Question 1

Which of the following appears on both the income statement and statement of retained earnings?

Accepted Answer

A)  Ending stockholders' equity 
B)  Total revenues 
C)  Net income 
D)  Dividends 
A)  Ending stockholders' equity 
B)  Total revenues 
C)  Net income 
D)  Dividends

Question 2

Saturn, Inc. paid $13,000 on accounts payable. How does this transaction affect the accounting equation of Saturn?

Accepted Answer

A)  Assets decrease by $13,000 and equity increases by $13,000. 
B)  Assets decrease by $13,000 and liabilities decrease by $13,000. 
C)  Assets increase by $13,000 and equity decreases by $13,000. 
D)  Assets increase by $13,000 and liabilities increase by $13,000. 
A)  Assets decrease by $13,000 and equity increases by $13,000. 
B)  Assets decrease by $13,000 and liabilities decrease by $13,000. 
C)  Assets increase by $13,000 and equity decreases by $13,000. 
D)  Assets increase by $13,000 and liabilities increase by $13,000.

Question 3

List the three sections of the statement of cash flows and state what is included in each section.
 $$\begin{array} { | l | l | } 
\hline \text { Statement of cash flows sections } & \text { What is included in each section } \
\hline 1 . & \
\hline 2 . & \
\hline 3 . & \
\hline
\end{array}$$

Accepted Answer

The answer of List the three sections of the statement...

Question 4

Jason Ford has been the sole owner of a bicycle sales and repair shop for several years. Which of the following business types would limit Jason's personal liability exposure to the entity's debts?

Accepted Answer

A)  partnership 
B)  limited-liability company 
C)  sole proprietorship 
D)  Any of the above. 
A)  partnership 
B)  limited-liability company 
C)  sole proprietorship 
D)  Any of the above.

Question 5

Which financial statement includes a specific date in its heading?

Accepted Answer

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

Question 6

Brooks Landscaping Corporation performs lawn mowing services for its customers in May. Payments for May's services are expected to be received in June. How does the transaction for performing services in May affect the accounting equation of Brooks Landscaping?

Accepted Answer

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

Question 7

International Financial Reporting Standards (IFRS) allows periodic revaluation of certain assets and liabilities to restate them to market value.

Accepted Answer

A) True 
 B)False

Question 8

Critical thinking and judgment skills are not necessary for accountants because technology has made the activities routine.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following events is NOT recorded by accountants?

Accepted Answer

A)  purchase of a building for $200,000 cash 
B)  effects of an economic boom 
C)  sale of merchandise on account 
D)  signing a $400,000 note to purchase land 
A)  purchase of a building for $200,000 cash 
B)  effects of an economic boom 
C)  sale of merchandise on account 
D)  signing a $400,000 note to purchase land

Question 10

Accounting is referred to as the language of business because it is the method of communicating business information to decision makers.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following will be categorized as a financing activity on the statement of cash flows?

Accepted Answer

A)  Cash received by selling old equipment 
B)  Cash paid for purchase of new machinery 
C)  Cash paid for rent 
D)  Cash received from issuance of shares of common stock 
A)  Cash received by selling old equipment 
B)  Cash paid for purchase of new machinery 
C)  Cash paid for rent 
D)  Cash received from issuance of shares of common stock

Question 12

Jason Repair Corporation incurred $1,500 as advertising expense and promised to pay the advertising agency within 30 days. Which of the following will decrease as a result of this transaction?

Accepted Answer

A)  Assets 
B)  Stockholders' equity 
C)  Liabilities 
D)  Revenues 
A)  Assets 
B)  Stockholders' equity 
C)  Liabilities 
D)  Revenues

Question 13

An audit is an examination of a company's financial statements and records.

Accepted Answer

A) True 
 B)False

Question 14

Since cost is a reliable measure, the cost principle holds that the accounting records should continue reporting an asset at its historical cost over its useful life.

