Question 1

Howard Company had a transaction that caused a $15,000 increase in both assets and liabilities. This transaction could have been a(n):

Accepted Answer

A)  Purchase of office equipment for $22,000, paying $7,000 cash and issuing a note payable for the balance 
B)  Investment of $15,000 cash in the business by the stockholders 
C)  Purchase of office equipment for $15,000 cash 
D)  Repayment of a $15,000 bank loan

Question 2

Which of the following is not a source document?

Accepted Answer

A)  Bank check 
B)  Account in general ledger 
C)  Lease contract 
D)  Invoice sent to customer 
E)  None of the above

Question 3

Match each of the numbered transactions of a corporation with the appropriate letters, indicating the effect of the transactions (increases and decreases
-Borrowed money from bank, giving a note.

Accepted Answer

A)  Increase an asset 
B)  Decrease an asset 
C)  Decrease a liability 
D)  Increase a liability 
E)  Decrease common stock
F) Increase common stock
G) Increase dividends
H) Decease dividends
I) Decrease revenue
J) Increase revenue
K) Increase expense
L) Decrease expense

Question 4

Terry Company purchased supplies for $7,000 on credit on January 1. On January 15, they made a cash payment of $2,000 to the supplier, and signed a one-year note for the remaining amount to settle the account.
Terry Company's entry on January 15 will include:

Accepted Answer

A)  Decrease to Notes Payable for $5,000 
B)  Increase to Accounts Payable for $5,000 
C)  Increase to Notes Payable for $5,000 
D)  Increase to Cash for $5,000

Question 5

Which of the following is not among the five major steps in the accounting cycle?

Accepted Answer

A)  Record transactions in a journal 
B)  Prepare a chart of accounts 
C)  Adjust the general ledger accounts and prepare an adjusted trial balance 
D)  Analyze transactions from source documents 
E)  Prepare financial statements

Question 6

Recording the collection of accounts receivable from customers involves:

Accepted Answer

A)  Increasing Accounts Receivable and decreasing Cash 
B)  Increasing Cash and increasing Service Fees Earned 
C)  Increasing Cash and increasing Accounts Payable 
D)  Increasing Cash and decreasing Accounts Receivable 
E)  None of the above

Question 7

A transaction caused a $100,000 increase in both assets and total liabilities. This transaction could have been:

Accepted Answer

A)  Purchase for office equipment for $100,000 cash 
B)  Repayment of a $100,000 bank loan 
C)  Investment of $100,000 cash in the business by the owner 
D)  Purchase of office equipment for $120,000, paying $20,000 cash and issuing a note payable for the balance

Question 8

The first step in the accounting cycle is to record transactions in a journal.

Accepted Answer

A) True 
 B)False

Question 9

Mr. Cool Dude started a company (Cool Dude Company) by contributing $50,000 cash, and a building valued at $400,000. The company then purchased a machine by making a $50,000 down payment (which accounted for half its purchase price), and signed a note payable to the bank.
After recording the above transactions, the company's balance sheet will show:

Accepted Answer

The answer of Mr. Cool Dude started a company (Cool...

Question 10

During January, Wells Corporation purchased $100,000 of inventory; they paid one-fourth in cash, and signed a note for the remaining balance.
This transaction will have the following effect on the accounting equation:

Accepted Answer

A)  Increase Inventory 100,000; decrease Cash 75,000; increase Notes Payable 25,000 
B)  Increase Inventory 100,000; decrease cash 25,000; increase Accounts Payable 75,000 
C)  Increase Inventory 100,000; increase Accounts Payable 25,000; decrease Cash 75,000 
D)  Increase Inventory 100,000; decrease Cash 25,000; increase Notes Payable 75,000

Question 11

Which of the following is a source document?

Accepted Answer

A)  Posting reference 
B)  General ledger 
C)  Chart of accounts 
D)  Invoice received from seller 
E)  Compound journal entry

Question 12

A company incurred $30,000 (to be paid next year) for the current year's advertising activities. What would the effect of this transaction on the current year's accounting equation?

Accepted Answer

A)  No effect on Assets; $30,000 decrease in Liabilities; $30,000 increase in Stockholders' Equity 
B)  $30,000 increase in Assets; $30,000 increase in Liabilities; No effect on Stockholders' Equity 
C)  $30,000 increase in Assets; No effect on Liabilities; $30,000 increase in Stockholders' Equity 
D)  No effect on Assets; $30,000 increase in Liabilities; $30,000 decrease in Stockholders' Equity

Question 13

Which of the following is one effect of a purchase of $300 of supplies on credit?

Accepted Answer

A)  It would increase liabilities by $300 
B)  It would decrease retained earnings by $300 
C)  It would decrease liabilities by $300 
D)  It would decrease cash asset $300

Question 14

If a company paid off $100,000 of its accounts payable, the effect of this transaction as reflected in the accounting equation are:

Accepted Answer

A)  Total assets and total liabilities decrease 
B)  Total assets and total liabilities increase 
C)  Both total assets, total liabilities and stockholders' equity are unchanged 
D)  Total assets decrease and total liabilities increase

Question 15

Natalie Company had $56,750 of Accounts Payable on March 31. During March, the company made total purchases on account of $96,870, and paid a total of $105,230 cash on accounts payable.
Determine the balance of Accounts Payable on March 1.

Accepted Answer

A)  $48,390 
B)  $145,350 
C)  $65,200 
D)  $65,110

Question 16

Beginning and ending Cash account balances were $9,500 and $4,000, respectively. If total cash received during the period was $18,500, what amount of cash was paid out during the period?

Accepted Answer

A)  $23,000 
B)  $26,500 
C)  $24,000 
D)  $15,000 
E)  None of the above

Question 17

Which of the following is the correct order of the steps in the accounting cycle?

Accepted Answer

A)  Adjust, report, analyze, record, and close 
B)  Record, report, analyze, adjust, and close 
C)  Report, analyze, close, record, and adjust 
D)  Analyze, record, adjust, report, and close

Question 18

Recording the payment of dividends to shareholders involves:

Accepted Answer

A)  Increasing Dividends and decreasing Cash 
B)  Increasing Cash and Common Stock 
C)  Increasing Withdrawal Expense and decreasing Cash 
D)  Decreasing Notes Payable and decreasing Cash 
E)  None of the above

Question 19

Kobe Company provided consulting service to a client on January 1, and billed them for $15,000. On February 1, the client made cash payment of $8,000 and signed a note for $7,000 to settle the account.
What is Kobe Company's entry on February 1?

Accepted Answer

A)  Increase Cash 8,000; Increase Accounts Receivable 7,000; decrease Notes Receivable 15,000 
B)  Decrease Accounts Payable 15,000; increase Notes Payable 7,000; decrease Cash 8,000 
C)  Increase Cash 8,000; increase Notes Receivable 7,000; increase Consulting Revenue 15,000 
D)  Increase Cash 8,000; increase Notes Receivable 7,000; decrease Accounts Receivable 15,000

Question 20

A general ledger is a grouping of a firm's permanent accounts.

Accepted Answer

A) True 
 B)False

Exam 2: Processing Accounting Information

Howard Company had a transaction that caused a $15,000 increase in both assets and liabilities. This transaction could have been a(n) :