Question 1

Cash is collected from a customer who was previously put on account. How does the collection of the cash affect the accounting equation?

Accepted Answer

A)  Assets increase; owner's equity increases. 
B)  Assets increase; liabilities increase. 
C)  Assets increase; assets decrease. 
D)  Assets decrease; owner's equity decreases. 
A)  Assets increase; owner's equity increases. 
B)  Assets increase; liabilities increase. 
C)  Assets increase; assets decrease. 
D)  Assets decrease; owner's equity decreases. C

Question 2

Beginning capital was $25,000. Ending capital is $37,000. Withdrawals were $23,000. What was net income or loss for the year?

Accepted Answer

A)  $18,000 
B)  $8,000 
C)  $60,000 
D)  $5,000 
A)  $18,000 
B)  $8,000 
C)  $60,000 
D)  $5,000 B

Question 3

Beginning capital is $20, 000. Withdrawals were $7, 000. Ending capital is $37, 000. What was net income?

Accepted Answer

A)  $24, 000 
B)  $13, 000 
C)  $10, 000 
D)  $27, 000 
A)  $24, 000 
B)  $13, 000 
C)  $10, 000 
D)  $27, 000 A

Question 4

Organizing as a corporation separates management from the:

Accepted Answer

A)  proprietors. 
B)  vendors. 
C)  customers. 
D)  stockholders. 
A)  proprietors. 
B)  vendors. 
C)  customers. 
D)  stockholders.

Question 5

Businesses can be organized in a variety of forms. The types of business forms found in the U.S. include all of the following EXCEPT:

Accepted Answer

A)  corporation. 
B)  tax shelter. 
C)  partnership. 
D)  proprietorship. 
A)  corporation. 
B)  tax shelter. 
C)  partnership. 
D)  proprietorship.

Question 6

Generally accepted auditing standards are the rules that govern public accounting information.

Accepted Answer

A) True 
 B)False

Question 7

David has decided to open an auto-detailing business. He will pick up an automobile from the client, take it to his parents' garage, detail it, and return it to the client. Which of the following accounting decisions will he face?

Accepted Answer

A)  Choice of products to use to detail the automobiles 
B)  How to organize the business 
C)  How to advertise his service 
D)  All of the above 
A)  Choice of products to use to detail the automobiles 
B)  How to organize the business 
C)  How to advertise his service 
D)  All of the above

Question 8

accounting equation only represents the relationship between assets and liabilities.

Accepted Answer

A) True 
 B)False

Question 9

proprietorship possesses all but one of the following characteristics. Which of the following is a characteristic of a proprietorship?

Accepted Answer

A)  If a proprietorship cannot pay its debts, lenders can take the owner's personal assets to satisfy the obligations. 
B)  A proprietorship is an "artificial person" in the eyes of the law. 
C)  Ownership is divided into individual shares. 
D)  A proprietorship is owned by shareholders or stockholders. 
A)  If a proprietorship cannot pay its debts, lenders can take the owner's personal assets to satisfy the obligations. 
B)  A proprietorship is an "artificial person" in the eyes of the law. 
C)  Ownership is divided into individual shares. 
D)  A proprietorship is owned by shareholders or stockholders.

Question 10

Land is purchased with a $20,000 down payment and the execution of an $80,000 promissory note. How does this purchase affect the accounting equation?

Accepted Answer

A)  Assets increase $80, 000; liabilities decrease $20,000. 
B)  Assets increase $20, 000; liabilities decrease $80,000. 
C)  Assets increase $80, 000; owner's equity increases $80,000. 
D)  Assets increase $80, 000; liabilities increase $80,000. 
A)  Assets increase $80, 000; liabilities decrease $20,000. 
B)  Assets increase $20, 000; liabilities decrease $80,000. 
C)  Assets increase $80, 000; owner's equity increases $80,000. 
D)  Assets increase $80, 000; liabilities increase $80,000.

Question 11

Accounting information may be generated for a variety of purposes. The key products of accounting are:

Accepted Answer

A)  financial statements. 
B)  remittance advices. 
C)  spreadsheets. 
D)  work sheets. 
A)  financial statements. 
B)  remittance advices. 
C)  spreadsheets. 
D)  work sheets.

Question 12

Accounting is the information system that provides information to various users. This process includes:

Accepted Answer

A)  compiling the data into reports. 
B)  measuring business activity. 
C)  communicating the results to decisions makers. 
D)  all of the above. 
A)  compiling the data into reports. 
B)  measuring business activity. 
C)  communicating the results to decisions makers. 
D)  all of the above.

Question 13

balance sheet of a proprietorship represents the account balances as of a particular date in time.

Accepted Answer

A) True 
 B)False

Question 14

Counting the actual physical inventory of a company would be an example of the:

Accepted Answer

A)  objectivity principle (verifiability). 
B)  entity concept. 
C)  going-concern concept. 
D)  stable monetary unit concept. 
A)  objectivity principle (verifiability). 
B)  entity concept. 
C)  going-concern concept. 
D)  stable monetary unit concept.

