978-0134125053 Chapter 1 Part 3

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34) A company purchases supplies for cash. What is the net result on the accounting equation?

A) Total Assets will increase and total Liabilities will decrease.

B) Total Assets will increase and Stockholders’ Equity will increase.

C) Total Assets will not change.

D) Total Liabilities will increase.

Question Type: Application

35) Illusions, Inc. provided $27,000 worth of services for cash. Which of the following best

describes the effect on the expanded accounting equation?

A) Total Assets and total Liabilities will increase.

B) Total Assets and total Revenue will increase.

C) Total Liabilities will increase and total Revenue will decrease.

D) Total Assets will decrease and total Liabilities will increase.

Question Type: Application

36) In the expanded accounting equation, revenues minus expenses are part of:

A) Assets.

B) Retained Earnings.

C) Liabilities.

D) Dividends.

Question Type: Concept

37) A net loss will:

A) decrease Retained Earnings.

B) increase Retained Earnings.

C) force the company into bankruptcy.

D) force the company to pay dividends.

Question Type: Application

38) Juan invested $7,000 into his business. He would:

A) increase Cash and increase Stockholders’ Equity.

B) decrease Cash and increase Stockholders’ Equity.

C) increase Liabilities and increase Stockholders‘ Equity.

D) increase Cash only.

Question Type: Application

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39) The payment of cash dividends would have which of the following effects on the accounting

equation?

A) Increase Liabilities

B) Decrease Stockholders‘ Equity

C) Increase Assets

D) Increase Stockholders‘ Equity

Question Type: Application

40) Payment of expenses would have which of the following effects on the accounting equation?

A) Increase Liabilities

B) Decrease Stockholders‘ Equity

C) Increase Assets

D) Increase Stockholders‘ Equity

Question Type: Application

41) Amounts owed to a company by its customers are classified as:

A) payables.

B) dividends.

C) cash.

D) receivables.

Question Type: Concept

42) Crispy’s is famous for their cupcakes. Crispy’sTotal Assets were $350,000 and Total

Liabilities were $135,500. How much was Crispy’s Stockholders’ Equity?

A) $485,500

B) $350,000

C) $214,500

D) Some other number

Question Type: Application

43) Tumbler, Inc. purchased office supplies on account for $50,000. How would this transaction

affect Tumbler’s accounting equation?

A) Increase Assets and Stockholders‘ Equity by $50,000

B) Increase Liabilities and Stockholders‘ Equity by $50,000

C) Increase Assets by $50,000 and decrease Liabilities by $50,000

D) Increase Assets by $50,000 and increase Liabilities by $50,000

Question Type: Application

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44) How would the purchase of a computer on account affect the accounting equation?

A) Assets increase; Liabilities decrease.

B) Assets increase; Stockholder Equity increases.

C) Assets increase; Liabilities increase.

D) Assets decrease; Liabilities increase.

Question Type: Concept

45) Beginning Retained Earnings are $78,000; sales are $30,300; expenses are $84,000 and

dividends paid are $4,500. How much is the net income or loss for the company?

A) $25,800

B) ($53,700)

C) ($58,200)

D) $0

Question Type: Application

46) Beginning Retained Earnings are $35,000; sales are $52,000; expenses are $44,500 and

dividends paid are $3,000. How much is the net income or loss for the company?

A) $7,500

B) $17,000

C) $9,500

D) ($7,500)

Question Type: Application

47) Beginning Retained Earnings are $87,000; sales are $31,800; expenses are $37,000; and

dividends paid are $3,700. How much is the amount in ending Retained Earnings?

A) $78,100

B) $83,300

C) $118,800

D) $87,000

Question Type: Application

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48) Beginning Retained Earnings are $356,000; sales are $529,000; expenses are $44,400; and

dividends paid are $3,000. How much is the amount in ending Retained Earnings?

A) $356,000

B) $353,000

C) $840,600

D) $837,600

Question Type: Application

49) Which of the following is a FALSE statement?

A) Revenues provide inward flows of assets.

B) Revenue is categorized as an asset.

C) Revenue is categorized as part of Retained Earnings.

D) Revenues are generated from the sale of goods and services.

Question Type: Concept

50) Which of the following is a TRUE statement?

A) Purchasing office equipment for cash is a shift of Assets.

B) Buying something on account decreases total Liabilities.

C) Retained Earnings do not include payments of dividends.

D) Paying off an account increases the total of Assets.

Question Type: Concept

51) Rapid Repair buys a new machine for its shop on credit. The effect on the accounting

equation is to:

A) increase Liabilities and increase Assets.

B) decrease Liabilities and increase Assets.

C) increase Assets and increase Stockholders’ Equity.

D) increase Liabilities and decrease Stockholders‘ Equity.

Question Type: Application

52) Fiona‘s Flowers buys a new van for the business using cash. The effect on the accounting

equation is to:

A) Increase assets and decrease liabilities

B) Shift liabilities to stockholders’ equity.

C) Decrease assets.

D) No effect.

Question Type: Application

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1.6 Understand and be able to prepare basic financial statements

1) Financial statements are historical reports of what has taken place financially in a business.

Question Type: Concept

2) The Income Statement details how cash changed over an accounting period or cycle.

Question Type: Concept

3) The Balance Sheet presents changes to assets and liabilities over a period of time.

