Accounting Test 1

Emmitt had the following final balances after the first year of operations: assets, $35,600; stockholders' equity, $13,300; dividends, $3,800; and net income, $10,800. What is the amount of Emmitt's liabilities? -$7,700 -$35,600 -$22,300 -$26,100

$22,300

If the liabilities of a company increased by $55,000 during a month and the stockholders' equity decreased by $21,000 during that same month, did assets increase or decrease and by how much? A.$34,000 decrease. B. $34,000 increase. C. $76,000 increase. D. $55,000 increase.

$34,000 increase

DW has an ending retained earnings balance of $52,000. If during the year DW paid dividends of $5,000 and had net income of $22,000, then what was the beginning retained earnings balance? a. $69,000. b. $35,000. c. $25,000. d. $30,000.

$35,000

The ending Retained Earnings balance of Boomer Inc. decreased by $1.0 million from the beginning of the year. The company declared a dividend of $5.4 million during the year. What was the net income for the year? -$7.5 million. -$6.4 million. -$1.0 million. -$4.4 million.

$4.4 million

Use the following appropriate amounts to calculate net income: Revenues, $11,100; Liabilities, $3,900; Expenses, $4,900; Assets, $18,400; Dividends, $1,500. -$14,500 -$4,700 -$7,050 -$6,200

$6,200

Nina Corp. had the following net income (loss) for the first three years of operations, respectively: $6,600, ($1,300), and $3,200. If the Retained Earnings balance at the end of year three is $800, what was the total amount of dividends paid over these three years? -$7,700 -$8,500 -$500 -$0

$7,700

Use the following amounts to calculate net income. Revenues, $14,000; Liabilities, $6,000; Expenses, $5,800; Assets, $21,000; Dividends, $1,200. a. $29,200. b. $15,200. c. $5,800. d. $8,200.

$8,200

Johnson had the following final balances after the first year of operations: Assets, $26,000; stockholders' equity, $10,000; dividends, $2,000; and net income, $6,000. What is the amount of Johnson's liabilities? a. $36,000. b. $20,000. c. $16,000. d. $10,000.

16,000

A(n) _______________ summarizes all transactions related to a particular item over a period of time. -Chart of accounts -Debit -Source document -Account

Account

Which of the following accounts would normally have a credit balance? a. Accounts payable, service revenue, common stock. b. Salaries payable, unearned revenue, telephone expense. c. Income taxes payable, service revenue, dividends. d. Cash, maintenance expense, dividends.

Accounts payable, service revenue, common stock.

A trial balance can best be explained as a list of: -Revenue, expense, and dividend accounts used to show the balances of the components of retained earnings. -The income statement accounts used to calculate net income. -The balance sheet accounts used to show the equality of the accounting equation. -All accounts and their balances at a particular date.

All accounts and their balances at a particular date.

The accounts that represent the resources of the company are called: -Expenses. -Liabilities. -Assets. -Revenues.

Assets

When a payment is made on an account payable: -Assets and liabilities decrease. -Assets and stockholders' equity decreases -Assets and expenses decrease. -Liabilities and revenues decrease.

Assets and liabilities decrease.

On September 10, MFP Co. paid employee salaries of $7,000 owed to its employees last month. What are the effects of this transaction on the accounting equation? -Expenses decrease and liabilities decrease. -Assets decrease and expenses decrease. -Assets decrease and liabilities decrease. -Expenses increase and liabilities increase.

Assets decrease and liabilities decrease

Which of the following financial statements reports a company's retained earnings? -Statement of cash flows. -All of the other answers are statements that report retained earnings. -Income statement. -Balance sheet.

Balance sheet

Which business form has the advantage of limited liability? A. Corporation. B. Partnership. C. Sole proprietorship. D. All business forms share equal limited liability.

Corporation

Which business form has the advantage of limited liability? a. Corporation. b. Sole proprietorship. c. Partnership. d. All business forms share equal limited liability.

Corporation

Xenon Corporation borrows $75,000 from First Bank. Xenon Corporation records this transaction with a: a. Debit to investments. b. Credit to retained earnings. c. Credit to liabilities. d. Credit to expenses.

Credit to liabilities.

Liabilities normally carry a _______ balance and are shown in the ______________. -Debit; Balance sheet -Debit; Statement of stockholders' equity -Debit; Income statement -Credit; Balance sheet

Credit; Balance sheet

When a company pays $2,500 dividends to its stockholders, the transaction should be recorded as: -Debit Retained Earnings; credit Dividends. -Debit Dividends; credit Accounts Payable. -Debit Cash; credit Dividends. -Debit Dividends; credit Cash.

Debit Dividends; credit Cash.

