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Chapter 1
42. Revenues received from providing services are referred to as:
a.
fees earned.
b.
net income.
c.
gross income.
d.
retained earnings.
43. A note payable requires payment of the amount borrowed plus:
a.
interest.
b.
tax.
c.
overhead.
d.
dividend.
Chapter 1
44. Shares of ownership are evidenced by issuing:
a.
shares payable.
b.
commercial paper.
c.
shares of stock.
d.
notes payable.
45. The resources a business owns are called:
a.
assets.
b.
liabilities.
c.
earnings.
d.
stockholders' equity.
Chapter 1
46. The purchase of factory equipment would be an example of which type of business activity?
a.
Financing
b.
Investing
c.
Operating
d.
All of these
47. Which of the following is an intangible asset?
a.
Patent
b.
Cash
c.
Land
d.
Equipment
Chapter 1
48. Rights to payments from customers are:
a.
liabilities.
b.
prepaid expenses.
c.
accounts receivable.
d.
accounts payable.
49. Which of the following is considered an asset until consumed?
a.
Accounts payable
b.
Prepaid expense
c.
Accounts receivable
d.
Stockholders' equity
Chapter 1
50. _____ is the increase in assets from selling products or services.
a.
Revenue
b.
Interest income
c.
Equity
d.
Cost of goods sold
51. Cash collected from sales during the normal course of business would be an example of which type of business
activity?
a.
Operating
b.
Investing
c.
Financing
d.
None of these
Chapter 1
52. Costs incurred to earn revenue are referred to as _____.
a.
common stock
b.
expenses
c.
liabilities
d.
retained earnings
53. Debts owed by a business are referred to as:
a.
accounts receivable.
b.
equities.
c.
stockholders' equity.
d.
liabilities.
Chapter 1
54. Cash investments made by the stockholders of the business are reported on the statement of cash flows in the:
a.
financing activities section.
b.
investing activities section.
c.
operating activities section.
d.
supplemental statement.
55. Financing activities_____ .
a.
involve obtaining funds to operate a business
b.
involve obtaining assets such as buildings and equipment
c.
help to earn revenues and profits
d.
help to make wise investments in other companies
Chapter 1
56. Reporting the financial condition of a business at a point in time and reporting the changes in the financial condition
of a business over a period of time are the two major objectives of:
a.
fund accounting.
b.
forensic accounting.
c.
not-for-profit accounting.
d.
financial accounting.
57. The role of accounting in business is best defined as:
a.
an information system that provides reports to stakeholders about the economic activities and condition of a
business.
b.
a method of forecasting the future profitability of a company.
c.
the policies, procedures, and strategies used in a business.
d.
transaction analysis.
Chapter 1
58. A list of assets, liabilities, and owners' equity as of a specific date is a(n):
a.
income statement.
b.
balance sheet.
c.
statement of cash flows.
d.
retained earnings statement.
59. Given the following list of accounts, calculate Total Assets:
Accounts Receivable
$ 10,000
Capital Stock
20,000
Cash
25,300
Equipment
16,800
Chapter 1
Fees Earned
44,400
Miscellaneous Expense
17,800
Rent Expense
3,250
Retained Earnings
7,850
Salaries Expense
15,400
Wages Expense
15,000
a.
$52,100
b.
$55,300
c.
$54,600
d.
$40,050
60. Which of the following is an appropriate representation of the accounting equation?
a.
Assets + Liabilities = Stockholders' equity
b.
Assets = Liabilities + Stockholders' equity
c.
Assets = Liabilities
d.
Assets = Liabilities + Retained earnings
Chapter 1
61. Use the following information to determine Total Stockholders' Equity:
Total Assets
$ 85,000
Total Liabilities
21,000
Total Stockholders' Equity
x
Total Retained Earnings
9,000
a.
$58,000
b.
$64,000
c.
$55,000
d.
$40,000
62. A summary of the cash receipts and cash payments for a specific period of time is a(n):
a.
income statement.
b.
balance sheet.
c.
statement of cash flows.
d.
retained earnings statement.
