110)
Marsha Bogswell is the owner of Bogswell Legal Services. Which accounting principle requires
Marsha to keep her personal financial information separate from the financial information of
Bogswell Legal Services?
A)
Expense recognition (Matching) principle.
B)
Going-concern assumption.
C)
Monetary unit assumption.
D)
Measurement (Cost) principle.
E)
Business entity assumption.
111)
A limited partnership:
A)
Is subject to double taxation.
B)
Includes a general partner with unlimited liability.
C)
May only have two partners.
D)
Is the same as a corporation.
E)
Has owners called stockholders.
112)
A partnership:
A)
Is also called a sole proprietorship.
B)
Has to have a written agreement in order to be legal.
C)
Has unlimited liability for its partners.
D)
Is a legal organization separate from its owners.
E)
Has owners called shareholders.
113)
Which of the following accounting principles require that all goods and services purchased be
recorded at actual cost?
A)
Expense recognition (Matching) principle..
B)
Measurement (Cost) principle.
C)
Consideration assumption.
D)
Going-concern assumption.
E)
Business entity assumption.
114)
Which of the following accounting principles prescribes that a company record its expenses
incurred to generate the revenue reported?
A)
Expense recognition (Matching) principle.
B)
Going-concern assumption.
C)
Measurement (Cost) principle.
D)
Consideration assumption.
E)
Business entity assumption.
115)
Revenue is properly recognized:
A)
Only if the transaction creates an account receivable.
B)
At the end of the accounting period.
C)
When the customer makes an order.
D)
Upon completion of the sale or when services have been performed and the business obtains
the right to collect the sales price.
E)
When cash from a sale is received.
116)
Which of the following purposes would financial statements serve for external users?
A)
To determine purchasing needs.
B)
To fulfill regulatory requirements for companies whose stock is sold to the public.
C)
To assess employee performance and compensation.
D)
To find information about projected costs and revenues of proposed products.
E)
To assist in monitoring consumer needs and price concerns.
117)
In a business decision where there are ethical concerns, the preferred course of action should be
one that:
A)
Results in maintaining operations at the current level.
B)
Is agreed upon by the most managers.
C)
Avoids casting doubt on the decision maker and upholds trust.
D)
Maximizes the company’s profits.
E)
Costs the least to implement.
118)
If a company uses $1,300 of its cash to purchase supplies, the effect on the accounting equation
would be:
A)
Assets decrease $1,300 and equity decreases $1,300.
B)
Assets increase $1,300 and liabilities decrease $1,300.
C)
Assets increase $1,300 and liabilities increase $1,300.
D)
One asset increases $1,300 and another asset decreases $1,300, causing no effect.
E)
Assets decrease $1,300 and equity increases $1,300.
119)
If a company receives $12,000 from the owner to establish a proprietorship, the effect on the
accounting equation would be:
A)
Liabilities increase $12,000 and equity decreases $12,000.
B)
Assets increase $12,000 and liabilities increase $12,000.
C)
Assets decrease $12,000 and equity decreases $12,000.
D)
Assets increase $12,000 and equity increases $12,000.
E)
Assets increase $12,000 and liabilities decrease $12,000.
120)
If a company purchases equipment costing $4,500 on credit, the effect on the accounting equation
would be:
A)
Assets increase $4,500 and liabilities decrease $4,500.
B)
Assets increase $4,500 and liabilities increase $4,500.
C)
Equity decreases $4,500 and liabilities increase $4,500.
D)
Equity increases $4,500 and liabilities decrease $4,500.
E)
Liabilities decrease $4,500 and assets increase $4,500.
121)
An example of a financing activity is:
A)
Buying office supplies.
B)
Buying land.
C)
Obtaining a long-term loan.
D)
Buying office equipment.
E)
Selling inventory.
122)
An example of an operating activity is:
A)
Purchasing office equipment.
B)
Selling stock.
C)
Paying wages.
D)
Paying off a loan.
E)
Borrowing money from a bank.
123)
Operating activities:
A)
Are also called strategic management.
B)
Are the means organizations use to pay for resources like land, buildings and equipment.
C)
Are also called asset management.
D)
Involve acquiring and disposing of resources that a business uses to acquire and sell its
products or services.
E)
Involve using resources to research, develop, purchase, produce, distribute and market
products and services.
124)
An example of an investing activity is:
A)
Selling inventory.
B)
Paying wages of employees.
C)
Withdrawals by the owner.
