Question 1

Which of the following transactions will affect the balance of Owner's Equity?

Accepted Answer

A) received cash in advance for services to be provided later 
B) paid rent expense for the month 
C) purchased land for cash 
D) collection on account 
A) received cash in advance for services to be provided later 
B) paid rent expense for the month 
C) purchased land for cash 
D) collection on account

Question 2

Assets are something of value that the business owns or has control of.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following organizations requires publicly owned companies to be audited by independent accountants (CPAs)?

Accepted Answer

A) Securities and Exchange Commission (SE
C)  
B) Public Company Accounting Oversight Board (PCAO
B)  
C) Financial Accounting Standards Board (FAS
B)  
D) American Institute of Certified Public Accountants (AICP
A)  
A) Securities and Exchange Commission (SE
C)  
B) Public Company Accounting Oversight Board (PCAO
B)  
C) Financial Accounting Standards Board (FAS
B)  
D) American Institute of Certified Public Accountants (AICP
A)

Question 4

A business purchased office supplies on account.As a result of this transaction,expenses and liabilities will increase.

Accepted Answer

A) True 
 B)False

Question 5

Marisol Company has just completed operations for the year ended December 31,2016.This is the second year of operations for the company.The following data have been assembled for the business.
   
Prepare the statement of retained earnings.Use a proper heading.

Accepted Answer

The answer of Marisol Company has just completed operations for...

Question 6

Vista Camera Services started the year with total assets of $90,000 and total liabilities of $65,000.The revenues and the expenses for the year amounted to $120,000 and $50,000,respectively.During the year,the owner did not make any additional contributions,but made withdrawals of $55,000.What is the amount of owner's equity at the end of the year?

Accepted Answer

A) $50,000 
B) $120,000 
C) $40,000 
D) $55,000 
A) $50,000 
B) $120,000 
C) $40,000 
D) $55,000

Question 7

Which of the following financial statements reports an increase or decrease in net cash during the time period covered?

Accepted Answer

A) Income statement 
B) Statement of owner's equity 
C) Statement of cash flows 
D) Cash budget 
A) Income statement 
B) Statement of owner's equity 
C) Statement of cash flows 
D) Cash budget

Question 8

Accountants assume that the dollar's purchasing power is stable.

Accepted Answer

A) True 
 B)False

Question 9

Exchange Company collected $14,000 from one of its customers,the amount owed from the previous month.How does this affect the accounting equation for Exchange?

Accepted Answer

A) assets increase by $14,000;liabilities decrease by $14,000 
B) assets increase by $14,000;assets decrease by $14,000 
C) assets increase by $14,000;liabilities increase by $14,000 
D) assets increase by $14,000;equity increases by $14,000 
A) assets increase by $14,000;liabilities decrease by $14,000 
B) assets increase by $14,000;assets decrease by $14,000 
C) assets increase by $14,000;liabilities increase by $14,000 
D) assets increase by $14,000;equity increases by $14,000

Question 10

Critical thinking and judgment skills are not necessary for accountants because technology has made the activities routine.

Accepted Answer

A) True 
 B)False

Question 11

What are Generally Accepted Accounting Principles (GAAP)? Which entity is currently responsible for determining GAAP?

Accepted Answer

Generally Accepted Accounting Principles

Question 12

York Casting Services started the year with total assets of $120,000 and total liabilities of $60,000.The revenues and the expenses for the year amounted to $150,000 and $50,000,respectively.During the year,the owner did not make any additional contributions,but had withdrawals of $75,000.Calculate the amount of increase or decrease in owner's equity for the year.

Accepted Answer

A) a $25,000 increase 
B) a $85,000 increase 
C) a $60,000 decrease 
D) a $75,000 increase 
A) a $25,000 increase 
B) a $85,000 increase 
C) a $60,000 decrease 
D) a $75,000 increase

Question 13

Accord Company purchased land for $120,000 by making a cash payment of $38,000 and promising to pay the remaining amount in a later accounting period.What is the net effect of this transaction on Accord's accounting equation?

