Question 1

A creditor who has loaned money to a business has a claim to some of the assets of the business until the debt is paid.

Accepted Answer

A) True 
 B)False

Question 2

In a limited-liability company,the ________.

Accepted Answer

A) members are personally liable to pay the entity's debts 
B) business pays income tax on earnings 
C) members are liable for each other's actions 
D) members pay income tax on their share of earnings 
A) members are personally liable to pay the entity's debts 
B) business pays income tax on earnings 
C) members are liable for each other's actions 
D) members pay income tax on their share of earnings

Question 3

The sole proprietorship form of business ________.

Accepted Answer

A) enjoys an indefinite life 
B) has limited liability for the business's debts 
C) is a common form of organization for small businesses 
D) is a separate taxable entity from its owner 
A) enjoys an indefinite life 
B) has limited liability for the business's debts 
C) is a common form of organization for small businesses 
D) is a separate taxable entity from its owner

Question 4

A partnership is not taxed.Instead individual partners pay taxes on their share of the earnings.

Accepted Answer

A) True 
 B)False

Question 5

The total amount of assets a business possesses may or may not be equal to the total of liabilities and equity of the business.

Accepted Answer

A) True 
 B)False

Question 6

Thirty years ago,Star Grocer Corporation purchased a building for its grocery store for $30,000.Based on inflation estimates,the amount of the building has been adjusted in the accounting records.The building is now reported at $75,000 in Star Grocer's financial statements.Which of the following concepts or principles of accounting is being violated?

Accepted Answer

A) going concern assumption 
B) revenue realization concept 
C) economic entity assumption 
D) cost principle 
A) going concern assumption 
B) revenue realization concept 
C) economic entity assumption 
D) cost principle

Question 7

The relative proportion of economic resources and obligations would be shown by the balance sheet.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following financial statements is used to analyze the economic resources,debt,and overall financial position of a company?

Accepted Answer

A) income statement 
B) balance sheet 
C) statement of cash flows 
D) statement of owner's equity 
A) income statement 
B) balance sheet 
C) statement of cash flows 
D) statement of owner's equity

Question 9

The total assets and the total liabilities of Smart Financial Services are shown below.The company did not receive any new contributions from the owner and did not issue any withdrawals during the year.
 
What was the amount of net income for the year?

Accepted Answer

A) $15,000 
B) $10,000 
C) $5,000 
D) $25,000 
A) $15,000 
B) $10,000 
C) $5,000 
D) $25,000

Question 10

According to the ________,acquired assets should be recorded at the amount actually paid rather than at the estimated market value.

Accepted Answer

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

Question 11

Ace,Inc.had the following transactions during June:
Performed services for $4,000 on account;received cash on account,$8,000;paid $900 for repair expense;paid $1,800 to a supplier that it owed from the previous month.What is the combined effect on Cash of the June transactions?

Accepted Answer

A) $5,300 increase 
B) $5,300 decrease 
C) $8,000 increase 
D) $2,700 decrease 
A) $5,300 increase 
B) $5,300 decrease 
C) $8,000 increase 
D) $2,700 decrease

Question 12

Homeward Supply Services received $1,000 cash from a customer;the amount was owed to the business from the previous month.Which of the following accounts will decrease as a result of this transaction?

Accepted Answer

A) Cash 
B) Revenue 
C) Accounts Payable 
D) Accounts Receivable 
A) Cash 
B) Revenue 
C) Accounts Payable 
D) Accounts Receivable

Question 13

A lawyer provides legal services for clients who do not pay immediately.As a result of this transaction,assets and revenues increase.

Accepted Answer

A) True 
 B)False

Question 14

GAAP refer to guidelines for accounting information in the United States.The acronym GAAP in this statement refers to ________.

Accepted Answer

A) Globally Accepted and Accurate Policies 
B) Global Accommodation Accounting Principles 
C) Generally Accredited Accounting Policies 
D) Generally Accepted Accounting Principles 
A) Globally Accepted and Accurate Policies 
B) Global Accommodation Accounting Principles 
C) Generally Accredited Accounting Policies 
D) Generally Accepted Accounting Principles

Question 15

The return on assets is calculated by ________.

Accepted Answer

A) subtracting net income from average total assets 
B) adding net income and average total assets 
C) dividing net income by average total assets 
D) multiplying net income and average total assets 
A) subtracting net income from average total assets 
B) adding net income and average total assets 
C) dividing net income by average total assets 
D) multiplying net income and average total assets

Question 16

The balance sheet of a business summarizes an entity's revenues and expenses.

Accepted Answer

A) True 
 B)False

Question 17

The guidelines for accounting information are called Generally Accepted Accounting Principles (GAAP).

Accepted Answer

A) True 
 B)False

Question 18

An accounting firm collected cash on account.As a result of this transaction,assets and revenues increase.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following formulae is used to calculate average total assets for the return on assets ratio?

Accepted Answer

A) Average total assets = (Beginning total assets + Ending total assets)× 2 
B) Average total assets = (Beginning total assets - Ending total assets)× 2 
C) Average total assets = (Beginning total assets - Ending total assets)/ 2 
D) Average total assets = (Beginning total assets + Ending total assets)/ 2 
A) Average total assets = (Beginning total assets + Ending total assets)× 2 
B) Average total assets = (Beginning total assets - Ending total assets)× 2 
C) Average total assets = (Beginning total assets - Ending total assets)/ 2 
D) Average total assets = (Beginning total assets + Ending total assets)/ 2

Question 20

The balance sheet helps analyze the business performance in terms of profitability.

Accepted Answer

A) True 
 B)False

Exam 1: Accounting and the Business Environment

A creditor who has loaned money to a business has a claim to some of the assets of the business until the debt is paid.

In a limited-liability company,the ________.

The sole proprietorship form of business ________.

A partnership is not taxed.Instead individual partners pay taxes on their share of the earnings.

The total amount of assets a business possesses may or may not be equal to the total of liabilities and equity of the business.

The relative proportion of economic resources and obligations would be shown by the balance sheet.

Which of the following financial statements is used to analyze the economic resources,debt,and overall financial position of a company?

The total assets and the total liabilities of Smart Financial Services are shown below.The company did not receive any new contributions from the owner and did not issue any withdrawals during the year. What was the amount of net income for the year?

According to the ________,acquired assets should be recorded at the amount actually paid rather than at the estimated market value.

Ace,Inc.had the following transactions during June: Performed services for $4,000 on account;received cash on account,$8,000;paid $900 for repair expense;paid $1,800 to a supplier that it owed from the previous month.What is the combined effect on Cash of the June transactions?

Homeward Supply Services received $1,000 cash from a customer;the amount was owed to the business from the previous month.Which of the following accounts will decrease as a result of this transaction?

A lawyer provides legal services for clients who do not pay immediately.As a result of this transaction,assets and revenues increase.

GAAP refer to guidelines for accounting information in the United States.The acronym GAAP in this statement refers to ________.

The return on assets is calculated by ________.

The balance sheet of a business summarizes an entity's revenues and expenses.

The guidelines for accounting information are called Generally Accepted Accounting Principles (GAAP).

An accounting firm collected cash on account.As a result of this transaction,assets and revenues increase.

Which of the following formulae is used to calculate average total assets for the return on assets ratio?

The balance sheet helps analyze the business performance in terms of profitability.

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

Filters