Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (or Dodd-Frank) to:

Accepted Answer

A)  Protect the taxpayer by ending bailouts. 
B)  Promote accountability and transparency in the financial system. 
C)  All of the above. 
D)  Put an end to the notion of "too big to fail." 
E)  Protect consumers from abusive financial services. 
A)  Protect the taxpayer by ending bailouts. 
B)  Promote accountability and transparency in the financial system. 
C)  All of the above. 
D)  Put an end to the notion of "too big to fail." 
E)  Protect consumers from abusive financial services.

Question 10

Zapper has beginning equity of $257,000, net income of $51,000, withdrawals of $40,000 and investments by owners of $6,000. Its ending equity is:

Accepted Answer

A)  $274,000. 
B)  $208,000. 
C)  $223,000. 
D)  $268,000. 
E)  $240,000. 
A)  $274,000. 
B)  $208,000. 
C)  $223,000. 
D)  $268,000. 
E)  $240,000.

Question 11

Flitter 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:

Accepted Answer

A)  23.3%. 
B)  35.0%. 
C)  8.8%. 
D)  7.0%. 
E)  5.8%. 
A)  23.3%. 
B)  35.0%. 
C)  8.8%. 
D)  7.0%. 
E)  5.8%.

Question 12

Which of the following accounts is not included in the asset section of the balance sheet?

Accepted Answer

A)  Services revenue. 
B)  Accounts receivable. 
C)  Supplies. 
D)  Cash. 
E)  Land. 
A)  Services revenue. 
B)  Accounts receivable. 
C)  Supplies. 
D)  Cash. 
E)  Land.

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Match the following definitions with the terms 1 through 9. Place the letter that identifies the best definition in the blank space next to the term.
1. Statement of cash flows
____ 2. Events
3. Monetary unit principle
____ 4. Business entity principle
____ 5. Revenue recognition principle
____ 6. Accounting equation
7. Income statement
____ 8. Expenses
9. Liabilities
a. The relation between a company's assets, liabilities, and equity.
b. Happenings, such as changes in market value, that effect the accounting equation and are reliably measured.
c. The principle that assumes transactions and events can be expressed in money units.
d. Describes a company's revenues and expenses along with the resulting net income or loss over a period of time.
e. A financial statement that lists cash inflows (receipts) and cash outflows (payments); the cash flows are arranged by operating, investing, and financing activities.
f. Creditor's claims on assets.
g. The cost of assets or services used to earn revenue.
h. The principle that requires a business to be accounted for separately from its owners.
i. The principle that revenue is recorded when earned through providing goods or services.

Accepted Answer

1. E; 2. B; 3. C; 4.

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

A disadvantage of a sole proprietorship is the fact that the owner has ________.

Accepted Answer

The answer of A disadvantage of a sole proprietorship is...

Question 17

A partnership:

Accepted Answer

A)  Is also called a sole proprietorship. 
B)  Has to have a written agreement in order to be legal. 
C)  Has unlimited liability for its partners. 
D)  Is a legal organization separate from its owners. 
E)  Has owners called shareholders. 
A)  Is also called a sole proprietorship. 
B)  Has to have a written agreement in order to be legal. 
C)  Has unlimited liability for its partners. 
D)  Is a legal organization separate from its owners. 
E)  Has owners called shareholders.

Question 18

Match each of the following terms with the most appropriate definition.
a. Return on assets
b. Assets
c. Expenses
d. Risk
e. Liabilities
f. Owner withdrawals
g. Accounting equation
h. Owner capital
1. The uncertainty about the return to be earned.
____ 2. Resources such as cash that an owner puts into the company.
____ 3. A financial ratio stated as income divided by assets invested.
____ 4. Creditor's claims on a company's assets.
____ 5. Decreases in equity from costs of providing products or services to customers.
____ 6. Resources such as cash that an owner takes from the company for personal use.
____ 7.Resources a company owns or controls that are expected to yield future benefit.
8. Expresses the relation of assets, liabilities and equity in a company, comparing the resources the company owns to the sources of funds to acquire the resources.

Accepted Answer

1. D; 2. H

Question 19

The fraud triangle asserts that the three factors that must exist for a person to commit fraud are opportunity, pressure, and rationalization.

Accepted Answer

A) True 
 B)False

Question 20

If a company paid $38,000 of its accounts payable in cash, what was the effect on the accounting equation?

Accepted Answer

A)  Assets would decrease $38,000, liabilities would decrease $38,000, and equity would increase $38,000. 
B)  Assets would decrease $38,000, liabilities would decrease $38,000, and equity remains unchanged. 
C)  Assets would increase $38,000 and liabilities would decrease $38,000. 
D)  There would be no effect on the accounts because the accounts are affected by the same amount. 
E)  Assets would decrease $38,000, liabilities would decrease $38,000, and equity would decrease $38,000. 
A)  Assets would decrease $38,000, liabilities would decrease $38,000, and equity would increase $38,000. 
B)  Assets would decrease $38,000, liabilities would decrease $38,000, and equity remains unchanged. 
C)  Assets would increase $38,000 and liabilities would decrease $38,000. 
D)  There would be no effect on the accounts because the accounts are affected by the same amount. 
E)  Assets would decrease $38,000, liabilities would decrease $38,000, and equity would decrease $38,000.

Exam 1: Accounting in Business

Which of the following purposes would financial statements serve for external users?

A company's balance sheet shows: cash $24,000, accounts receivable $30,000, equipment $50,000, and equity $72,000. What is the amount of liabilities?

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

A limited liability company offers the limited liability of a partnership or proprietorship and the tax treatment of a corporation.

Use the following information for Meeker Corp. to determine the amount of equity to report. Cash \ 70,000 Buildings 125,000 Land 205,000 Liabilities 130,000

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

The financial statement that identifies a company's cash receipts and cash payments over a period of time is the:

Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (or Dodd-Frank) to:

Zapper has beginning equity of $257,000, net income of $51,000, withdrawals of $40,000 and investments by owners of $6,000. Its ending equity is:

Flitter 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:

Which of the following accounts is not included in the asset section of the balance sheet?

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

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

A disadvantage of a sole proprietorship is the fact that the owner has ________.

A partnership:

The fraud triangle asserts that the three factors that must exist for a person to commit fraud are opportunity, pressure, and rationalization.

If a company paid $38,000 of its accounts payable in cash, what was the effect on the accounting equation?

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets Natural Resoures and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Present and Future Values in Accounting

Activity-Based Costing

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