Chapter 1
63. The portion of a corporation's net income retained in the business is called:
a.
interest earnings.
b.
dividends.
c.
tax expense.
d.
retained earnings.
64. The debt created by a business when it borrows from a vendor or supplier is called a(n):
a.
account payable.
b.
contingent liability.
c.
intangible asset.
d.
account receivable.
Chapter 1
65. If there was no beginning retained earnings, net income of $30,300, and ending retained earnings of $8,000, how
much were dividends?
a.
$38,300
b.
$22,300
c.
$6,000
d.
$8,000
66. During 2016, Banigo Corporation experienced an increase in total assets of $72,600 and an increase in total liabilities
of $40,900. Assuming that capital stock increased by $5,000 and no dividends were paid, calculate Banigo's net income or
net loss for 2016.
a.
Net income of $26,700
b.
Net loss of $31,700
c.
Net income of $67,600
d.
Net loss of $45,900
Chapter 1
67. The financial statement that presents a summary of the revenues and expenses of a business for a specific period of
time, such as a month or an year, is called a(n):
a.
prior period statement.
b.
statement of retained earnings.
c.
income statement.
d.
balance sheet.
68. Which of the following is the correct order for preparing financial statements?
a.
Income statement, Statement of cash flows, Retained earnings statement, Balance sheet
b.
Retained earnings statement, Income statement, Statement of cash flows, Balance sheet
Chapter 1
c.
Statement of cash flows, Retained earnings statement, Balance sheet, Income statement
d.
Income statement, Retained earnings statement, Balance sheet, Statement of cash flows
69. A financial statement that summarizes the cash receipts and cash payments of a company for a specific period of time
is:
a.
the cash analysis statement.
b.
the bank reconciliation statement.
c.
the statement of cash flows.
d.
the statement of retained and nonretained cash earnings.
Chapter 1
70. Hofnim, Inc. had the following account balances on September 30, 2016. What is Hofnim's net income for the month
of September?
Accounts Payable
$ 9,900
Capital Stock
15,000
Cash
19,600
Equipment
19,100
Fees Earned
64,000
Miscellaneous Expense
19,700
Rent Expense
5,100
Retained Earnings
5,000
Wages Expense
16,450
a.
$8,800
b.
$22,750
c.
$13,260
d.
$17,750
71. Pelican, Inc. had revenues of $395,000, expenses of $155,000, and dividends of $54,000 during the current year.
Based on the given information, which of the following statements is true?
a.
Net income for the current year totaled $240,000.
b.
Net income for the current year totaled $186,000.
c.
Total retained earnings increased by $240,000 during the current year.
d.
Total retained earnings decreased by $186,000 during the current year.
Chapter 1
72. The portion of a corporation's net income that is paid out to the stockholders, instead of being retained in the business,
is referred to as:
a.
gross income.
b.
earnings before interest and taxes.
c.
interest expense.
d.
dividends.
73. Which of the following accounting concepts requires that the financial statements, including related notes, contain all
relevant data a stakeholder would need to understand the financial condition and performance of the company?
a.
The adequate disclosure concept
b.
The cost concept
c.
The objectivity concept
d.
The matching concept
Chapter 1
74. Heedy Company had the following account balances in 2016 and 2017, respectively. Assuming dividends of $20,000
were paid in 2017, how much was net income?
2017
2016
Capital Stock
$ 42,000
$ 40,000
Retained Earnings
x
210,000
Total Stockholders' Equity
$ 314,000
$ 250,000
a.
$62,000
b.
$82,000
c.
$272,000
d.
$252,000
Chapter 1
75. The "rules" of accounting are called:
a.
income tax regulations.
b.
SEC regulations.
c.
Internet rules.
d.
Generally Accepted Accounting Principles.
76. Which of the following is true about the cost principle?
a.
It limits the economic data recorded in an accounting system to data related to the activities of that company.
b.
It initially records assets in the accounting records at their purchase price.
c.
It assumes that a company will continue in business indefinitely.
d.
It reports the revenues earned by a company for a period with the expenses incurred in generating the
revenues.