Schooner Inc. purchased equipment by signing a note payable. This transaction would be recorded as: -Debit Cash, credit Notes Payable. -Debit Equipment, credit Cash. -Debit Notes Payable, credit Equipment. -Debit Equipment, credit Notes Payable.

Debit Equipment, credit Notes Payable.

A company received a bill for newspaper advertising services received, $400. The bill will be paid in 10 days. How would the transaction be recorded today? a. Debit advertising expense $400, credit accounts payable $400. b. Debit accounts payable $400, credit advertising expense $400. c. Debit accounts payable $400, credit cash $400. d. Debit advertising expense $400, credit cash $400.

Debit advertising expense $400, credit accounts payable $400.

Styleson Inc. performed cleaning services for their customers for cash. These transactions would be recorded as: a. Debit service revenue, credit cash. b. Debit cash, credit service revenue. c. Debit cash, credit accounts receivable. d. Debit accounts receivable, credit service revenue.

Debit cash, credit service revenue.

Assume that cash is paid for rent to cover the next year. The appropriate debit and credit are: a. Debit rent expense, credit cash. b. Debit prepaid rent, credit rent expense. c. Debit prepaid rent, credit cash. d. Debit cash, credit prepaid rent.

Debit prepaid rent, credit cash.

An increase to an asset account is shown with a ______________. An increase to a liability account is shown with a ______________. -Debit; Credit -Debit; Debit -Credit; Debit -Credit; Credit

Debit; Credit

Dividends normally carry a _______ balance and are shown in the ______________. -Debit; Balance sheet -Credit; Balance sheet -Debit; Statement of stockholders' equity -Debit; Income statement

Debit; Statement of stockholders' equity

Dividends normally carry a _______ balance and are shown in the ______________. a. Debit; Statement of stockholders' equity. b. Debit; Income statement. c. Credit; Balance sheet. d. Debit; Balance Sheet.

Debit; Statement of stockholders' equity

Liabilities are best defined as: a. Amounts the company expects to collect in the future from customers. b. Debts or obligations the company owes resulting from past transactions. c. The amounts that owners have invested in the business. d. Payments to stockholders.

Debts or obligations the company owes resulting from past transactions.

An expense has what effect on the accounting equation? a. Decrease liabilities. b. Decrease stockholders' equity. c. Increase assets. d. No effect.

Decrease stockholders' equity.

The assumption that the assets and liabilities of the business are accounted for on the books of the company but not included in the records of the owner is the: -Monetary unit assumption. -Periodicity assumption. -Economic entity assumption. -Going concern assumption.

Economic entity assumption.

The costs of providing goods and services to customers are referred to as: -Assets. -Revenues. -Liabilities. -Expenses.

Expenses

The costs of providing goods and services to customers are referred to as: a. Assets. b. Expenses. c. Liabilities. d. Revenues

Expenses

Which of the following is the correct order for preparing the financial statements? a. Balance sheet, statement of stockholders' equity, and income statement. b. Balance sheet, income statement, and statement of stockholders' equity. c. Statement of stockholders' equity, income statement, and balance sheet. d. Income statement, statement of stockholders' equity, and balance sheet.

Income statement, statement of stockholders' equity, and balance sheet.

Providing services and receiving cash will: a. Increase assets and increase stockholders' equity. b. Increase assets and increase liabilities. c. Decrease assets and increase liabilities. d. Decrease liabilities and increase stockholders' equity.

Increase assets and increase stockholders' equity.

Transactions of a company that include the purchase and sale of long-term assets are referred to as: -Financing activities. -Operating activities. -Investing activities. -Expenditure activities.

Investing Activities

FlintCo purchases additional office equipment to better serves its customers. This cash purchase is reported in the statement of cash flows as what type of activity? -Investing activity. -Operating activity. -Financing activity. -Company activity.

Investing activity

The major underlying assumptions of accounting include all of the following except: a. Economic entity. b. Monetary unit. c. Legal liability. d. Going concern.

Legal liability

The accounts that represent resources owed to creditors are called: a.Assets. b.Dividends. c.Liabilities. d.Stockholders' equity.

Liabilities

Amounts owed to suppliers for supplies purchased on account are defined as a(n): -Revenue. -Liability. -Asset. -Expense.

Liability

What is the primary purpose of financial accounting? a. Determine the amount of tax liability owed to the government. b. Communicate business transactions to internal management. c. Measure business transactions and communicate those measures to external users to make decisions. d. Measure the profitability of the company in order to assist employees with making decisions.

Measure business transactions and communicate those measures to external users to make decisions.

