Question 1

Which of the following can be an effect of a transaction that increased an asset of a corporation for the accounting equation to balance?

Accepted Answer

A)  There is an equal decrease in another asset. 
B)  There is an equal decrease in equity. 
C)  There is an equal decrease in a liability account. 
D)  Both liabilities and equity decrease. 
A)  There is an equal decrease in another asset. 
B)  There is an equal decrease in equity. 
C)  There is an equal decrease in a liability account. 
D)  Both liabilities and equity decrease.

Question 2

Which of the following financial statements lists the entity's assets, liabilities, and stockholders' equity as of a specific date?

Accepted Answer

A)  Balance sheet 
B)  Statement of retained earnings 
C)  Income statement 
D)  Statement of cash flows 
A)  Balance sheet 
B)  Statement of retained earnings 
C)  Income statement 
D)  Statement of cash flows

Question 3

Which of the following is the correct order of preparation of financial statements?

Accepted Answer

A)  Income statement → statement of retained earnings → balance sheet → statement of cash flows 
B)  Statement of retained earnings → balance sheet → income statement → statement of cash flows 
C)  Balance sheet → statement of retained earnings → income statement → statement of cash flows 
D)  Balance sheet → income statement → statement of retained earnings → statement of cash flows 
A)  Income statement → statement of retained earnings → balance sheet → statement of cash flows 
B)  Statement of retained earnings → balance sheet → income statement → statement of cash flows 
C)  Balance sheet → statement of retained earnings → income statement → statement of cash flows 
D)  Balance sheet → income statement → statement of retained earnings → statement of cash flows

Question 4

The balance sheet helps analyze the business performance in terms of profitability.

Accepted Answer

A) True 
 B)False

Question 5

Lamar Corporation originally purchased land for $20,000. It later sold the land for $20,000 in cash. Which of the following is true of the effect of the sale of land on the accounting equation?

Accepted Answer

A)  Assets increase and liabilities decrease by $20,000. 
B)  Assets and equity increase by $40,000. 
C)  Assets increase by $20,000; equity increases by $20,000. 
D)  The amount of total assets remains the same. 
A)  Assets increase and liabilities decrease by $20,000. 
B)  Assets and equity increase by $40,000. 
C)  Assets increase by $20,000; equity increases by $20,000. 
D)  The amount of total assets remains the same.

Question 6

Mitchell Company receives a bill from one of its suppliers for advertising services received and will pay the supplier next month. How does the receipt of the bill from the supplier affect the accounting equation of Mitchell?

Accepted Answer

A)  Assets and equity decrease. 
B)  Liabilities increase and equity decreases. 
C)  Assets and liabilities increase. 
D)  Liabilities and equity increase. 
A)  Assets and equity decrease. 
B)  Liabilities increase and equity decreases. 
C)  Assets and liabilities increase. 
D)  Liabilities and equity increase.

Question 7

Which of the follow statements regarding the primary objective of financial reporting is correct?

Accepted Answer

A)  The primary objective of financial reporting is to provide information useful for the acquisition of long-term assets. 
B)  Information that is faithfully represented is complete, neutral, and free from error. 
C)  Relevant information ensures that users of the information will make the correct decisions. 
D)  To be useful, information must follow the Generally Accepted Accounting Principles which are created and governed by the Securities and Exchange Commission. 
A)  The primary objective of financial reporting is to provide information useful for the acquisition of long-term assets. 
B)  Information that is faithfully represented is complete, neutral, and free from error. 
C)  Relevant information ensures that users of the information will make the correct decisions. 
D)  To be useful, information must follow the Generally Accepted Accounting Principles which are created and governed by the Securities and Exchange Commission.

Question 8

Assets are something of value that the business owns or has control of.

Accepted Answer

A) True 
 B)False

Question 9

The heading of a balance sheet will show the date as a specific date, not a period of time.

Accepted Answer

A) True 
 B)False

Question 10

The net income of Thomas Corporation was $71,000 for this year. The beginning balance of stockholders' equity was $33,000 and the ending balance was $72,000. The company issued no common stock during the year. What was the amount of dividends distributed during the year?

Accepted Answer

A)  $72,000 
B)  $32,000 
C)  $143,000 
D)  $33,000 
A)  $72,000 
B)  $32,000 
C)  $143,000 
D)  $33,000

Question 11

Which of the following is included on the balance sheet?

Accepted Answer

A)  Revenues 
B)  Expenses 
C)  Assets 
D)  Dividends 
A)  Revenues 
B)  Expenses 
C)  Assets 
D)  Dividends

Question 12

The Financial Accounting Standards Board (FASB) works with the following groups. Which of these groups was congressionally created?