Question Type: Concept

4) The Statement of Retained Earnings is prepared to determine the final amount of Retained

Earnings shown on the Balance Sheet.

Question Type: Concept

5) The Income Statement is the first financial statement prepared.

Question Type: Concept

6) Financial statements are prepared primarily for internal company use.

Question Type: Concept

7) The Statement of Cash Flows is used to report sources and uses of cash for a specific date.

Question Type: Concept

8) The Statement of Cash Flows is used to report sources and uses of cash for a given period of

time.

Question Type: Concept

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9) Purchasing equipment is considered an operating activity on the Statement of Cash Flows.

Question Type: Application

10) If a business is planning on growth, it will generally issue additional dividends to

shareholders.

Question Type: Concept

11) Which of the following is TRUE regarding revenue and profit?

A) The terms revenue and profit mean the same thing.

B) Both revenue and profit are found on the Income Statement.

C) Profit equals liabilities plus Stockholders’ Equity.

D) Revenue is found on the Balance Sheet and profit is found on the Income Statement.

Question Type: Concept

12) The first financial statement that is prepared is the:

A) Statement of Cash Flows.

B) Income Statement.

C) Statement of Retained Earnings.

D) Balance Sheet.

Question Type: Concept

13) The net income figure is needed to prepare:

A) a Balance Sheet.

B) a Statement of Retained Earnings.

C) a Statement of Liabilities.

D) some other report.

Question Type: Application

14) A Statement of Cash Flows is usually prepared:

A) first.

B) second.

C) third.

D) last.

Question Type: Concept

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15) Net income or loss is originally shown on the:

A) Statement of Cash Flows.

B) Balance Sheet.

C) Statement of Retained Earnings.

D) Income Statement.

Question Type: Concept

16) Which of the following financial statements illustrates the accounting equation?

A) Statement of Retained Earnings

B) Income Statement

C) Balance Sheet

D) Statement of Cash Flows

Question Type: Concept

17) Beginning Retained Earnings for the period would be shown on the:

A) Statement of Retained Earnings.

B) Income Statement.

C) Balance Sheets.

D) Statement of Cash Flows.

Question Type: Concept

18) Of the financial statements, which is dated as of a specific date?

A) Statement of Cash Flows

B) Income Statement

C) Balance Sheet

D) Statement of Retained Earnings

Question Type: Concept

19) Which of the financial statements includes a listing of assets owned by the company?

A) Statement of Cash Flows

B) Income Statement

C) Balance Sheet

D) Statement of Retained Earnings

Question Type: Concept

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20) The correct order for the preparation of financial statements is:

1. Statement of Cash Flows

2. Income Statement

3. Balance Sheet

4. Statement of Retained Earnings

A) 4, 3, 2, 1.

B) 1, 2, 3, 4.

C) 2, 3, 4, 1.

D) 2, 4, 3, 1.

Question Type: Concept

21) The Statement of Retained Earnings is used to report:

A) accumulated dividends paid out to shareholders.

B) accumulated net profits not paid out in dividends.

C) beginning and ending cash balances.

D) beginning and ending revenues for the period.

Question Type: Concept

22) The Balance Sheet is used to report:

A) results of operations for a specific date.

B) the financial position on a specific date.

C) results of operations for a specific period.

D) the financial position for a specific period.

Question Type: Concept

23) The Income Statement is used to report:

A) results of operations for a specific date.

B) the financial position on a specific date.

C) results of operations for a specific period.

D) the financial position for a specific period.

Question Type: Concept

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24) Which of the following would be reported in the Investing Activities section of the Statement

of Cash Flows?

A) Sale of common stock

B) Purchase of equipment

C) Payment of dividends

D) Both A and C would be in this section.

Question Type: Concept

25) Information for the Alaska Alehouse’s first month of operations is presented below:

Revenues

$22,000

Expenses

6,000

Retained

Earnings

1/31/16

5,000

How much did Alaska Alehouse pay out in dividends?

A) $0

B) $11,000

C) $5,000

D) Cannot be determined from given information

Question Type: Application

26) Information for Sassycat Inc.’s first year of operations is presented below:

Revenues

$70,000

Retained

Earnings

12/31/20XX

14,000

Dividends

7,000

What was Sassycat’s net income for the year?

A) $21,000

B) $49,000

C) $70,000

D) Cannot be determined from the information given.

Question Type: Application

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27) Information for Bach Corporation’s first year of operations is presented below:

Expenses

$50,000

Retained

Earnings

12/31/20XX

20,000

Dividends

10,000

What was Bach’s net income for the year?

A) $20,000

B) $30,000

C) $60,000

D) Cannot be determined from the information given.

Question Type: Application

28) Select balance sheet data for Snow, Inc. is presented below:

Jan 31, 20XX

Feb 28, 20XX

Assets

$116,000

$192,000

Liabilities

47,000

53,000

Common

Stock

14,000

Snow did not pay any dividends during this period. What is the net income for February?

A) $14,000

B) $70,000

C) $55,000

D) Cannot be determined from the information given.

Question Type: Application

29) Select balance sheet data for Snow, Inc. is presented below:

Jan 31, 20XX

Feb 28, 20XX

Assets

$115,000

$166,000

Liabilities

48,000

84,000

Common

Stock

8,000

Snow paid $3,000 in dividends during this period. What is the net income for February?

A) $8,000

B) $115,000

C) $18,000

D) Cannot be determined from the information given.

Question Type: Application