Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Montgomery Equipment Rental Company received $1,000 cash from a customer; the amount was owed to the business from the previous month.What is the effect of this transaction on the accounting equation?

Accepted Answer

A)  Accounts Receivable increases and Service Revenue increases 
B)  Cash increases and Accounts Receivable decreases 
C)  Cash increases and Service Revenue increases 
D)  Cash increases and Accounts Payable decreases 
A)  Accounts Receivable increases and Service Revenue increases 
B)  Cash increases and Accounts Receivable decreases 
C)  Cash increases and Service Revenue increases 
D)  Cash increases and Accounts Payable decreases

Question 3

Which of the following appears on both the income statement and statement of owner's equity?

Accepted Answer

A)  Owner, Capital, ending balance 
B)  Total revenues 
C)  Net income 
D)  Owner, Withdrawals 
A)  Owner, Capital, ending balance 
B)  Total revenues 
C)  Net income 
D)  Owner, Withdrawals

Question 4

The assets of Star Company are $110,000 and the total liabilities are $10,000.The equity is ________.

Accepted Answer

A)  $110,000 
B)  $120,000 
C)  $10,000 
D)  $100,000 
A)  $110,000 
B)  $120,000 
C)  $10,000 
D)  $100,000

Question 5

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

Accepted Answer

A)  Income statement → statement of owner's equity → balance sheet → statement of cash flows 
B)  Statement of owner's equity → balance sheet → income statement → statement of cash flows 
C)  Balance sheet → statement of owner's equity → income statement → statement of cash flows 
D)  Balance sheet → income statement → statement of owner's equity → statement of cash flows 
A)  Income statement → statement of owner's equity → balance sheet → statement of cash flows 
B)  Statement of owner's equity → balance sheet → income statement → statement of cash flows 
C)  Balance sheet → statement of owner's equity → income statement → statement of cash flows 
D)  Balance sheet → income statement → statement of owner's equity → statement of cash flows

Question 6

The income statement is also called the statement of financial position.

Accepted Answer

A) True 
 B)False

Question 7

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 8

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 9

________ are professional accountants who serve the general public,not one particular company.

Accepted Answer

A)  Certified public accountants 
B)  Financial managers 
C)  Internal auditors 
D)  Controllers 
A)  Certified public accountants 
B)  Financial managers 
C)  Internal auditors 
D)  Controllers

Question 10

Following is a list of account balances of Lincoln Lawn Services as of December 31,after the first year of operations. $$\begin{array} { | l | r | } 
\hline \text { Accounts Receivable } & \$ 7,000 \
\hline \text { Accounts Payable } & 6,000 \
\hline \text { Salaries Expense } & 6,000 \
\hline \text { Repairs Expense } & 900 \
\hline \text { Truck } & 8,000 \
\hline \text { Equipment } & 11,000 \
\hline \text { Notes Payable } & 26,000 \
\hline \text { Cash } & 8,000 \
\hline \text { Supplies Expense } & 11,000 \
\hline \text { Service Revenue } & 26,000 \
\hline \text { Gasoline Expense } & 7,500 \
\hline \text { Salaries Payable } & 1,200 \
\hline
\end{array}$$ Calculate the net income.

Accepted Answer

A)  $600 
B)  $32,500 
C)  $1,000 
D)  $33,500 
A)  $600 
B)  $32,500 
C)  $1,000 
D)  $33,500

Question 11

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 owner's equity 
D)  statement of cash flows 
A)  income statement 
B)  balance sheet 
C)  statement of owner's equity 
D)  statement of cash flows

Question 12

John contributed $6,000 cash to a sole proprietorship by opening a bank account in the name of the business,United Marketing.John received capital in the business in exchange.This transaction results in an increase in the assets of the business.

Accepted Answer

A) True 
 B)False

Question 13

Match the accounting position to the job description.
-Auditor

Accepted Answer

A) Specializes in accounting and financial management knowledge 
B) Serves the general public 
C) Performs reviews of companies to ensure compliance to rules and regulations 
D) Compiles financial statements, interacts with auditors, oversees regulatory reporting 
A) Specializes in accounting and financial management knowledge 
B) Serves the general public 
C) Performs reviews of companies to ensure compliance to rules and regulations 
D) Compiles financial statements, interacts with auditors, oversees regulatory reporting

