Question 1

As of December 31,Year 1,Mason Company had $500 cash.During Year 2,Mason earned $1,200 of cash revenue and paid $800 of cash expenses.What is the amount of cash that will be reported on the balance sheet at the end of Year 2?

Accepted Answer

A)  $900 
B)  $400 
C)  $1,700 
D)  $2,500

Question 2

Which of the financial statements are required by the Generally Accepted Accounting Principles (GAAP)?

Accepted Answer

A)  Income Statement 
B)  Statement of Changes in stockholders' equity 
C)  Statement of Cash Flows 
D)  Balance Sheet 
E)  All of these financial statements are required by GAAP

Question 3

What does negative retained earnings indicate?

Accepted Answer

A)  The company has lost some or all of the owners' investment 
B)  The company experienced a large cash outflow during the year 
C)  The company's liabilities are greater than its assets 
D)  The company's common stock is negative

Question 4

Perez Company paid a $300 cash dividend.Which of the following accurately reflects how this event affects the company's financial statements?
$$\begin{array} { | l | c | l | c | c | c | c | c | } 
\hline & \text { Assets } & = & \text { Liabilities } & + & \begin{array} { c } 
\text { Common } \
\text { Stack }
\end{array} & + & \begin{array} { c } 
\text { Retained } \
\text { Earnings }
\end{array} \
\hline \text { A } & 300 & = & 300 & + & \text { NA } & + & \text { NA } \
\hline \text { B. } & ( 300 ) & = & \text { NA } & + & ( 300 ) & + & \text { NA } \
\hline \text { C } & ( 300 ) & = & \text { NA } & + & \text { NA } & + & ( 300 ) \
\hline \text { D. } & 300 & = & \text { NA } & + & \text { NA } & + & 300 \
\hline
\end{array}$$

Accepted Answer

A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D

Question 5

[The following information applies to the questions displayed below.]
Packard Company engaged in the following transactions during Year 1, its first year of operations: (Assume all transactions are cash transactions.)
1) Acquired $950 cash from the issue of common stock.
2) Borrowed $420 from a bank.
3) Earned $650 of revenues.
4) Paid expenses of $250.
"5) Paid a $50 dividend.
During Year 2, Packard engaged in the following transactions: (Assume all transactions are cash transactions.)"
1) Issued an additional $325 of common stock.
2) Repaid $220 of its debt to the bank.
3) Earned revenues of $750.
4) Incurred expenses of $360.
5) Paid dividends of $100.
-The amount of assets on Packard's Year 2 balance sheet is

Accepted Answer

A)  $2,115. 
B)  $440. 
C)  $2,215. 
D)  $395.

Question 6

[The following information applies to the questions displayed below.]
Lexington Company engaged in the following transactions during Year 1, its first year in operation: (Assume all transactions are cash transactions.)
1) Acquired $6,000 cash from issuing common stock.
2) Borrowed $4,400 from a bank.
3) Earned $6,200 of revenues.
4) Incurred $4,800 in expenses.
"5) Paid dividends of $800.
Lexington Company engaged in the following transactions during Year 2: (Assume all transactions are cash transactions.)"
1) Acquired an additional $1,000 cash from the issue of common stock.
2) Repaid $2,600 of its debt to the bank.
3) Earned revenues, $9,000.
4) Incurred expenses of $5,500.
5) Paid dividends of $1,280.
-What was the amount of retained earnings that will be reported on Lexington's balance sheet at the end of Year 1?

