Question 1

A transaction that causes an increase in an asset may also cause a decrease in another asset, an increase in a liability, or an increase in owners' equity.

Accepted Answer

A) True 
 B)False

Question 2

Deerpark Corporation recently borrowed $70,000 cash from its bank. Which of the following was unaffected by this transaction?

Accepted Answer

A)  Assets. 
B)  Liabilities. 
C)  Owners' equity. 
D)  Cash. 
A)  Assets. 
B)  Liabilities. 
C)  Owners' equity. 
D)  Cash.

Question 3

To appear in a balance sheet of a business entity, an asset need not:

Accepted Answer

A)  Be an economic resource. 
B)  Have a ready market value. 
C)  Be expected to benefit future operations. 
D)  Be owned by the business. 
A)  Be an economic resource. 
B)  Have a ready market value. 
C)  Be expected to benefit future operations. 
D)  Be owned by the business.

Question 4

The owner of a sole proprietorship is personally liable for the debts of the business, whereas the stockholders of a corporation are not personally liable for the debts of the business.

Accepted Answer

A) True 
 B)False

Question 5

If Retained Earnings at December 31, 2010, is $100,000, Equipment is carried in Hercules Manufacturing, Inc. accounting records at:

Accepted Answer

A)  $42,000. 
B)  $58,000. 
C)  $43,500. 
D)  $345,000. 
A)  $42,000. 
B)  $58,000. 
C)  $43,500. 
D)  $345,000.

Question 6

Which of the following best describes liquidity?

Accepted Answer

A)  The ability to increase the value of retained earnings. 
B)  The ability to pay the debts of the company as they become due. 
C)  Being able to buy everything the company requires for cash. 
D)  Purchasing everything the company requires on credit. 
A)  The ability to increase the value of retained earnings. 
B)  The ability to pay the debts of the company as they become due. 
C)  Being able to buy everything the company requires for cash. 
D)  Purchasing everything the company requires on credit.

Question 7

It is not unusual for an entity to report a significant increase in cash from operating activities, but a decrease in the total amount of cash.

Accepted Answer

A) True 
 B)False

Question 8

List the following accounts in the order that they would appear in a balance sheet.
Capital Stock
Equipment
Accounts Receivable
Retained Earnings
Revenue
Accounts Payable
Cash
Rent Expense

Accepted Answer

Cash, Accounts Recei

Question 9

Which one of the following is not considered one of the three primary financial statements?

Accepted Answer

A)  Balance sheet. 
B)  Income statement. 
C)  Statement of cash flows. 
D)  Statement of budgeting activities. 
A)  Balance sheet. 
B)  Income statement. 
C)  Statement of cash flows. 
D)  Statement of budgeting activities.

Question 10

Accounting equation
(A.) During the current year, the assets of Duffy Stationery increased by $650,000 and the liabilities decreased by $340,000. What was the change in owners' equity during the year?
(B.) The owners' equity of Graham Interiors appears on the balance sheet as $720,000 and is equal to one-fourth of total assets. Compute the amount of total liabilities.
(C.) At the end of the year, the owners' equity in Scott Mfg. amounted to $845,000. During 2009, the assets of the business increased by $515,000 and the liabilities increased by $205,000. The owners' equity at the beginning of 2009 was how much?

Accepted Answer

(A.) $990,000 increa

Question 11

Total assets plus total liabilities must equal total owners' equity.

Accepted Answer

A) True 
 B)False

Question 12

From an accounting viewpoint, when is a business considered an entity separate from its owner(s)?

Accepted Answer

A)  Only when organized as a sole proprietorship. 
B)  Only when organized as a partnership. 
C)  Only when organized as a corporation. 
D)  In each of the above situations, the business is an accounting entity separate from the activities of the owner(s). 
A)  Only when organized as a sole proprietorship. 
B)  Only when organized as a partnership. 
C)  Only when organized as a corporation. 
D)  In each of the above situations, the business is an accounting entity separate from the activities of the owner(s).

Question 13

According to the Sarbanes-Oxley Act of 2002, internal controls must be audited by the same accounting firm that audits the financial statements.

Accepted Answer

A) True 
 B)False

Question 14

Eton Corporation purchased land in 1990 for $190,000. In 2008, it purchased a nearly identical parcel of land for $430,000. In its 2008 balance sheet, Eton valued these two parcels of land at a combined value of $860,000. Reporting the land in this manner violated the:

Accepted Answer

A)  Cost principle. 
B)  Principle of the business entity. 
C)  Objectivity principle. 
D)  Going-concern assumption. 
A)  Cost principle. 
B)  Principle of the business entity. 
C)  Objectivity principle. 
D)  Going-concern assumption.

