Question 1

Regulators often have legal authority over certain activities of organizations.

Accepted Answer

A) True 
 B)False

Question 2

All of the following are classified as liabilities except:

Accepted Answer

A)  Supplies. 
B)  Bonds Payable. 
C)  Wages Payable. 
D)  Accounts Payable. 
E)  Interest Payable.

Question 3

Atkins Company collected $1,750 as payment for the amount owed by a customer from services provided the prior month on credit. How does this transaction affect the accounting equation for Atkins?

Accepted Answer

A)  Assets would decrease $1,750 and liabilities would decrease $1,750. 
B)  One asset would increase $1,750 and a different asset would decrease $1,750, causing no effect. 
C)  Assets would increase $1,750 and equity would increase $1,750. 
D)  Assets would increase $1,750 and liabilities would increase $1,750. 
E)  Liabilities would decrease $1,750 and equity would increase $1,750.

Question 4

The business entity principle means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.

Accepted Answer

A) True 
 B)False

Question 5

The accounting concept that requires every business to be accounted for separately from other business entities, including its owner or owners is known as the:

Accepted Answer

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

Question 6

Every business transaction leaves the accounting equation in balance.

Accepted Answer

A) True 
 B)False

Question 7

A financial statement providing information that helps users understand a company's financial status, and which lists the types and amounts of assets, liabilities, and equity as of a specific date, is called a(n):

Accepted Answer

A)  Balance sheet. 
B)  Income statement. 
C)  Statement of cash flows. 
D)  Statement of retained earnings. 
E)  Financial Status Statement.

Question 8

What distinguishes liabilities from equity?

Accepted Answer

The answer of What distinguishes liabilities from equity?...

Question 9

Risk is:

Accepted Answer

A)  Net income divided by average total assets. 
B)  The reward for investment. 
C)  The uncertainty about the return expected to be earned. 
D)  Unrelated to return expected. 
E)  Derived from the idea of getting something back from an investment.

Question 10

The purchase of supplies appears on the statement of cash flows as an investing activity because it involves the purchase of assets.

Accepted Answer

A) True 
 B)False

Question 11

Jet Styling, Inc. has the following beginning cash balance and cash transactions for the month of January. Using this information prepare a statement of cash flows. $\begin{array}{llcc}
\text { a. } &  \text {Beginning cash balance.........................  } &\$3,200\
\text { b. } & \text {Cash investment by owner....................  } &15,000\
\text { c. } & \text {Cash payment toward long-term loan  } &1,000\
\text {  d.} & \text {Cash payment of rent...........................  } &1,800\
\text { e. } & \text { Purchased equipment for cash............ } &7,500\
\text { f. } & \text {Purchased store supplies for cash..........  } &1,500\
 \text { g. } & \text { Cash collected from customers............. } &7,750\
 \text {h.  } &\text {  Cash dividend to stockholder...............} &2,000\
 \text {i.  } &\text {Cash payment of wages.........................  } &4,000\
\end{array}$

Accepted Answer

The answer of Jet Styling, Inc. has the following beginning...

Question 12

There are three major types of business activities. ________________ activities are the means organizations use to pay for resources such as land, building, and equipment to carry out plans.

Accepted Answer

The answer of There are three major types of business...

Question 13

Decreases in equity that represent costs of providing products or services to customers, used to earn revenues are called:

Accepted Answer

A)  Liabilities. 
B)  Equity. 
C)  Dividends. 
D)  Expenses. 
E)  Common Stock.

Question 14

____________ are the increases in equity from a company's sales of products and services to customers.

Accepted Answer

The answer of ____________ are the increases in equity from...

Question 15

Strategic management is the process of determining the right mix of operating activities for the type of organization, its plans, and its market.

Accepted Answer

A) True 
 B)False

Question 16

Rico's Taqueria had cash inflows from operating activities of $27,000; cash outflows from investing activities of $22,000, and cash outflows from financing activities of $12,000. Calculate the net increase or decrease in cash.

Accepted Answer

A)  $61,000 increase. 
B)  $37,000 increase. 
C)  $7,000 decrease. 
D)  $7,000 increase. 
E)  $34,000 decrease.

Question 17

General accounting principles arise from long-used accounting practices.

Accepted Answer

A) True 
 B)False

Question 18

Stockholders' equity is increased when cash is received from customers in payment of previously recorded accounts receivable.

Accepted Answer

A) True 
 B)False

Question 19

Ethical behavior requires that:

Accepted Answer

A)  Auditors' pay not depend on the success of the client's business. 
B)  Auditors invest in businesses they audit. 
C)  Analysts report information favorable to their companies. 
D)  Managers use accounting information to benefit themselves. 
E)  Auditors' pay depends on the success of the client's business.

Question 20

If a company paid $38,000 of its accounts payable in cash, what was the effect on the accounting equation?

Accepted Answer

A)  Assets would decrease $38,000, liabilities would decrease $38,000, and equity would decrease $38,000. 
B)  Assets would decrease $38,000, liabilities would decrease $38,000, and equity would increase $38,000. 
C)  Assets would decrease $38,000 and liabilities would decrease $38,000. 
D)  There would be no effect on the accounts because the accounts are affected by the same amount. 
E)  Assets would increase $38,000 and liabilities would decrease $38,000.

Exam 1: Accounting in Business

Regulators often have legal authority over certain activities of organizations.

All of the following are classified as liabilities except:

Atkins Company collected $1,750 as payment for the amount owed by a customer from services provided the prior month on credit. How does this transaction affect the accounting equation for Atkins?

The business entity principle means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.

The accounting concept that requires every business to be accounted for separately from other business entities, including its owner or owners is known as the:

Every business transaction leaves the accounting equation in balance.

A financial statement providing information that helps users understand a company's financial status, and which lists the types and amounts of assets, liabilities, and equity as of a specific date, is called a(n) :

What distinguishes liabilities from equity?

Risk is:

The purchase of supplies appears on the statement of cash flows as an investing activity because it involves the purchase of assets.

There are three major types of business activities. ________________ activities are the means organizations use to pay for resources such as land, building, and equipment to carry out plans.

Decreases in equity that represent costs of providing products or services to customers, used to earn revenues are called:

____________ are the increases in equity from a company's sales of products and services to customers.

Strategic management is the process of determining the right mix of operating activities for the type of organization, its plans, and its market.

Rico's Taqueria had cash inflows from operating activities of $27,000; cash outflows from investing activities of $22,000, and cash outflows from financing activities of $12,000. Calculate the net increase or decrease in cash.

General accounting principles arise from long-used accounting practices.

Stockholders' equity is increased when cash is received from customers in payment of previously recorded accounts receivable.

Ethical behavior requires that:

If a company paid $38,000 of its accounts payable in cash, what was the effect on the accounting equation?