Accepted Answer

A)  $6,200 
B)  $5,400 
C)  $1,400 
D)  $600

Question 7

Which of the following could describe the effects of an asset exchange transaction on a company's total assets,total liabilities and total equity?
$\begin{array}{|c|c|c|c|c|c|}
\hline & \text { Assets } & = & \text { Liab. } & + & \text { Equity } \
\hline \mathrm{A} & \mathrm{NA} & = & \mathrm{NA} & + & \mathrm{NA} \\hline \mathrm{B} . & + & = & \mathrm{NA} & + & + \
\hline \mathrm{C} . & - & = & \mathrm{NA} & + & - \
\hline \mathrm{D} . & \mathrm{NA} & = & \mathrm{NA} & + & +- \
\hline
\end{array}$

Accepted Answer

A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D

Question 8

Indicate whether each of the following statements about retained earnings is true or false.
________ a)A dividend paid to stockholders decreases retained earnings.
________ b)Issuing common stock for cash increases retained earnings.
________ c)The amount of net income for a period must equal retained earnings.
________ d)The purchase of a truck decreases retained earnings.
________ e)Net income increases retained earnings.

Accepted Answer

The answer of Indicate whether each of the following statements...

Question 9

Dividends paid by a company are reported on which of the following financial statement(s)?

Accepted Answer

A)  Income statement 
B)  Statement of changes in stockholders' equity 
C)  Statement of cash flows 
D)  Statement of changes in stockholders' equity and statement of cash flows

Question 10

[The following information applies to the questions displayed below.]
The financial statements of Calloway Company prepared at the end of the current year contained the following elements and corresponding amounts: Assets = $50,000; Liabilities = ?; Common Stock = $15,000; Revenue = $22,000; Dividends = $1,500; Beginning Retained Earnings = $3,500; Ending Retained Earnings = $7,500.
-Based on this information,what was the amount of expenses reported on Calloway's income statement for the current year?

Accepted Answer

A)  $18,500 
B)  $13,000 
C)  $16,500 
D)  $10,000

Question 11

Liabilities are not a source of assets for a business.

Accepted Answer

A) True 
 B)False

Question 12

Li Company paid cash to purchase land.What happened as a result of this business event?

Accepted Answer

A)  Total assets decreased. 
B)  Total assets were unaffected. 
C)  Total equity decreased. 
D)  Both assets and total equity decreased.

Question 13

Robertson Company paid $1,850 cash for rent expense.What happened as a result of this business event?

Accepted Answer

A)  Total equity decreased. 
B)  Liabilities decreased. 
C)  The net cash flow from operating activities decreased. 
D)  Both total equity and net cash flow for operating activities decreased.

Question 14

Which type of accounting information is intended to satisfy the needs of external users of accounting information?

Accepted Answer

A)  Cost accounting 
B)  Managerial accounting 
C)  Tax accounting 
D)  Financial accounting

Question 15

Indicate whether each of the following statements about accounting information is true or false.
________ a)Financial accounting is primarily intended to satisfy the information needs of internal stakeholders.
________ b)Managerial accounting information includes financial and nonfinancial information.
________ c)The accounting information intended to satisfy the needs of a company's employees is managerial accounting information.
________ d)GAAP requires that companies adhere to financial accounting standards.
________ e)Managerial accounting information is usually less detailed than financial accounting information.

Accepted Answer

The answer of Indicate whether each of the following statements...

Question 16

Glavine Company repaid a bank loan with cash.The cash flow from this event should be reported as:

Accepted Answer

A)  an outflow for investing activities on the Statement of Cash Flows 
B)  an outflow for financing activities on the Statement of Cash Flows 
C)  an inflow for investing activities on the Statement of Cash Flows 
D)  an inflow for operating activities on the Statement of Cash Flows

Question 17

Which of the following is not an element of the financial statements?

Accepted Answer

A)  Net income 
B)  Revenue 
C)  Assets 
D)  Cash

Question 18

Which of the following is an example of revenue?

Accepted Answer

A)  Cash received as a result of a bank loan 
B)  Cash received from investors from the sale of common stock 
C)  Cash received from customers at the time services were provided 
D)  Cash received from the sale of land for its original selling price

Question 19

Which of the following groups has the primary responsibility for establishing generally accepted accounting principles for business entities in the United States?

Accepted Answer

A)  Securities and Exchange Commission 
B)  U.S. Congress 
C)  International Accounting Standards Board 
D)  Financial Accounting Standards Board

Exam 1: An Introduction to Accounting