Question 1

If a $15,000 purchase of equipment for cash is incorrectly recorded as an increase to equipment and as an increase to cash,at the end of the period assets will:

Accepted Answer

A) exceed liabilities and stockholders' equity by $15,000. 
B) equal liabilities and stockholders' equity. 
C) exceed liabilities and stockholders' equity by $30,000. 
D) exceed liabilities and stockholders' equity by $40,000.

Question 2

Lewis Company has $25,000 in retained earnings,$40,000 in assets,and $11,000 in liabilities.How much is in common stock?

Accepted Answer

A) $29,000 
B) $25,000 
C) $14,000 
D) $4,000

Question 3

Philip Corporation purchased equipment on account.What is the effect of this transaction?

Accepted Answer

A) Cash will decrease and equipment will increase. 
B) Total assets will remain unchanged. 
C) Cash flow from Investing Activities will decrease. 
D) Total assets and total liabilities will both increase.

Question 4

A common-sized balance sheet is prepared by expressing each liability item as a percent of:

Accepted Answer

A) total sales. 
B) total stockholders' equity. 
C) total liabilities. 
D) total liabilities plus stockholders' equity.

Question 5

Flow,Inc.received cash from fees earned.How does this transaction affect the Statement of Cash Flows?

Accepted Answer

A) Increase cash from Operating Activities 
B) Increase cash from Investing Activities 
C) Increase cash from Financing Activities 
D) No effect on the Statement of Cash Flows

Question 6

Stockholders' equity will be reduced by:

Accepted Answer

A) payment of dividends. 
B) increase in revenues. 
C) owners' investments. 
D) issuance of bonds.

Question 7

Expenses can be defined as:

Accepted Answer

A) assets consumed. 
B) services used in the process of generating revenues. 
C) costs that have been incurred during the normal course of business. 
D) all of these.

Question 8

By keeping a running total of the effects of transactions,the accounting equation provides a framework for summarizing the effects of a series of transactions.

Accepted Answer

A) True 
 B)False

Question 9

A to Z Corporation issued a $30,000 note payable to borrow cash from the bank.On the Statement of Cash Flows,the transaction would be classified as:

Accepted Answer

A) Cash Flows from Operating Activities. 
B) Cash Flows from Investing Activities. 
C) Cash Flows from Financing Activities. 
D) Noncash transaction.

Question 10

Equality of the accounting equation means that no errors have occurred.

Accepted Answer