Question 1

A corporation purchased a $40,000 delivery truck by paying 4,000 cash and signing a $36,000 note payable. Immediately prior to this transaction the corporation had assets, liabilities and owners' equity in the amounts of $75,000; $52,000; and $23,000 respectively. What is the total amount of the corporation's assets after this transaction has been recorded?

Accepted Answer

A)  $115,000 
B)  $111,000 
C)  $79,000 
D)  $71,000 
E)  $75,000

Question 2

How would the accounting equation of Boston Company be affected by the billing of a client for $10,000 of consulting work completed?

Accepted Answer

A)  +$10,000 accounts receivable, -$10,000 accounts payable 
B)  +$10,000 accounts receivable, +$10,000 accounts payable 
C)  +$10,000 accounts receivable, +$10,000 cash 
D)  +$10,000 accounts receivable, +$10,000 consulting revenue 
E)  +$10,000 accounts receivable, -$10,000 consulting revenue

Question 3

What is the balance sheet? What is its purpose?

Accepted Answer

The answer of What is the balance sheet? What is...

Question 4

The first section of the income statement reports cash from operations.

Accepted Answer

A) True 
 B)False

Question 5

The statement of retained earnings:

Accepted Answer

A)  Reports how retained earnings changes at a point in time 
B)  Reports how retained earnings changes over a period of time 
C)  Reports on cash flows for operating, financing and investing activities over a period of time 
D)  Reports on cash flows for operating, financing and investing activities at a point in time 
E)  Reports on amounts for assets, liabilities and equity at a point in time

Question 6

If liabilities are $51,500 and assets are $173,425, then equity equals:

Accepted Answer

A)  $224,925 
B)  $51,500 
C)  $173,425 
D)  $121,925 
E)  $103,000

Question 7

The area of accounting aimed at serving the decision making needs of internal users is:

Accepted Answer

A)  Financial accounting 
B)  Managerial accounting 
C)  External auditing 
D)  SEC reporting 
E)  Governmental accounting

Question 8

The following information is available for the Skate and Boards Rental.

Using the above information prepare an Income Statement, Statement of Retained Earnings and Statement of Cash Flows for the Skate and Boards Rental for 2011. Also, prepare its Balance Sheet as of December 31, 2011. Assume that the 12/31/10 cash balance is $70,000.

Accepted Answer

The answer of The following information is available for the...

Question 9

Use the following information as of December 31 to determine equity.

Accepted Answer

A)  $1,000 
B)  $3,000 
C)  $5,000 
D)  $10,000 
E)  $11,000

Question 10

Which of the following statements is not true about assets?

Accepted Answer

A)  They are economic resources owned or controlled by the business 
B)  They are expected to provide future benefits to the business 
C)  They appear on the balance sheet 
D)  They appear on the statement of retained earnings 
E)  Claims on them are shared between creditors and owners

Question 11

Marian Mosely is the owner of Mosely Accounting Services. Which accounting assumption requires Marian to keep her personal financial information separate from the financial information of Mosely Accounting Services?

Accepted Answer

A)  Monetary unit assumption 
B)  Going-concern assumption 
C)  Cost assumption 
D)  Business entity assumption 
E)  None of these. Since Marian is a sole proprietor, she is not required to separate her personal financial information from the financial information of Mosely Accounting Services

Question 12

How do revenues and expenses affect net income?

Accepted Answer

The answer of How do revenues and expenses affect net...

Question 13

Acme Company had equity of $55,000 at the end of the current year. During the year the company had a $2,000 net loss and investments by owners in exchange for stock of $7,000. Compute equity as of the beginning of the year.

Accepted Answer

A)  $5,000 
B)  $46,000 
C)  $50,000 
D)  $52,000 
E)  $64,000

Question 14

According to generally accepted accounting principles, a company's balance sheet should show the company's assets at:

Accepted Answer

A)  The cash equivalent value of what was given up 
B)  The current market value of the assets at the balance sheet date 
C)  The cash paid to acquire them, even if something other than cash was given in the exchange 
D)  The best estimate from a certified internal auditor 
E)  The objective value to external users

Question 15

The major activities of a business include:

Accepted Answer

A)  Operating, Investing, Making a Profit 
B)  Investing, Making a Profit, Operating 
C)  Making a Profit, Operating, Borrowing 
D)  Operating, Investing, Financing 
E)  Investing, Making a Profit Financing

Question 16

Which accounting assumption assumes that all accounting information is reported monthly or yearly?

Accepted Answer

A)  Business entity assumption 
B)  Monetary unit assumption 
C)  Value assumption 
D)  Cost assumption 
E)  Time period assumption

Question 17

The objectivity principle:

Accepted Answer

A)  Means that information is supported by independent, unbiased evidence 
B)  Means that information can be based on what the preparer thinks is true 
C)  Means that financial statement should contain information that is optimistic 
D)  Means that a business may not recognize revenue until cash is received 
E)  Means the assets acquired must be recorded and what the company paid for them

Question 18

Congress passed the Sarbanes-Oxley Act to

Accepted Answer

A)  Provide jobs to U.S. accountants and limit the number of jobs sent outside the country 
B)  Impose penalties on CEO's and CFO's who knowingly sign off on bogus accounting reports, although at this time the penalties are token amounts 
C)  Help curb financial abuses at companies that issue their stock to the public 
D)  Force auditors to attest to the absolute accuracy of the financial statements 
E)  Require that all companies publicly disclose their internal control plans

Question 19

For each of the following transactions for a corporation, identify the effects on the accounting equation. Use "+" to indicate an increase and "-" to indicate a decrease. Use "A", "L" and "E" to indicate assets, liabilities and equity, respectively. Part A has been completed as an example.

Accepted Answer

The answer of For each of the following transactions for...

Question 20

The accounts of Garfield Company listed with the increases or decreases that occurred during the past year are as follows.

Accepted Answer

The answer of The accounts of Garfield Company listed with...

Exam 1: Introducing Accounting in Business