Question 15

Following is a list of account balances (except for owner's equity) of Wilson Mowing as of December 31 of the first year of operation:
$$\begin{array} { | l | r | } 
\hline \text { Accounts receivable } & \$ 2,500 \
\hline \text { Accounts payable } & 3,500 \
\hline \text { Salary expense } & 4,500 \
\hline \text { Repairs expense } & 800 \
\hline \text { Truck } & 8,500 \
\hline \text { Equipment } & 6,300 \
\hline \text { Notes payable } & 8,200 \
\hline \text { Cash } & 6,800 \
\hline \text { Supplies expense } & 1,600 \
\hline \text { Service revenue } & 31,900 \
\hline \text { Gasoline expense } & 3,800 \
\hline \text { Salary payable } & 200 \
\hline
\end{array}$$ The sole proprietor, J.D. Wilson, contributed $3,000 at the beginning of the year and made withdrawals of $12,000 during the year.
At the end of the year, what is the amount of total liabilities?

Accepted Answer

A)  $11,900 
B)  $24,100 
C)  $21,200 
D)  $12,200 
A)  $11,900 
B)  $24,100 
C)  $21,200 
D)  $12,200

Question 16

of the following concepts (or principles) would be most likely to require that data be verifiable?

Accepted Answer

A)  Cost principle 
B)  Reliability concept 
C)  Entity concept 
D)  Going-concern concept 
A)  Cost principle 
B)  Reliability concept 
C)  Entity concept 
D)  Going-concern concept

Question 17

corporation has all of the following EXCEPT:

Accepted Answer

A)  a charter. 
B)  a board of directors. 
C)  unlimited liability. 
D)  none of the above. 
A)  a charter. 
B)  a board of directors. 
C)  unlimited liability. 
D)  none of the above.

Question 18

Net income is $29,000. Beginning capital was $34,000. Ending capital was $55,000. What were the cash withdrawals for the proprietorship??

Accepted Answer

A)  $18,000 
B)  $ 8,000 
C)  $ 5,000 
D)  $60,000 
A)  $18,000 
B)  $ 8,000 
C)  $ 5,000 
D)  $60,000

Question 19

are more __________ than any other form of business organization.

Accepted Answer

A)  partnerships 
B)  sole proprietorships 
C)  corporations 
D)  limited liability partnerships 
A)  partnerships 
B)  sole proprietorships 
C)  corporations 
D)  limited liability partnerships

Question 20

obligation that a proprietorship owes to an outside person or agency is called a(n):

Accepted Answer

A)  asset. 
B)  liability. 
C)  owner's equity. 
D)  revenue. 
A)  asset. 
B)  liability. 
C)  owner's equity. 
D)  revenue.

Exam 1: Accounting and the Business Environment

Cash is collected from a customer who was previously put on account. How does the collection of the cash affect the accounting equation?

Beginning capital was $25,000. Ending capital is $37,000. Withdrawals were $23,000. What was net income or loss for the year?

Beginning capital is $20, 000. Withdrawals were $7, 000. Ending capital is $37, 000. What was net income?

Organizing as a corporation separates management from the:

Businesses can be organized in a variety of forms. The types of business forms found in the U.S. include all of the following EXCEPT:

Generally accepted auditing standards are the rules that govern public accounting information.

David has decided to open an auto-detailing business. He will pick up an automobile from the client, take it to his parents' garage, detail it, and return it to the client. Which of the following accounting decisions will he face?

accounting equation only represents the relationship between assets and liabilities.

proprietorship possesses all but one of the following characteristics. Which of the following is a characteristic of a proprietorship?

Land is purchased with a $20,000 down payment and the execution of an $80,000 promissory note. How does this purchase affect the accounting equation?

Accounting information may be generated for a variety of purposes. The key products of accounting are:

Accounting is the information system that provides information to various users. This process includes:

balance sheet of a proprietorship represents the account balances as of a particular date in time.

Counting the actual physical inventory of a company would be an example of the:

of the following concepts (or principles) would be most likely to require that data be verifiable?

corporation has all of the following EXCEPT:

Net income is $29,000. Beginning capital was $34,000. Ending capital was $55,000. What were the cash withdrawals for the proprietorship??

are more __________ than any other form of business organization.

obligation that a proprietorship owes to an outside person or agency is called a(n):

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandising Inventory

Internal Control and Cash

Receivables

Plant Assets and Intangibles

Current Liabilities, Payroll, and Long-Term Liabilities

Corporations: Paid-In Capital and the Balance Sheet

Corporations: Effects on Retained Earnings and the Income Statement

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Management Accounting

Job Order and Process Costing

Appendix: Process Costing

Activity-Based Costing and Other Cost Management Tools

Cost-Volume-Profit Analysis

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

The Master Budget and Responsibility Accounting

Flexible Budgets and Standard Costs

Performance Evaluation and the Balanced Scorecard

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