Accepted Answer

A) True 
 B)False

Question 15

For each of the following events:
(1) State whether the event increases (INC) or decreases (DEC) retained earnings. If the event does not affect retained earnings, state NE for no effect.
(2) State which equity account is affected.
 $$\begin{array} { | l | l | } 
\hline \text { Event } & \text { 1. Retained earnings:INC, DEC, NE } \
& \text { 2. Which equity account is affected? } \
\hline \text { Distribution of a corporation's earnings } & \
\text { to stockholders } & \
\hline \text { Creditor loaned money to the business } & \
\hline \text { Costs of selling goods or services } & \
\hline
\end{array}$$

Accepted Answer

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

Question 16

Regent Plumbing Corporation provides plumbing services. Selected transactions of Regent Plumbing Corporation are described as follows: 
a)	Received $8,000 cash and issued common stock to Sharon Regent.
b)	Paid $5,000 cash for equipment to be used for plumbing repairs.
c)	Borrowed $11,000 from a local bank and deposited the money in the checking account.
d)	Paid $900 rent for the year.
e)	Paid $200 cash for plumbing supplies to be used next year.
f)	Completed a plumbing repair project for a local lawyer and received $3,000 cash.

Calculate the net income. Assume plumbing supplies of $200 are left at the end of the accounting period.

Accepted Answer

A)  $700 
B)  $2,800 
C)  $3,000 
D)  $2,100 
A)  $700 
B)  $2,800 
C)  $3,000 
D)  $2,100

Question 17

Following is a list of account balances of Nabers Delivery Services as of December 31, after the first year of operations. $$\begin{array} { | l | r | } 
\hline \text { Accounts Receivable } & \$ 5,000 \
\hline \text { Accounts Payable } & 5,000 \
\hline \text { Salaries Expense } & 4,000 \
\hline \text { Repairs Expense } & 600 \
\hline \text { Truck } & 9,000 \
\hline \text { Equipment } & 10,000 \
\hline \text { Notes Payable } & 8,500 \
\hline \text { Cash } & 11,500 \
\hline \text { Supplies Expense } & 1,400 \
\hline \text { Service Revenue } & 31,000 \
\hline \text { Gasoline Expense } & 3,200 \
\hline \text { Salaries Payable } & 200 \
\hline
\end{array}$$ What is the amount of total liabilities at the end of the year?

Accepted Answer

A)  $13,700 
B)  $22,900 
C)  $19,700 
D)  $13,500 
A)  $13,700 
B)  $22,900 
C)  $19,700 
D)  $13,500

Question 18

Managerial accounting provides information to ________.

Accepted Answer

A)  internal decision makers 
B)  outside investors and lenders 
C)  creditors 
D)  taxing authorities 
A)  internal decision makers 
B)  outside investors and lenders 
C)  creditors 
D)  taxing authorities

Question 19

Under the going concern principle, accountants assume that the business will remain in operations long enough to use existing resources for their intended purpose.

Accepted Answer

A) True 
 B)False

Question 20

In a limited-liability company, the ________.

Accepted Answer

A)  members are personally liable to pay the company's debts 
B)  business terminates at the death of a member 
C)  members are liable for each other's actions 
D)  members pay income tax on their share of earnings 
A)  members are personally liable to pay the company's debts 
B)  business terminates at the death of a member 
C)  members are liable for each other's actions 
D)  members pay income tax on their share of earnings

Exam 1: Accounting and the Business Environment

Which of the following appears on both the income statement and statement of retained earnings?

Saturn, Inc. paid $13,000 on accounts payable. How does this transaction affect the accounting equation of Saturn?

List the three sections of the statement of cash flows and state what is included in each section. Statement of cash flows sections What is included in each section 1. 2. 3.

Jason Ford has been the sole owner of a bicycle sales and repair shop for several years. Which of the following business types would limit Jason's personal liability exposure to the entity's debts?

Which financial statement includes a specific date in its heading?

Brooks Landscaping Corporation performs lawn mowing services for its customers in May. Payments for May's services are expected to be received in June. How does the transaction for performing services in May affect the accounting equation of Brooks Landscaping?

International Financial Reporting Standards (IFRS) allows periodic revaluation of certain assets and liabilities to restate them to market value.

Critical thinking and judgment skills are not necessary for accountants because technology has made the activities routine.

Which of the following events is NOT recorded by accountants?

Accounting is referred to as the language of business because it is the method of communicating business information to decision makers.

Which of the following will be categorized as a financing activity on the statement of cash flows?

Jason Repair Corporation incurred $1,500 as advertising expense and promised to pay the advertising agency within 30 days. Which of the following will decrease as a result of this transaction?

An audit is an examination of a company's financial statements and records.

Since cost is a reliable measure, the cost principle holds that the accounting records should continue reporting an asset at its historical cost over its useful life.

Managerial accounting provides information to ________.

Under the going concern principle, accountants assume that the business will remain in operations long enough to use existing resources for their intended purpose.

In a limited-liability company, the ________.

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

Filters