130. Distributions of assets by a business to its owners are called:
A. Withdrawals.
B. Expenses.
C. Assets.
D. Retained earnings.
E. Net Income.
131. The assets of a company total $700,000; the liabilities, $200,000. What are the claims of
the owners?
A. $900,000.
B. $700,000.
C. $500,000.
D. $200,000.
E. It is impossible to determine unless the amount of this owners’ investment is known.
132. On June 30 of the current year, the assets and liabilities of Phoenix, Inc. are as follows:
Cash $20,500; Accounts Receivable, $7,250; Supplies, $650; Equipment, $12,000; Accounts
Payable, $9,300. What is the amount of owner’s equity as of June 30 of the current year?
A. $8,300
B. $13,050
C. $20,500
D. $31,100
E. $40,400
133. Assets created by selling goods and services on credit are:
A. Accounts payable.
B. Accounts receivable.
C. Liabilities.
D. Expenses.
E. Equity.
134. An exchange of value between two entities is called:
A. The accounting equation.
B. Recordkeeping or bookkeeping.
C. An external transaction.
D. An asset.
E. Net Income.
135. Photometer Company paid off $30,000 of its accounts payable in cash. What would be
the effects of this transaction on the accounting equation?
A. Assets, $30,000 increase; liabilities, no effect; equity, $30,000 increase.
B. Assets, $30,000 decrease; liabilities, $30,000 decrease; equity, no effect.
C. Assets, $30,000 decrease; liabilities, $30,000 increase; equity, no effect.
D. Assets, no effect; liabilities, $30,000 decrease; equity, $30,000 increase.
E. Assets, $30,000 decrease; liabilities, no effect; equity $30,000 decrease.
136. How would the accounting equation of Boston Company be affected by the billing of a
client for $10,000 of consulting work completed?
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 revenue.
E. +$10,000 accounts receivable, -$10,000 revenue.
137. Zion Company has assets of $600,000, liabilities of $250,000, and equity of $350,000. It
buys office equipment on credit for $75,000. What would be the effects of this transaction on
the accounting equation?
A. Assets increase by $75,000 and expenses increase by $75,000.
B. Assets increase by $75,000 and expenses decrease by $75,000.
C. Liabilities increase by $75,000 and expenses decrease by $75,000.
D. Assets decrease by $75,000 and expenses decrease by $75,000.
E. Assets increase by $75,000 and liabilities increase by $75,000.
138. Viscount Company collected $42,000 cash on its accounts receivable. The effects of this
transaction as reflected in the accounting equation are:
A. Total assets decrease and equity increases.
B. Both total assets and total liabilities decrease.
C. Total assets, total liabilities, and equity are unchanged.
D. Both total assets and equity are unchanged and liabilities increase.
E. Total assets increase and equity decreases.
139. If the liabilities of a business increased $75,000 during a period of time and the owner’s
equity in the business decreased $30,000 during the same period, the assets of the business
must have:
A. Decreased $105,000.
B. Decreased $45,000.
C. Increased $30,000.
D. Increased $45,000.
E. Increased $105,000.
140. If the assets of a business increased $89,000 during a period of time and its liabilities
increased $67,000 during the same period, equity in the business must have:
A. Increased $22,000.
B. Decreased $22,000.
C. Increased $89,000.
D. Decreased $156,000.
E. Increased $156,000.
141. If the liabilities of a company increased $74,000 during a period of time and equity in the
company decreased $19,000 during the same period, what was the effect on the assets?
A. Assets would have increased $55,000.
B. Assets would have decreased $55,000.
C. Assets would have increased $19,000.
D. Assets would have decreased $19,000.
E. None of these.
142. If a company paid $38,000 of its accounts payable in cash, what was the effect on the
assets, liabilities, and equity?
A. Assets would decrease $38,000, liabilities would decrease $38,000, and equity would
decrease $38,000.
B. Assets would decrease $38,000, liabilities would decrease $38,000, and equity would
increase $38,000.
C. Assets would decrease $38,000, liabilities would decrease $38,000, and equity would not
change.
D. There would be no effect on the accounts because the accounts are affected by the same
amount.
E. None of these.
143. If assets are $365,000 and equity is $120,000, then liabilities are:
A. $120,000.
B. $245,000.
C. $365,000.
D. $485,000.
E. $610,000.
144. Reston had income of $150 million and average invested assets of $1,800 million. Its
return on assets is:
A. 8.3%.
B. 83.3%.
C. 12%.
D. 120%.
E. 16.7%.
145. Nick’s had income of $350 million and average invested assets of $2,000 million. Its
ROA is:
A. 1.8%.
B. 35%.
C. 17.5%.
D. 5.7%.
E. 3.5%.
146. FastLane has net income of $18,955, and assets at the beginning of the year of $200,000.
Assets at the end of the year total $246,000. Compute its return on assets.
A. 7.7%.
B. 8.5%.
C. 9.5%.
D. 11.8%.
E. 13.0%.
147. Harris Co. has a net income of $43,000, assets at the beginning of the year are $250,000
and assets at the end of the year are $300,000. Compute its return on assets.
