Question 1

Owner's equity is increased by

Accepted Answer

A)  drawings. 
B)  revenues. 
C)  expenses. 
D)  liabilities.

Question 2

Letty Company began the year with owner's equity of $105000. During the year Letty received additional owner investments of $147000 recorded expenses of $420000 and had owner drawings of $28000. If Letty's ending owner's equity was $290000 what was the company's revenue for the year?

Accepted Answer

A)  $458000. 
B)  $486000. 
C)  $605000. 
D)  $633000.

Question 3

Loya Company entered into the following transactions during March 2016.
1. Purchased office equipment for $25000 from Office Equipment Inc. on account.
2. Paid $3000 cash for March rent on office furniture.
3. Received $18000 cash from customers for services billed in February.
4. Provided legal services to Miguel Construction Company for $3500 cash.
5. Paid Western States Power Co. $2500 cash for electric usage in March.
6. F. Loya invested an additional $32000 in the business.
7. Paid Office Equipment Inc. for the office equipment purchased in (1) above.
8. Incurred advertising expense for March of $1600 on account.
Instructions
Indicate with the appropriate letter whether each of the transactions above results in:
(a) an increase in assets and a decrease in assets.
(b) an increase in assets and an increase in owner's equity.
(c) an increase in assets and an increase in liabilities.
(d) a decrease in assets and a decrease in owner's equity.
(e) a decrease in assets and a decrease in liabilities.
(f) an increase in liabilities and a decrease in owner's equity.
(g) an increase in owner's equity and a decrease in liabilities.

Accepted Answer

The answer of Loya Company entered into the following transactions...

Question 4

Revenues are

Accepted Answer

A)  the cost of assets consumed during the period. 
B)  gross increases in owner's equity resulting from business activities. 
C)  the cost of services used during the period. 
D)  actual or expected cash outflows.

Question 5

Owner's equity can be described as

Accepted Answer

A)  creditorship claim on total assets. 
B)  ownership claim on total assets. 
C)  benefactor's claim on total assets. 
D)  debtor claim on total assets.

Question 6

An income statement

Accepted Answer

A)  summarizes the changes in owner's equity for a specific period of time. 
B)  reports the changes in assets liabilities and owner's equity over a period of time. 
C)  reports the assets liabilities and owner's equity at a specific date. 
D)  presents the revenues and expenses for a specific period of time.

Question 7

Gail Stocken was reviewing her business activities at the end of the year (2016) and decided to prepare an Owner's Equity Statement. At the beginning of the year her assets were $485000 and her liabilities were $210000. At the end of the year the assets had grown to $750000 but liabilities had also increased to $380000. The net income for the year was $220000. Gail had withdrawn $125000 during the year for her personal use.
Prepare an owner's equity statement in good form.

Accepted Answer

The answer of Gail Stocken was reviewing her business activities...

Question 8

Identify whether the following items would be reported on the income statement (IS) or balance sheet (BS).
1. Cash
2. Service Revenue
3. Notes Payable
4. Interest Expense
5. Accounts Receivable

Accepted Answer

The answer of Identify whether the following items would be...

Question 9

Accounting is an information system that identifies _____________ and _____________ the economic events of an organization.

Accepted Answer

The answer of Accounting is an information system that identifies...

Question 10

The ending owner's equity amount is shown on

Accepted Answer

A)  the balance sheet only. 
B)  the owner's equity statement only. 
C)  both the income statement and the owner's equity statement. 
D)  both the balance sheet and the owner's equity statement.

Question 11

George and Ringo met at law school and decide to start a small law practice after graduation. They agree to split revenues and expenses evenly. The most common form of business organization for a business such as this would be a

Accepted Answer

A)  joint venture. 
B)  partnership. 
C)  corporation. 
D)  proprietorship.

Question 12

Use the accounting equation to answer the following questions.
1. Penny Sales Co. has total assets of $140000 and total liabilities of $54000. What is owner's equity?
2. The Virtual Sun Center has total assets of $252000 and owner's equity of $100000. What are total liabilities?
3. Columbia River Restaurant has total liabilities of $50000 and owner's equity of $80000. What are total assets?

Accepted Answer

The answer of Use the accounting equation to answer the...

Question 13

A working knowledge of accounting is not relevant to a lawyer or an architect.

Accepted Answer

A) True 
 B)False

Question 14

Presented below is a balance sheet for Mark Bledsoe Yard Service at December 31, 2016.
$\begin{array}{c}
\text { MARK BLEDSOE YARD SERVICE}\
\text { Balance Sheet}\
\text { December 31, 2016}\\
\begin{array}{lclr}
\text { Assets }&&\text { Liabilities and Owner's Equity }\
 \text { Cash } & \$ 13,000 & \text { Liabilities } & \
 \text { Accounts receivable } & 6,000 & \text { Accounts payable } & \$ 8,000 \
 \text { Supplies } & 9,000 & \text { Notes payable } & 15,000 \
\text { Equipment } & 11,000 & 
\text { Owner's equity } \ 
&\underline{\quad\quad}&\text { Owner's capital }&\underline{16,000}\
 \text { Total assets } &\underline{\$ 39.000}& \text { Total liabilities \& owner's equity } &\underline{\$39,000}  \
\end{array}\end{array}$
The following additional data are available for the year which began on January 1: All expenses (excluding supplies expense) total $6,000. Supplies on January 1, were $11,000 and $7,000 of supplies were purchased during the year. Net income for the year was $8,000 and drawings were $9,000.
Determine the following:  (Show all computations.)
1.	Supplies used during the year.
2.	Total expenses for the year.
3.	Service revenues for the year.
4.	Owner’s capital balance on January 1.

Accepted Answer

The answer of Presented below is a balance sheet for...

Question 15

The private sector organization involved in developing accounting principles is the

Accepted Answer

A)  Feasible Accounting Standards Body. 
B)  Financial Accounting Studies Board. 
C)  Financial Accounting Standards Board. 
D)  Financial Auditors' Standards Body.

Question 16

The United States and the international standard-setting environment are primarily driven by meeting the needs of

Accepted Answer

A)  investors and creditors. 
B)  tax authorities. 
C)  central government planners. 
D)  academic researchers.

Question 17

Eli's Electronic Repair Shop started the year with total assets of $300000 and total liabilities of $200000. During the year the business recorded $400000 in electronic repair revenues $300000 in expenses and Eli withdrew $50000. Eli's Owner's Capital balance at the end of the year was

Accepted Answer

A)  $200000. 
B)  $100000. 
C)  $150000. 
D)  $350000.

Question 18

The residual claim on total assets of a business is known as ________________ and is equal to total assets minus total liabilities.

Accepted Answer

The answer of The residual claim on total assets of...

Question 19

Mirah Company compiled the following financial information as of December 31 2016: $$\begin{array} { l r } 
\text { Revenues } & \$ 340,000 \
\text { Owner's Capital (1/1/16) } & 140,000 \
\text { Equipment } & 80,000 \
\text { Expenses } & 240,000 \
\text { Cash } & 90,000 \
\text { Owner's Drawings } & 20,000 \
\text { Supplies } & 20,000 \
\text { Accounts payable } & 40,000 \
\text { Accounts receivable } & 70,000
\end{array}$$ Mirah's assets on December 31 2016 are

Accepted Answer

A)  $190000. 
B)  $260000. 
C)  $360000. 
D)  $480000.

Question 20

A business whose owners enjoy limited liability is a

Accepted Answer

A)  proprietorship. 
B)  partnership. 
C)  corporation. 
D)  sole proprietorship.

Exam 1: Accounting in Action