During May, Aniston, Inc. purchased office supplies for cash. The supplies will be used
in June. What effect does this purchase transaction have on the accounting equation?
a. Assets increase and stockholders’ equity decreases.
b. Assets increase and liabilities increase.
c. Assets decrease and liabilities decrease.
d. There is no effect on the accounting equation as one asset account increases while
another asset account decreases.
UnderArmour is an example of a service provider.
a. True
b. False
A machine with a cost of $100,000 and accumulated depreciation of $80,000 was sold
at a loss of $6,000. What amount of cash was received from the sale?
a. $26,000
b. $14,000
c. $20,000
d. $94,000
Select the correct revenue recognition principle for each of the following.
a. Recognize revenue over the passage of time.
b. Recognize revenue when the customer takes possession of the product.
c. Recognize revenue when cash is collected.
d. Recognize revenue when service is performed.
Merchandise
The group with primary responsibility for development of a single set of accounting
standards around the world is the
a. FASB
b. SEC
c. IFRS
d. IASB
One effect on the accounting equation when a firm borrows money is
a. stockholders’ equity decreases.
b. assets increase.
c. liabilities decrease.
d. assets decrease.
Income statement accounts are also known as which of the following?
a. Nominal accounts
b. Real accounts
c. Closing accounts
d. Both a and c
Which of the following statements regarding contingencies is true?
a. Contingencies that are probable and estimable must be recorded before the outcome
of future events.
b. Contingent assets, if probable and estimable, are treated in much the same way as
contingent liabilities.
c. The accounting principle that determines whether a contingent asset is recorded is
that of materiality.
d. Contingencies that are not estimable should not be disclosed even if probable.
For each of the following items, indicate whether it would appear on a statement of
cash flows prepared using the Direct method (a) or the Indirect method (b).
a. Direct
b. Indirect
Collections on accounts receivable
Given the following list of methods of depreciation, select the method that is best for
the situation or purpose given. Some answers may be used more than once, while others
may not be used at all.
a. Straight-line
b. Units-of-production
c. Double-declining-balance
d. MACRS
Early in the life of the asset, this method maximizes net income.
Which of the following transactions has an effect on the statement of cash flows?
a. The sale of preferred stock
b. The declaration of a cash dividend
c. A small stock dividend
d. A large stock dividend
Stockholders’ equity is owners’ equity in a corporation.
a. True
b. False
Tracy, Inc.
Tracy, Inc. adjusts its books each month but closes its books at the end of the year. The
trial balance at July 31 before adjustments is as follows:
Refer to the trial balance for Tracy, Inc.Employees are owed $750 for services since the
last payday in July, to be paid the first week in August. The amount to be reported in the
July income statement for salaries expense is:
a. $750
b. $8,550
c. $7,050
d. $7,800
Which one of the following adjustments increases net income for the period?
a. Recognition of the amount of supplies used
b. Recognition of interest on a note receivable
c. Recognition of wages earned, but not paid to employees
d. Recognition of rent costs that had been paid to the landlord in advance
The following information is provided by the Ferrara Corporation:
Calculate Ferrara Corporation’s expenses.
a. $20,000
b. $30,000
c. $40,000
d. Cannot tell from the information provided.
If Tanner Company becomes less creditworthy, the market price of its bonds will
decline.
a. True
b. False