A. 8.4%
B. 17.2%
C. 14.3%
D. 15.6%
E. 1.5%
148. U. S. government bonds are:
A. High-risk and high-return investments.
B. Low-risk and low-return investments.
C. High-risk and low-return investments.
D. Low-risk and high-return investments.
E. High risk and no-return investments.
149. Risk is:
A. Net income divided by average total assets.
B. The reward for investment.
C. The uncertainty about the expected return to be earned.
D. Unrelated to expected return.
E. Derived from the idea of getting something back from an investment.
150. The statement of cash flows reports all of the following except:
A. Cash flows from operating activities.
B. Cash flows from investing activities.
C. Cash flows from financing activities.
D. The net increase or decrease in assets for the period reported.
E. The net increase or decrease in cash for the period reported.
151. The basic financial statements include all of the following except:
A. Balance Sheet.
B. Income Statement.
C. Statement of Owner’s Equity.
D. Statement of Cash Flows.
E. Trial Balance.
152. The statement of owner’s equity:
A. Reports how equity changes at a point in time.
B. Reports how equity 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.
153. The financial statement that reports whether the business earned a profit and also lists the
revenues and expenses is called the:
A. Balance sheet.
B. Statement of owner’s equity.
C. Statement of cash flows.
D. Income statement.
E. Statement of financial position.
154. A balance sheet lists:
A. The types and amounts of the revenues and expenses of a business.
B. Only the information about what happened to equity during a time period.
C. The types and amounts of assets, liabilities, and equity of a business as of a specific date.
D. The inflows and outflows of cash during the period.
E. The assets and liabilities of a company but not the owner’s equity.
155. A financial statement providing information that helps users understand a company’s
financial status, and which lists the types and amounts of assets, liabilities, and equity as of a
specific date, is called a(n):
A. Balance sheet.
B. Income statement.
C. Statement of cash flows.
D. Statement of owner’s equity.
E. Financial Status Statement.
156. The financial statement that identifies where a company’s cash came from and where it
went during the period is the:
A. Statement of financial position.
B. Statement of cash flows.
C. Balance sheet.
D. Income statement.
E. Statement of changes in owner’s equity.
157. The financial statement that shows the beginning balance of owner’s equity; the changes
in equity that resulted from new investments by the owner, net income (or net loss);
withdrawals; and the ending balance, is the:
A. Statement of financial position.
B. Statement of cash flows.
C. Balance sheet.
D. Income statement.
E. Statement of owner’s equity.
158. Cash investments by owners are listed on which of the following statements?
A. Balance sheet.
B. Income statement.
C. Statement of owner’s equity only.
D. Statement of cash flows only.
E. Statement of owner’s equity and statement of cash flows.
159. Accounts payable appear on which of the following statements?
A. Balance sheet.
B. Income statement.
C. Statement of owner’s equity.
D. Statement of cash flows.
E. Transaction statement.
160. The income statement reports all of the following except:
A. Revenues earned by a business.
B. Expenses incurred by a business.
C. Assets owned by a business.
D. Net income or loss earned by a business.
E. The time period over which the earnings occurred.
161. Use the following information as of December 31 to determine equity.
Liabilities……………… $141,000
Cash…………………… 57,000
Equipment…………….. 206,000
Buildings…………………… 175,000
A. $57,000.
B. $141,000.
C. $297,000.
D. $438,000.
E. $579,000.
162. Determine the net income of a company for which the following information is available
for the month of May.
Employee salaries expense….
$180,000
Interest expense………………..
10,000
Rent expense……………………
20,000
Consulting revenue……………
400,000
A. $190,000.
B. $210,000.
C. $230,000.
D. $400,000.
E. $610,000.
163. A company acquires equipment for $75,000 cash. This represents a(n):
A. Operating activity.
B. Investing activity.
C. Financing activity.
D. Revenue activity.
E. Expense activity.
164. A company borrows $125,000 from the Eastside Bank and receives the loan proceeds in
cash. This represents a(n):
A. Revenue activity.
B. Operating activity.
C. Expense activity.
D. Investing activity.
E. Financing activity.
165. Flash had cash inflows from operations $62,500; cash outflows from investing activities
of $47,000; and cash inflows from financing of $25,000. The net change in cash was:
A. $40,500 increase.
B. $40,500 decrease.
C. $134,500 decrease.
D. $134,000 increase.
E. $9,500 increase.
166. Flash has beginning equity of $257,000, net income of $51,000, withdrawals of $40,000
and investments by owners of $6,000. Its ending equity is:
A. $223,000.
B. $240,000.
C. $268,000.
D. $274,000.
E. $208,000.
167. Rent expense that is paid with cash appears on which of the following statements?
A. Balance sheet.
B. Income statement.
C. Statement of owner’s equity.
D. Income statement and statement of cash flows.
E. Statement of cash flows only.
168. A company’s balance sheet shows: cash $22,000, accounts receivable $16,000, office
equipment $50,000, and accounts payable $17,000. What is the amount of owner’s equity?
A. $17,000.
B. $29,000.
C. $71,000.
D. $88,000.
E. $105,000.
169. A company reported total equity of $145,000 at the beginning of the year. The company
reported $210,000 in revenues and $165,000 in expenses for the year. Liabilities at the end of
the year totaled $92,000. What are the total assets of the company at the end of the year?
A. $45,000.
B. $92,000.
C. $98,000.
D. $210,000.
E. $282,000.
170. Flash reported net income of $17,500 for the past year. At the beginning of the year the
company had $200,000 in assets and $50,000 in liabilities. By the end of the year, assets had
increased to $300,000 and liabilities were $75,000. Calculate its return on assets:
A. 8.8%
B. 7.0%
C. 5.8%
D. 35.0%
E. 23.3%
171. Quick Computer Service had revenues of $80,000 and expenses of $50,000 for the year.
Its assets at the beginning of the year were $400,000. At the end of the year assets were worth
$450,000. Calculate its return on assets.
A. 7.1%
B. 7.5%
C. 6.7%
D. 20.0%
E. 18.8%