Question 1

The valuation of assets in the balance sheet is based primarily upon:

Accepted Answer

A)  What it would cost to replace the assets. 
B)  Cost, because cost is usually factual and verifiable. 
C)  Current fair market value as established by independent appraisers. 
D)  Cost, because in the event of liquidation, the assets would be sold at an amount equal to their original cost. 
A)  What it would cost to replace the assets. 
B)  Cost, because cost is usually factual and verifiable. 
C)  Current fair market value as established by independent appraisers. 
D)  Cost, because in the event of liquidation, the assets would be sold at an amount equal to their original cost.

Question 2

Articulation between the financial statements means that they relate closely to each other.

Accepted Answer

A) True 
 B)False

Question 3

The entity principle states that the affairs of the owners are not part of the financial operations of a business entity and should be separated.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following would you expect to find in a correctly-prepared income statement?

Accepted Answer

A)  Cash balance at the end of the period. 
B)  Revenues earned during the period. 
C)  Contributions by the owner during the period. 
D)  Expenses incurred during the period to earn revenues. 
A)  Cash balance at the end of the period. 
B)  Revenues earned during the period. 
C)  Contributions by the owner during the period. 
D)  Expenses incurred during the period to earn revenues.

Question 5

The payment of a liability causes an increase in owners' equity.

Accepted Answer

A) True 
 B)False

Question 6

During the current year, the assets of Wheatley's increased by $362,000, and the liabilities increased by $260,000. The owners' equity in the business must have:

Accepted Answer

A)  Decreased by $102,000. 
B)  Decreased by $622,000. 
C)  Increased by $102,000. 
D)  Increased by $622,000. 
A)  Decreased by $102,000. 
B)  Decreased by $622,000. 
C)  Increased by $102,000. 
D)  Increased by $622,000.

Question 7

A revenue transaction results in all of the following except:

Accepted Answer

A)  An increase in assets. 
B)  An increase in owners' equity. 
C)  A positive cash flow in either the past, present, or future. 
D)  An increase in liabilities. 
A)  An increase in assets. 
B)  An increase in owners' equity. 
C)  A positive cash flow in either the past, present, or future. 
D)  An increase in liabilities.

Question 8

Decreases in owners' equity are caused by:

Accepted Answer

A)  Purchases of assets and payment of liabilities. 
B)  Purchases of assets and incurrence of liabilities. 
C)  Payment of liabilities and unprofitable operations. 
D)  Distributions of assets to the owner and unprofitable operations. 
A)  Purchases of assets and payment of liabilities. 
B)  Purchases of assets and incurrence of liabilities. 
C)  Payment of liabilities and unprofitable operations. 
D)  Distributions of assets to the owner and unprofitable operations.

Question 9

Profitability may be defined as:

Accepted Answer

A)  The ability to pay the debts of the company as they fall due. 
B)  The ability to increase retained earnings. 
C)  Distributing dividends. 
D)  Having excess cash. 
A)  The ability to pay the debts of the company as they fall due. 
B)  The ability to increase retained earnings. 
C)  Distributing dividends. 
D)  Having excess cash.

Question 10

A statement of cash flows for February, would report net cash flows from investing activities of:

Accepted Answer

A)  $4,000. 
B)  $47,000. 
C)  $53,600. 
D)  $96,600. 
A)  $4,000. 
B)  $47,000. 
C)  $53,600. 
D)  $96,600.

Question 11

Thirty percent of the total assets of Shanahan Corporation have been financed through borrowing. The total liabilities of the company are $600,000. What is the amount of owners' equity?

Accepted Answer

A)  $180,000. 
B)  $2,000,000. 
C)  $1,400,000. 
D)  $2,600,000. 
A)  $180,000. 
B)  $2,000,000. 
C)  $1,400,000. 
D)  $2,600,000.

Question 12

Bob Bertolucci, owner of Bob's Bazaar, also owns a personal residence that costs $575,000. The market value of his residence is $725,000. During preparation of the financial statements for Bob's Bazaar, the accounting principle most relevant to the presentation of Bob's home is:

Accepted Answer

A)  The concept of the business entity. 
B)  The cost principle. 
C)  The going-concern assumption. 
D)  The objectivity principle. 
A)  The concept of the business entity. 
B)  The cost principle. 
C)  The going-concern assumption. 
D)  The objectivity principle.