Which definition below best describes financial accounting? -Measuring business activities and communicating them to external parties. -System of maintaining communication with a company's customers and suppliers. -Process of measuring income taxes owed to the government. -Procedures designed to enhance the company's image to potential investors.

Measuring business activities and communicating them to external parties.

Which of the following items is reported in the statement of stockholders' equity? -Operating cash flows. -total assets. -Total expenses. -Net income.

Net Income

Pumpkin Inc. sold $500 in pumpkins to a customer on account on January 1. On January 11 Pumpkin collected the cash from that customer. What is the impact on Pumpkin's accounting equation from the collection of cash? a. No net effect to the accounting equation. b. Decrease assets and increase liabilities. c. Increase assets and increase liabilities. d. Decrease assets and decrease liabilities.

No net effect to the accounting equation.

On December 1, 2010, Bears Inc. signed a contract with a retailer to supply stuffed animal toys for the next calendar year. How should this transaction be recorded on December 1, 2010? a. Debit cash, credit sales revenue. b. Debit cash, credit accounts receivable. c. Debit accounts receivable, credit sales revenue. d. No transaction should be recorded on December 1, 2010.

No transaction should be recorded on December 1, 2010.

Transactions related to the primary business activities of the company, such as selling goods and services to customers, are referred to as: a. Investing activities. b. Management activities. c. Operating activities. d. Financing activities.

Operating activities

The conceptual framework's qualitative characteristic of relevance includes: -Verifiability. -Completeness. -Neutrality. -Predictive value.

Predictive value

The term "cooking the books" refers to: -Filing all tax-related statements by the required deadline. -Preparing internal budgets to plan for expenditures in the following year. -Hiring an auditor to provide independent verification of the fairness of financial statements. -Purposely providing misleading financial information to investors and creditors.

Purposely providing misleading financial information to investors and creditors.

Which statement below best describes the accounting equation? -The change in retained earnings equals net income less dividends. -Resources of the company equal creditors' and owners' claims to those resources. -Financing activities equal investing and operating activities. -Equality of revenue and expense transactions over time.

Resources of the company equal creditors' and owners' claims to those resources.

Which statement below best describes the accounting equation? a. The change in retained earnings equals net income less dividends. b. Equality of revenue and expense transactions over time. c. Resources of the company equal creditors' and owners' claims to those resources. d. Financing activities equal investing and operating activities.

Resources of the company equal creditors' and owners' claims to those resources.

Which of the following accounts appears in the statement of stockholders' equity? a. Prepaid rent b. Cash c. Unearned revenue d. Retained earnings

Retained earnings

The equation best describing the income statement is: -Assets = Liabilities + Stockholders' Equity. -Assets = Revenues − Expenses. -Revenues + Expenses = Net Income. -Revenues − Expenses = Net Income.

Revenues − Expenses = Net Income.

The owners' interest in a corporation is called: a. Dividends b. Assets c. Liabilities d. Stockholders' equity

Stockholders' equity

When a company incurs workers' salaries but does not pay them, how will the basic accounting equation be affected? a. Stockholders' equity decreases. b. Revenues decrease. c. Expenses decrease. d. Liabilities decrease.

Stockholders' equity decreases.

When a company pays employees' salaries for the current period, how will the basic accounting equation be affected? -Stockholders' equity decreases. -Revenues decrease. -Liabilities decrease. -Expenses decrease.

Stockholders' equity decreases.

Which of the following accounts represents a resource of the company? -Service revenue. -Salaries expense. -Common stock. -Supplies.

Supplies

Which of the following best explains the meaning of total stockholders' equity? -The amount of common stock less dividends over the life of the company. -The difference between total revenues and total expenses, less dividends for the year. -All revenues, expenses, and dividends over the life of the company. -The amount of capital invested by stockholders plus profits retained over the life of the company.

The amount of capital invested by stockholders plus profits retained over the life of the company.

A company receives a $50,000 cash deposit from a customer on October 15 but will not provide services until November 20. Which of the following statements is true? a. The company records service revenue on October 15. b. The company records cash collection November 20. c. The company records an unearned revenue on October 15. d. The company records nothing on October 15.

The company records an unearned revenue on October 15.

Posting transactions to T-accounts involves: -Analyzing source documents to determine the effects of transactions on the company's accounts. -Transferring debit and credit information from the journal to the accounts in the general ledger. -Listing all accounts and their balances at a particular date to ensure that debits equal credits. -Preparing a chronological record of all transactions affecting the company.

Transferring debit and credit information from the journal to the accounts in the general ledger

Receiving cash from customers before services are performed results in: -Service Revenue. -Accounts Receivable. -Deferred Revenues. -Prepaid Assets.

deferred revenues