Accepted Answer

A) assets increase by $120,000 and liabilities decrease by $38,000 
B) assets increase by $120,000 and liabilities decrease by $82,000 
C) assets and equity increase by $82,000 
D) assets and liabilities increase by $82,000 
A) assets increase by $120,000 and liabilities decrease by $38,000 
B) assets increase by $120,000 and liabilities decrease by $82,000 
C) assets and equity increase by $82,000 
D) assets and liabilities increase by $82,000

Question 14

David has decided to open an auto-detailing business.He will pick up an automobile from the client,take it to his parents' garage,detail it,and return it to the client.If he does all of the work himself and takes no legal steps to form a special organization,which type of business organization,in effect,has he chosen?

Accepted Answer

A) a limited-liability company 
B) a partnership 
C) a corporation 
D) a sole proprietorship 
A) a limited-liability company 
B) a partnership 
C) a corporation 
D) a sole proprietorship

Question 15

Financial statements are business documents used to communicate information needed to make business decisions.

Accepted Answer

A) True 
 B)False

Question 16

Bubble Wraps Company receives cash from the owner,John Trent.The two accounts involved in this transaction are ________.

Accepted Answer

A) Accounts Payable and Cash 
B) Cash and Owner's Capital 
C) Owner's Capital and Accounts Payable 
D) Owner's Capital and Accounts Receivable 
A) Accounts Payable and Cash 
B) Cash and Owner's Capital 
C) Owner's Capital and Accounts Payable 
D) Owner's Capital and Accounts Receivable

Question 17

Hamilton Lawn Services incurred $800 as a repair expense and paid for it in cash.This transaction will ________.

Accepted Answer

A) decrease the stockholders' equity 
B) increase the assets of the business 
C) increase the liabilities of the business 
D) decrease the liabilities of the business 
A) decrease the stockholders' equity 
B) increase the assets of the business 
C) increase the liabilities of the business 
D) decrease the liabilities of the business

Question 18

The ultimate control of the corporation rests with the ________.

Accepted Answer

A) board of directors 
B) stockholders 
C) chairperson 
D) chief operating officer 
A) board of directors 
B) stockholders 
C) chairperson 
D) chief operating officer

Question 19

Which of the following users would rely on managerial 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 20

The Public Company Accounting Oversight Board (PCAOB)was created ________.

Accepted Answer

A) by the Sarbanes-Oxley Act (SOX) 
B) to perform audits of public companies 
C) to make restitution to investors who were defrauded by the issuance of fraudulent financial reports 
D) to require auditors to take responsibility for the accuracy and completeness of financial reports 
A) by the Sarbanes-Oxley Act (SOX) 
B) to perform audits of public companies 
C) to make restitution to investors who were defrauded by the issuance of fraudulent financial reports 
D) to require auditors to take responsibility for the accuracy and completeness of financial reports

Exam 1: Accounting and the Business Environment

Which of the following transactions will affect the balance of Owner's Equity?

Assets are something of value that the business owns or has control of.

Which of the following organizations requires publicly owned companies to be audited by independent accountants (CPAs)?

A business purchased office supplies on account.As a result of this transaction,expenses and liabilities will increase.

Marisol Company has just completed operations for the year ended December 31,2016.This is the second year of operations for the company.The following data have been assembled for the business. Prepare the statement of retained earnings.Use a proper heading.

Which of the following financial statements reports an increase or decrease in net cash during the time period covered?

Accountants assume that the dollar's purchasing power is stable.

Exchange Company collected $14,000 from one of its customers,the amount owed from the previous month.How does this affect the accounting equation for Exchange?

Critical thinking and judgment skills are not necessary for accountants because technology has made the activities routine.

What are Generally Accepted Accounting Principles (GAAP)? Which entity is currently responsible for determining GAAP?

Accord Company purchased land for $120,000 by making a cash payment of $38,000 and promising to pay the remaining amount in a later accounting period.What is the net effect of this transaction on Accord's accounting equation?

Financial statements are business documents used to communicate information needed to make business decisions.

Bubble Wraps Company receives cash from the owner,John Trent.The two accounts involved in this transaction are ________.

Hamilton Lawn Services incurred $800 as a repair expense and paid for it in cash.This transaction will ________.

The ultimate control of the corporation rests with the ________.

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

The Public Company Accounting Oversight Board (PCAOB)was created ________.

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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