Question 14

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 15

Merian Company has just completed operations for the year ended December 31,2018.This is the second year of operations for the company.The company is a sole proprietorship.The following data have been assembled for the business at December 31,2018.
 $$\begin{array} { | l | r|r | r | } 
\hline \text { Accounts Payable } & \$ 12,200 & \text { Office Expense } & \$ 6,500 \
\hline \text { Accounts Receivable } & 14,500 & \text { Rent Expense } & 9,600 \
\hline \text { Cash } & 8,200 & \text { Merian, Capital, Jan. 1,2018 } & 17,300 \
\hline \text { Merian, Withdrawals } & 13,500 & \text { Salaries Expense } & 36,000 \
\hline \text { Equipment } & 15,000 & \text { Service Revenue } & 84,000 \
\hline \text { Insurance Expense } & 4,000 & \text { Utilities Expense } & 6,200 \
\hline
\end{array}$$ Prepare the statement of owner's equity for the year.There were no new capital contributions during the year.Use a proper heading.

Accepted Answer

Service Revenue $84,000 - Insu

Question 16

Beverly Dalton started her business as a sole proprietorship.At that time,the business purchased land for $51,000.The December 31,2019 market value of the land is $92,000.On the December 31,2019 balance sheet,this asset should be reported at ________ under U.S.GAAP and at ________ under international reporting standards.

Accepted Answer

A)  $51,000; $51,000 
B)  $92,000; $92,000 
C)  $51,000; $92,000 
D)  $92,000; $51,000 
A)  $51,000; $51,000 
B)  $92,000; $92,000 
C)  $51,000; $92,000 
D)  $92,000; $51,000

Question 17

Accountants record ________.

Accepted Answer

A)  economic recessions 
B)  estimated future transactions 
C)  only those events that have dollar amounts than can be measured reliably 
D)  the $20,000 increase in value of a building that actually costs $50,000 but could be sold for $70,000 
A)  economic recessions 
B)  estimated future transactions 
C)  only those events that have dollar amounts than can be measured reliably 
D)  the $20,000 increase in value of a building that actually costs $50,000 but could be sold for $70,000

Question 18

What are Generally Accepted Accounting Principles (GAAP)? Which entity is currently responsible for determining GAAP?

Accepted Answer

Generally Accepted Accounting Principles

Question 19

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 20

Selected information for Uptown Spa Services and Downtown Spa Services follows:
 $$\begin{array} { | l | l | l | } 
\hline \begin{array} { l } 
\text { Uptown Spa } \
\text { Services }
\end{array} && { \begin{array} { l } 
\text { Downtown Spa } \
\text { Services }
\end{array} } & \
\hline\ \text { Total Assets } & \$ 125,000& \text { Total Assets } & \$ 162,000 \
\hline \text { Total Owner's Equity } & \$ 90,000& \text { OTotal Owner's Equity } & \$ 137,000 \
\hline \text { Total Revenues } & \$ 82,000& \text { Total Revenues } & \$ 70,000 \
\hline \text { Net Income } & \$ 12,000 &\text { dNet Income } & \$ 18,000 \
\hline
\end{array}$$ The total assets and total owner's equity balances are at December 31,2018.Total revenues and net income are for the year ended December 31,2018.There were no new capital contributions during the year.No owner withdrawals were taken.Average net assets are $128,000 for Uptown and $178,000 for Downtown.
Provide answers for the following questions.Show your work and explain your answer.
1.Which business owes more to creditors?
2.Which business has more owner's equity at the end of the year?
3.Which business had more expenses?
4.What is the ROA for each business? (Show this as a percentage and round to one decimal place)Based on ROA,which company is more profitable?

Accepted Answer

1.Uptown has liabilities of $35,000 (Ass

Exam 1: Accounting and the Business Environment

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

Montgomery Equipment Rental Company received $1,000 cash from a customer; the amount was owed to the business from the previous month.What is the effect of this transaction on the accounting equation?

Which of the following appears on both the income statement and statement of owner's equity?

The assets of Star Company are $110,000 and the total liabilities are $10,000.The equity is ________.

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

The income statement is also called the statement of financial position.

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

Which of the following events is NOT recorded by accountants?

________ are professional accountants who serve the general public,not one particular company.

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

John contributed $6,000 cash to a sole proprietorship by opening a bank account in the name of the business,United Marketing.John received capital in the business in exchange.This transaction results in an increase in the assets of the business.

Match the accounting position to the job description. -Auditor

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

Accountants record ________.

What are Generally Accepted Accounting Principles (GAAP)? Which entity is currently responsible for determining GAAP?

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?

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets,natural Resources,and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

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