Accepted Answer

A)  Institute of Management Accountants 
B)  Public Company Accounting Oversight Board 
C)  International Accounting Standards Board 
D)  American Institute of CPAs 
A)  Institute of Management Accountants 
B)  Public Company Accounting Oversight Board 
C)  International Accounting Standards Board 
D)  American Institute of CPAs

Question 13

For each user of accounting information, identify if the user would use financial accounting (FA) or managerial accounting (MA).
 $\begin{array}{|l|l|}
\hline\text { Accounting Information User } & \text { FA or MA } \
\hline \text { Business manager } & \
\hline \text { Creditor } & \
\hline \text { Stockholder } & \
\hline \text { Human resources director } & \
\hline \text { Internal Revenue Service } &\
\hline
\end{array}$

Accepted Answer

\[\begin{array} { | l | c | } 
\hline \t

Question 14

Which of the following transactions will affect the balance of Retained Earnings?

Accepted Answer

A)  issued common stock for cash 
B)  paid rent expense for the month 
C)  purchased land for cash 
D)  collection on account 
A)  issued common stock for cash 
B)  paid rent expense for the month 
C)  purchased land for cash 
D)  collection on account

Question 15

Which of the following financial statements would be most useful if an analyst wants to know the profitability of a company?

Accepted Answer

A)  income statement 
B)  balance sheet 
C)  statement of retained earnings 
D)  statement of cash flows 
A)  income statement 
B)  balance sheet 
C)  statement of retained earnings 
D)  statement of cash flows

Question 16

The income statement provides information about profitability for a particular period for the company.

Accepted Answer

A) True 
 B)False

Question 17

Managerial accounting focuses on information needed by lenders, customers, and the federal government.

Accepted Answer

A) True 
 B)False

Question 18

Any person or business to whom a business owes money is called the business's creditor.

Accepted Answer

A) True 
 B)False

Question 19

A business purchases a building for $250,000. The current market value is $375,000. The tax assessment value is $325,000. At what value should the building be recorded, and which accounting principle supports your answer?

Accepted Answer

The building should be recorde

Question 20

What is the primary objective of financial reporting?

Accepted Answer

The primary objective of finan

Exam 1: Accounting and the Business Environment

Which of the following can be an effect of a transaction that increased an asset of a corporation for the accounting equation to balance?

Which of the following financial statements lists the entity's assets, liabilities, and stockholders' equity as of a specific date?

Which of the following is the correct order of preparation of financial statements?

The balance sheet helps analyze the business performance in terms of profitability.

Lamar Corporation originally purchased land for $20,000. It later sold the land for $20,000 in cash. Which of the following is true of the effect of the sale of land on the accounting equation?

Mitchell Company receives a bill from one of its suppliers for advertising services received and will pay the supplier next month. How does the receipt of the bill from the supplier affect the accounting equation of Mitchell?

Which of the follow statements regarding the primary objective of financial reporting is correct?

Assets are something of value that the business owns or has control of.

The heading of a balance sheet will show the date as a specific date, not a period of time.

The net income of Thomas Corporation was $71,000 for this year. The beginning balance of stockholders' equity was $33,000 and the ending balance was $72,000. The company issued no common stock during the year. What was the amount of dividends distributed during the year?

Which of the following is included on the balance sheet?

The Financial Accounting Standards Board (FASB) works with the following groups. Which of these groups was congressionally created?

For each user of accounting information, identify if the user would use financial accounting (FA) or managerial accounting (MA). Accounting Information User FA or MA Business manager Creditor Stockholder Human resources director Internal Revenue Service

Which of the following transactions will affect the balance of Retained Earnings?

Which of the following financial statements would be most useful if an analyst wants to know the profitability of a company?

The income statement provides information about profitability for a particular period for the company.

Managerial accounting focuses on information needed by lenders, customers, and the federal government.

Any person or business to whom a business owes money is called the business's creditor.

A business purchases a building for $250,000. The current market value is $375,000. The tax assessment value is $325,000. At what value should the building be recorded, and which accounting principle supports your answer?

What is the primary objective of financial reporting?

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Internal Control and Cash

Receivables

Plant Assets, Natural Resources, and Intangibles

Investments

Current Liabilities and Payroll

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost Management Systems: Activity-Based Just-In-Time

Cost Volume Profit Analysis

Variable Costing

Master Budgets

Flexible Budgets and Standard Cost Systems

Responsibility Accounting and Performance Evaluation

Short-Term Business Decisions

Capital Investment Decisions

Understanding Accounting Information Systems and their Components

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