Question 15

Retained earnings appears on:

Accepted Answer

A)  The income statement. 
B)  The balance sheet. 
C)  The statement of cash flows. 
D)  All three of the financial statements. 
A)  The income statement. 
B)  The balance sheet. 
C)  The statement of cash flows. 
D)  All three of the financial statements.

Question 16

Forms of Business Organization
State and describe the three most common forms of business organizations in the United States.

Accepted Answer

(1) Sole Proprietorship-One person, unli

Question 17

If Retained Earnings at December 31, 2010, is $140,000, total assets amount to:

Accepted Answer

A)  $98,000. 
B)  $377,000. 
C)  $475,000. 
D)  $188,000. 
A)  $98,000. 
B)  $377,000. 
C)  $475,000. 
D)  $188,000.

Question 18

Preparation of balance sheet
Prepare the balance sheet as of December 31, 2009, for Gamma Company, from the following list of items which are arranged in random order. You must compute the amount for accounts payable to complete the balance sheet.

Accepted Answer

The answer of Preparation of balance sheet
Prepare the balance sheet...

Question 19

A transaction caused a $15,000 decrease in both total assets and total liabilities. This transaction could have been:

Accepted Answer

A)  Purchase of a delivery truck for $15,000 cash. 
B)  An asset with a cost of $15,000 was destroyed by fire. 
C)  Repayment of a $15,000 bank loan. 
D)  Collection of a $15,000 account receivable. 
A)  Purchase of a delivery truck for $15,000 cash. 
B)  An asset with a cost of $15,000 was destroyed by fire. 
C)  Repayment of a $15,000 bank loan. 
D)  Collection of a $15,000 account receivable.

Question 20

Limited liability means that owners of a business are only liable for the debts of the business up to the amounts they can afford.

Accepted Answer

A) True 
 B)False

Exam 2: Basic Financial Statements

A transaction that causes an increase in an asset may also cause a decrease in another asset, an increase in a liability, or an increase in owners' equity.

Deerpark Corporation recently borrowed $70,000 cash from its bank. Which of the following was unaffected by this transaction?

To appear in a balance sheet of a business entity, an asset need not:

The owner of a sole proprietorship is personally liable for the debts of the business, whereas the stockholders of a corporation are not personally liable for the debts of the business.

If Retained Earnings at December 31, 2010, is $100,000, Equipment is carried in Hercules Manufacturing, Inc. accounting records at:

Which of the following best describes liquidity?

It is not unusual for an entity to report a significant increase in cash from operating activities, but a decrease in the total amount of cash.

List the following accounts in the order that they would appear in a balance sheet. Capital Stock Equipment Accounts Receivable Retained Earnings Revenue Accounts Payable Cash Rent Expense

Which one of the following is not considered one of the three primary financial statements?

Total assets plus total liabilities must equal total owners' equity.

From an accounting viewpoint, when is a business considered an entity separate from its owner(s)?

According to the Sarbanes-Oxley Act of 2002, internal controls must be audited by the same accounting firm that audits the financial statements.

Eton Corporation purchased land in 1990 for $190,000. In 2008, it purchased a nearly identical parcel of land for $430,000. In its 2008 balance sheet, Eton valued these two parcels of land at a combined value of $860,000. Reporting the land in this manner violated the:

Retained earnings appears on:

Forms of Business Organization State and describe the three most common forms of business organizations in the United States.

If Retained Earnings at December 31, 2010, is $140,000, total assets amount to:

Preparation of balance sheet Prepare the balance sheet as of December 31, 2009, for Gamma Company, from the following list of items which are arranged in random order. You must compute the amount for accounts payable to complete the balance sheet.

A transaction caused a $15,000 decrease in both total assets and total liabilities. This transaction could have been:

Limited liability means that owners of a business are only liable for the debts of the business up to the amounts they can afford.

Accounting: Information for Decision Making

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Management Accounting: a Business Partner

Job Order Cost Systems and Overhead Allocations

Process Costing

Costing and the Value Chain

Cost-Volume-Profit Analysis

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

Forms of Business Organization

The Time Value of Money: Future Amounts and Present Values Answer Key

Filters