D)
Contribution from owner.
E)
Purchase of land.
125)
Net Income:
A)
Decreases equity.
B)
Represents owners’ claims against assets.
C)
Equals assets minus liabilities.
D)
Is the excess of revenues over expenses.
E)
Represents the amount of assets owners put into a business.
126)
If equity is $300,000 and liabilities are $192,000, then assets equal:
A) $300,000. B) $792,000. C) $192,000. D) $492,000. E) $108,000.
127)
If assets are $300,000 and liabilities are $192,000, then equity equals:
A) $492,000. B) $792,000. C) $108,000. D) $300,000. E) $192,000.
128)
Resources a company owns or controls that are expected to yield future benefits are:
A)
Revenues.
B)
Liabilities.
C)
Owner’s Equity.
D)
Expenses.
E)
Assets.
129)
Increases in equity from a company’s sales of products or services are:
A)
Revenues.
B)
Owner’s Equity.
C)
Assets.
D)
Expenses.
E)
Liabilities.
130)
The difference between a company’s assets and its liabilities, or net assets is:
A)
Expense.
B)
Net loss.
C)
Equity.
D)
Net income.
E)
Revenue.
131)
Creditors’ claims on the assets of a company are called:
A)
Net losses. B) Liabilities. C) Expenses. D) Revenues. E) Equity.
132)
Decreases in equity that represent costs of providing products or services to customers, used to earn
revenues are called:
A)
Liabilities.
B)
Withdrawals.
C)
Equity.
D)
Owner’s Investment.
E)
Expenses.
133)
The description of the relation between a company’s assets, liabilities, and equity, which is
expressed as Assets = Liabilities + Equity, is known as the:
A)
Return on equity ratio.
B)
Accounting equation.
C)
Net income.
D)
Business equation.
E)
Income statement equation.
134)
Revenues are:
A)
The excess of expenses over assets.
B)
Resources owned or controlled by a company.
C)
The same as net income.
D)
The increase in equity from a company’s sales of products and services.
E)
The costs of assets or services used.
135)
If assets are $99,000 and liabilities are $32,000, then equity equals:
A) $131,000. B) $32,000. C) $198,000. D) $67,000. E) $99,000.
136)
Another name for equity is:
A)
Expenses.
B)
Net assets.
C)
Net loss.
D)
Net income.
E)
Revenue.
137)
When expenses exceed revenues, the resulting change in equity is called:
A)
Net assets.
B)
Net loss.
C)
Net income.
D)
Negative equity.
E)
A liability.
138)
A resource that the owner takes from the company is called a(n):
A)
Investment.
B)
Liability.
C)
Contribution.
D)
Withdrawal.
E)
Expense.
139)
Distributions of cash or other resources by a business to its owners are called:
A)
Expenses.
B)
Withdrawals.
C)
Assets.
D)
Net Income.
E)
Retained earnings.
140)
The assets of a company total $700,000; the liabilities, $200,000. What are the net assets?
A) $500,000.
B) $900,000.
C) $200,000.
D)
It is impossible to determine unless the amount of this owners’ investment is known.
E) $700,000.
141)
On May 31 of the current year, the assets and liabilities of Riser, 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 May 31 of the current year?
A) $13,050. B) $49,700. C) $40,400. D) $31,100. E) $20,500.
142)
On August 31 of the current year, the assets and liabilities of Gladstone, Inc. are as follows: Cash
$30,000; Supplies, $600; Equipment, $10,000; Accounts Payable, $8,500. What is the amount of
owner’s equity as of August 31 of the current year?
A) $12,100. B) $49,100. C) $30,900. D) $10,900. E) $32,100.
59
143)
Assets created by selling goods and services on credit are:
A)
Equity.
B)
Accounts payable.
C)
Expenses.
D)
Liabilities.
E)
Accounts receivable.
144)
An exchange of value between two entities that yields a change in the accounting equation is
called:
A)
An external transaction.
B)
The accounting equation.
C)
Net Income.
D)
Recordkeeping or bookkeeping.
E)
An asset.
145)
Saddleback 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 decrease; liabilities, $30,000 increase.
B)
Assets, $30,000 decrease; equity $30,000 decrease.
C)
Assets, $30,000 increase; equity, $30,000 increase.
D)
Liabilities, $30,000 decrease; equity, $30,000 increase.
E)
Assets, $30,000 decrease; liabilities, $30,000 decrease.