Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Murphy Company had originally purchased land for $35,000.It later sold it for $35,000 in cash.Which of the following is true of the effect of the sale of land on the accounting equation?

Accepted Answer

A) assets increase and liabilities decrease by $35,000 
B) assets and equity increase by $70,000 
C) assets increase by $35,000;equity increases by $35,000 
D) the amount of total assets remains the same 
A) assets increase and liabilities decrease by $35,000 
B) assets and equity increase by $70,000 
C) assets increase by $35,000;equity increases by $35,000 
D) the amount of total assets remains the same

Question 3

Merchant Company provides plumbing services.Transactions of Merchant during the first year of operations are given below.
A.The owner,Carol Merchant,contributed $10,000 cash to form the business.
B.Paid $1,200 cash for equipment to be used for plumbing repairs.
C.Borrowed $11,000 from a local bank and deposited the money in the checking account.
D.Paid $400 rent for the year.
E.Purchased $400 of office supplies by cash.
F.Completed a plumbing repair project for a local lawyer and received $3,300 cash.
Calculate the amount of total liabilities at the end of the first year.

Accepted Answer

A) $11,000 
B) $10,000 
C) $19,800 
D) $3,300 
A) $11,000 
B) $10,000 
C) $19,800 
D) $3,300

Question 4

Which of the following is an external user of a business's financial information?

Accepted Answer

A) customers 
B) cost accountant 
C) company manager 
D) the board of directors 
A) customers 
B) cost accountant 
C) company manager 
D) the board of directors

Question 5

The owners' claims to the assets of the business are called ________.

Accepted Answer

A) return on assets 
B) expenses 
C) equity 
D) debt 
A) return on assets 
B) expenses 
C) equity 
D) debt

Question 6

The Financial Accounting Standards Board is a U.S.governmental agency that oversees the creation and governance of accounting standards.

Accepted Answer

A) True 
 B)False

Question 7

Outside investors would ordinarily use managerial accounting information to decide whether or not to invest in a business.

Accepted Answer

A) True 
 B)False

Question 8

________ represents a short-term liability created by purchasing "on account."

Accepted Answer

A) Accounts Receivable 
B) Notes Payable 
C) Accounts Payable 
D) Expenses 
A) Accounts Receivable 
B) Notes Payable 
C) Accounts Payable 
D) Expenses

Question 9

Which of the following financial statements reports that total assets are equal to total liabilities plus total stockholders' equity?

Accepted Answer

A) Statement of owner's equity 
B) Statement of cash flows 
C) Income statement 
D) Balance sheet 
A) Statement of owner's equity 
B) Statement of cash flows 
C) Income statement 
D) Balance sheet

Question 10

In a sole proprietorship,the owner is personally liable for the debts of the business.

Accepted Answer

A) True 
 B)False

Question 11

The net income of Edwards Corporation amounted to $75,000 for this year.The beginning balance of owner's equity was $30,000 and the ending balance was $72,000.The company received no new contributions during the year.What was the amount of the owner's withdrawals during the year?

Accepted Answer

A) $72,000 
B) $33,000 
C) $147,000 
D) $30,000 
A) $72,000 
B) $33,000 
C) $147,000 
D) $30,000

Question 12

Gatto Production Services started the year with total assets of $90,000 and total liabilities of $40,000.The revenues and the expenses for the year amounted to $130,000 and $80,000,respectively.During the year,the owner did not make any additional contributions,but had withdrawals of $55,000.Calculate Gatto's net income for the year.

Accepted Answer

A) $50,000 
B) $130,000 
C) $80,000 
D) $90,000 
A) $50,000 
B) $130,000 
C) $80,000 
D) $90,000

Question 13

Under the going concern principle,accountants must provide proof that the business will remain in operations long enough to use existing resources for their intended purpose.

Accepted Answer

A) True 
 B)False

Question 14

What is the accounting equation? Briefly explain each of the three parts.

Accepted Answer

Assets = Liabilities + Equity.
Assets ar

Question 15

In a corporation,the stockholders are personally liable for the debts of the company.

Accepted Answer

A) True 
 B)False

Question 16

A publicly traded company in the United States does not come under Securities and Exchange Commission regulations as long as it follows the rules of GAAP.

Accepted Answer

A) True 
 B)False

Question 17

In a limited-liability company (LLC),the members are personally liable for the debts of the business.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following can be an effect of a transaction that increased an asset of a business for the accounting equation to balance?

Accepted Answer

A) there is an equal decrease in another asset 
B) there is an equal decrease in equity 
C) there is an equal decrease in a liability account 
D) both liabilities and equity decrease 
A) there is an equal decrease in another asset 
B) there is an equal decrease in equity 
C) there is an equal decrease in a liability account 
D) both liabilities and equity decrease

Question 19

Members of a limited-liability company (LLC)are not personally liable for the debts of the business.

Accepted Answer

A) True 
 B)False

Question 20

What is the calculation for return on assets (ROA)? What does ROA measure?

Accepted Answer

Return on Assets = Net income

Exam 1: Accounting and the Business Environment

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

Murphy Company had originally purchased land for $35,000.It later sold it for $35,000 in cash.Which of the following is true of the effect of the sale of land on the accounting equation?

Which of the following is an external user of a business's financial information?

The owners' claims to the assets of the business are called ________.

The Financial Accounting Standards Board is a U.S.governmental agency that oversees the creation and governance of accounting standards.

Outside investors would ordinarily use managerial accounting information to decide whether or not to invest in a business.

________ represents a short-term liability created by purchasing "on account."

Which of the following financial statements reports that total assets are equal to total liabilities plus total stockholders' equity?

In a sole proprietorship,the owner is personally liable for the debts of the business.

The net income of Edwards Corporation amounted to $75,000 for this year.The beginning balance of owner's equity was $30,000 and the ending balance was $72,000.The company received no new contributions during the year.What was the amount of the owner's withdrawals during the year?

Under the going concern principle,accountants must provide proof that the business will remain in operations long enough to use existing resources for their intended purpose.

What is the accounting equation? Briefly explain each of the three parts.

In a corporation,the stockholders are personally liable for the debts of the company.

A publicly traded company in the United States does not come under Securities and Exchange Commission regulations as long as it follows the rules of GAAP.

In a limited-liability company (LLC),the members are personally liable for the debts of the business.

Which of the following can be an effect of a transaction that increased an asset of a business for the accounting equation to balance?

Members of a limited-liability company (LLC)are not personally liable for the debts of the business.

What is the calculation for return on assets (ROA)? What does ROA measure?

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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