Question 13

On January 6, total assets of the business amount to:

Accepted Answer

A)  $826,650. 
B)  $994,950 
C)  $957,000. 
D)  $950,400. 
A)  $826,650. 
B)  $994,950 
C)  $957,000. 
D)  $950,400.

Question 14

If the Notes Payable balance is $25,000, then the total assets of Gordon, Inc. at December 31, 2011 amount to:

Accepted Answer

A)  $27,500. 
B)  $152,500. 
C)  $120,000. 
D)  $165,000. 
A)  $27,500. 
B)  $152,500. 
C)  $120,000. 
D)  $165,000.

Question 15

A statement of cash flows for February, would report net cash flows from operating activities of:

Accepted Answer

A)  $4,000. 
B)  $47,000. 
C)  $53,600. 
D)  $96,600. 
A)  $4,000. 
B)  $47,000. 
C)  $53,600. 
D)  $96,600.

Question 16

At the end of the current year, the owners' equity in Durante Co. is $360,000. During the year, the assets of the business had increased by $68,000 and the liabilities had increased by $118,000. Owners' equity at the beginning of the year must have been:

Accepted Answer

A)  $410,000. 
B)  $310,000. 
C)  $546,000. 
D)  $174,000. 
A)  $410,000. 
B)  $310,000. 
C)  $546,000. 
D)  $174,000.

Question 17

The balance sheet of Dotty Designs includes the following items: This list includes:

Accepted Answer

A)  Four assets and three liabilities. 
B)  Five assets and three liabilities. 
C)  Five assets and two liabilities. 
D)  Six assets and two liabilities. 
A)  Four assets and three liabilities. 
B)  Five assets and three liabilities. 
C)  Five assets and two liabilities. 
D)  Six assets and two liabilities.

Question 18

Effects of transactions on balance sheet items
Show the effect of each of the seven listed transactions on the balance sheet items of Renaissance Investment Services, Inc. Indicate the new balances after the transaction of November 2 and each subsequent transaction. The effects of the November 1 transaction are already filled in to provide you with an example.

Accepted Answer

The answer of Effects of transactions on balance sheet items
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Question 19

At the beginning of August, 2010, owners' equity in Astoria was $160,000. Given the transactions of August, what will owners' equity be at the end of the month?

Accepted Answer

A)  $167,500. 
B)  $150,500. 
C)  $193,500. 
D)  $158,000. 
A)  $167,500. 
B)  $150,500. 
C)  $193,500. 
D)  $158,000.

Question 20

For the month of October, net cash flows from operating activities for Waldorf were:

Accepted Answer

A)  $18,500. 
B)  $22,500. 
C)  $78,000. 
D)  $100,500. 
A)  $18,500. 
B)  $22,500. 
C)  $78,000. 
D)  $100,500.

Exam 2: Basic Financial Statements

The valuation of assets in the balance sheet is based primarily upon:

Articulation between the financial statements means that they relate closely to each other.

The entity principle states that the affairs of the owners are not part of the financial operations of a business entity and should be separated.

Which of the following would you expect to find in a correctly-prepared income statement?

The payment of a liability causes an increase in owners' equity.

During the current year, the assets of Wheatley's increased by $362,000, and the liabilities increased by $260,000. The owners' equity in the business must have:

A revenue transaction results in all of the following except:

Decreases in owners' equity are caused by:

Profitability may be defined as:

A statement of cash flows for February, would report net cash flows from investing activities of:

Thirty percent of the total assets of Shanahan Corporation have been financed through borrowing. The total liabilities of the company are $600,000. What is the amount of owners' equity?

Bob Bertolucci, owner of Bob's Bazaar, also owns a personal residence that costs $575,000. The market value of his residence is $725,000. During preparation of the financial statements for Bob's Bazaar, the accounting principle most relevant to the presentation of Bob's home is:

On January 6, total assets of the business amount to:

If the Notes Payable balance is $25,000, then the total assets of Gordon, Inc. at December 31, 2011 amount to:

A statement of cash flows for February, would report net cash flows from operating activities of:

At the end of the current year, the owners' equity in Durante Co. is $360,000. During the year, the assets of the business had increased by $68,000 and the liabilities had increased by $118,000. Owners' equity at the beginning of the year must have been:

The balance sheet of Dotty Designs includes the following items: This list includes:

At the beginning of August, 2010, owners' equity in Astoria was $160,000. Given the transactions of August, what will owners' equity be at the end of the month?

For the month of October, net cash flows from operating activities for Waldorf were:

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

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