Question 1

All of the following are classified as assets except:

Accepted Answer

A)  Accounts Receivable. 
B)  Supplies. 
C)  Equipment. 
D)  Accounts Payable. 
E)  Land.

Question 2

Generally the lower the risk, the higher the return that can be expected.

Accepted Answer

A) True 
 B)False

Question 3

Identify and describe the four basic financial statements:

Accepted Answer

The answer of Identify and describe the four basic financial...

Question 4

Alpha Company has assets of $600,000, liabilities of $250,000, and equity of $350,000. It buys office equipment on credit for $75,000. What would be the effects of this transaction on the accounting equation?

Accepted Answer

A)  Assets increase by $75,000 and expenses increase by $75,000. 
B)  Assets increase by $75,000 and expenses decrease by $75,000. 
C)  Liabilities increase by $75,000 and expenses decrease by $75,000. 
D)  Assets decrease by $75,000 and expenses decrease by $75,000. 
E)  Assets increase by $75,000 and liabilities increase by $75,000.

Question 5

Prepare a April 30 balance sheet in proper form for Two Rivers Vending Service, Inc. from the following alphabetical list of the accounts at April 30: $\begin{array}{llcc}
  \text {Accounts receivable.................  } &\$10,000\
 \text { Accounts payable.................. } &18,000\
\
 \text {Building...................................  } &28,000\
 \text { Cash....................................... } &10,000\
 \text {Notes payable..........................  } &47,000\
 \text {Office equipment.....................  } &12,000\
 \text {Stockholders' equity...............  } &?\
 \text { Trucks.................................... } &55,000\
\end{array}$

Accepted Answer

The answer of Prepare a April 30 balance sheet in...

Question 6

Grandmark Printing pays $2,000 rent to the landlord of the building where its facilities are located. How does this transaction affect the accounting equation for Grandmark?

Accepted Answer

A)  Assets would decrease $2,000 and liabilities would decrease $2,000. 
B)  Assets would decrease $2,000 and equity would decrease $2,000. 
C)  Assets would increase $2,000 and equity would increase $2,000. 
D)  Assets would increase $2,000 and liabilities would increase $2,000. 
E)  Liabilities would decrease $2,000 and equity would increase $2,000.

Question 7

The accountant of Action Adventure Games, Inc. prepared a balance sheet after every 10 day period. The only resources invested by the owner were at the start of the company on June 1. During June, the first month of operation, the following balance sheets were prepared:    Required:
 Describe the nature of each of the four transactions that took place between the balance sheet dates shown. Assume only one transaction affected each account. $\text {June}$
10 $\quad $$\underline{\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad}$
20 $\quad $$\underline{\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad}$
30 $\quad $$\underline{\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad}$
  $\quad $$\quad $$\underline{\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad}$

Accepted Answer

The answer of The accountant of Action Adventure Games, Inc....

Question 8

The three major types of business activities are operating, financing, and investing.

Accepted Answer

A) True 
 B)False

Question 9

The income statement describes revenues earned and expenses incurred over a specified period of time due to earnings activities.

Accepted Answer

A) True 
 B)False

Question 10

Owners of a corporation are called shareholders or stockholders.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following accounting principles require that all goods and services purchased be recorded at actual cost?

Accepted Answer

A)  Going-concern assumption. 
B)  Matching principle. 
C)  Cost principle. 
D)  Business entity assumption. 
E)  Consideration assumption.

Question 12

The statement of cash flows identifies cash flows separated into operating, investing, and financing activities over a period of time.

Accepted Answer

A) True 
 B)False

Question 13

The Superior Company acquired a building for $500,000. The building was appraised at a value of $575,000. The seller had paid $300,000 for the building 6 years ago. Which accounting principle would require Superior to record the building on its records at $500,000?

Accepted Answer

A)  Monetary unit assumption. 
B)  Going-concern assumption. 
C)  Cost principle. 
D)  Business entity assumption. 
E)  Revenue recognition principle.

Question 14

Understanding generally accepted accounting principles is not necessary to effectively use and interpret financial statements.

Accepted Answer

A) True 
 B)False

Question 15

Saddleback Company paid off $30,000 of its accounts payable in cash. What would be the effects of this transaction on the accounting equation?

Accepted Answer

A)  Assets, $30,000 increase; equity, $30,000 increase. 
B)  Assets, $30,000 decrease; liabilities, $30,000 decrease. 
C)  Assets, $30,000 decrease; liabilities, $30,000 increase. 
D)  Liabilities, $30,000 decrease; equity, $30,000 increase. 
E)  Assets, $30,000 decrease; equity $30,000 decrease.

Question 16

The four basic financial statements include the balance sheet, income statement, statement of retained earnings, and statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 17

Return on assets is also known as return on investment.

Accepted Answer

A) True 
 B)False

Question 18

What is the balance sheet? What is its purpose?

Accepted Answer

The answer of What is the balance sheet? What is...

Question 19

Chou Co. has a net income of $43,000, assets at the beginning of the year are $250,000 and assets at the end of the year are $300,000. Compute its return on assets.

Accepted Answer

A)  8.4% 
B)  17.2% 
C)  14.3% 
D)  15.6% 
E)  1.5%

Question 20

The private-sector group that currently has the authority to establish generally accepted accounting principles in the United States is the:

Accepted Answer

A)  APB. 
B)  FASB. 
C)  AAA. 
D)  AICPA. 
E)  SEC.

Exam 1: Accounting in Business

All of the following are classified as assets except:

Generally the lower the risk, the higher the return that can be expected.

Identify and describe the four basic financial statements:

Alpha Company has assets of $600,000, liabilities of $250,000, and equity of $350,000. It buys office equipment on credit for $75,000. What would be the effects of this transaction on the accounting equation?

Grandmark Printing pays $2,000 rent to the landlord of the building where its facilities are located. How does this transaction affect the accounting equation for Grandmark?

The three major types of business activities are operating, financing, and investing.

The income statement describes revenues earned and expenses incurred over a specified period of time due to earnings activities.

Owners of a corporation are called shareholders or stockholders.

Which of the following accounting principles require that all goods and services purchased be recorded at actual cost?

The statement of cash flows identifies cash flows separated into operating, investing, and financing activities over a period of time.

The Superior Company acquired a building for $500,000. The building was appraised at a value of $575,000. The seller had paid $300,000 for the building 6 years ago. Which accounting principle would require Superior to record the building on its records at $500,000?

Understanding generally accepted accounting principles is not necessary to effectively use and interpret financial statements.

Saddleback Company paid off $30,000 of its accounts payable in cash. What would be the effects of this transaction on the accounting equation?

The four basic financial statements include the balance sheet, income statement, statement of retained earnings, and statement of cash flows.

Return on assets is also known as return on investment.

What is the balance sheet? What is its purpose?

Chou Co. has a net income of $43,000, assets at the beginning of the year are $250,000 and assets at the end of the year are $300,000. Compute its return on assets.

The private-sector group that currently has the authority to establish generally accepted accounting principles in the United States is the: