ACNT 1303 Ex1

Total assets of Douglas Fuhr Furniture Co. are $84,000 and the total liabilities are $37,000. What is the amount of the owner's equity? A) $47,000 Answer: A (84,000 - 37,000 = 47,000)

A) $47,000 (84,000 - 37,000 = 47,000)

When recording transactions in the T-accounts, the debits should equal the credits: A) Always. Answer: A

A) Always.

A business earns $4,000 from various charge account clients. To record this transaction, the business would: A) Debit Accounts Receivable; Credit Fees Income Answer: A

A) Debit Accounts Receivable; Credit Fees Income

An example of an economic entity is A) a business. B) a town. C) a church. D) a politician. Answer: A

A) a business.

The rent paid for future months is a(n): A) asset. Answer: A

A) asset.

Examples of assets are: A) cash and accounts receivable. Answer: A

A) cash and accounts receivable.

Which of the following entries records the withdrawal of cash for personal use by Ty Knott, the owner of a business? A) debit Ty Knott, Drawing, and credit Cash Answer: A

A) debit Ty Knott, Drawing, and credit Cash

A withdrawal of funds by the owner for personal use is considered a business expense. B) False Answer: B

B) False

Identify which of the following are considered OUTSIDE users of financial accounting information A) managers B) banks C) employees D) owners Answer: B

B) banks

A firm paid cash to apply against a debt. To record this transaction, the accountant would: B) debit Accounts Payable and credit Cash. Answer: B

B) debit Accounts Payable and credit Cash.

Select the entry below to record the payment to employees for work performed during the pay period? B) debit Salary Expense and credit Cash Answer: B

B) debit Salary Expense and credit Cash

The ABC Company paid cash on account for supplies purchased last month. This would be recorded in the T-accounts as a: B) debit to Accounts Payable and credit Cash. Answer: B

B) debit to Accounts Payable and credit Cash.

The owners and managers of a business are the only users of the financial information. A) True B) False Answer: B

B.False

The form of a business organization that is not affected by the withdrawal or death of an owner and can continue indefinitely is the A) sole proprietorship. B) nonprofit organization. C) corporation. D) partnership. Answer: C

C) corporation

The Income Statement shows: C) the amount of net income or net loss. Answer: C

C) the amount of net income or net loss.

A business pays a creditor on account. The entry to record this transaction is: D) Debit Accounts Payable; Credit Cash Answer: D

D) Debit Accounts Payable; Credit Cash

An act passed in response to the wave of corporate accounting scandals is the A) Sorbine-Oxide Act. B) Sardonic-Oxone Act. C) Saxon-Ordanly Act. D) Sarbanes-Oxley Act Answer: D

D) Sarbanes-Oxley Act

The government agency that has final authority over the financial reporting of publicly owned corporations is the A) Financial Accounting Standards Board. B) Internal Revenue Service. C) Federal Trade Commission. D) Securities and Exchange Commission. Answer: D

D) Securities and Exchange Commission.

A business transaction must affect at least two accounts. A) True Answer: A

A) True

A double line drawn under the figures in a money column shows that the computation is complete. A) True Answer: A

A) True

The purpose of accounting is to provide financial information about an economic or social entity. A) True B) False *Answer: A*

A.True

Debit entries increase asset, drawing, expense and liability accounts. B) False Answer: B

B) False

Which of the following equations is the Fundamental Accounting Equation? C) Assets = Liabilities + Owner's Equity Answer: C

C) Assets = Liabilities + Owner's Equity

The review of financial statements to assess their fairness and adherence to GAAP is A) compliance. B) preparation. C) auditing. D) accounting. Answer: C

C) auditing.

Owners and managers need financial information in order to A) grant loans. B) collect taxes. C) make decisions. D) issue credit. Answer: C

C) make decisions.

Accounting standards update Answer: Changes to Accounting Standards Codification are communicated through Accounting Standards Update covering approximately 90 topics

Changes to Accounting Standards Codification are communicated through Accounting Standards Update covering approximately 90 topics

A business partnership consists of two or more owners. A) True B) False Answer: A

A.True

Public accounting firms provide three major types of services: auditing, tax accounting, and management advisory services. A) True B) False Answer: A

A.True

The Securities and Exchange Commission (SEC) requires that publicly owned corporations submit financial statements to it at least one time each year. A) True B) False Answer: A

A.True

The financial statements and the auditor's report must be made available to stockholders of publicly owned corporations. A) True B) False Answer: A

A.True

If assets are $8,000 and liabilities are $2,000, owner's equity is $10,000. B) False Answer: B

B) False

An accounting system is designed to accumulate and classify data about a company's financial activities and summarize them in the general journal. A) True B) False Answer: B

B.False

Anyone can invest in a closely held corporation. A) True B) False Answer: B

B.False

In a sole proprietorship, the owner is NOT responsible for the debts of the business if the company is unable to pay. A) True B) False Answer: B

B.False

A net loss results: C) when expenses are greater than revenue. Answer: C

C) when expenses are greater than revenue.

At the end of the first month of operations for SloMo Delivery Service, the business had the following accounts: Accounts Receivable, $11,350; Prepaid Insurance, $400; Equipment, $26,200 and Cash, $21,650. On the same date, SloMo owed the following creditors: Simpson Supply Company, $17,000; Allen Office Equipment, $14,500. The total amount of Liabilities is: D) $31,500. Answer: D Liabilities = Simpson Supply Company, $17,000 + Allen Office Equipment $14,500 = $31,500.

D) $31,500 Liabilities = Simpson Supply Company, $17,000 + Allen Office Equipment $14,500 = $31,500.

At the end of the first month of operations for SloMo Delivery Service, the business had the following accounts: Accounts Receivable, $11,350; Prepaid Insurance, $400; Equipment, $26,200 and Cash, $21,650. On the same date, SloMo owed the following creditors: Simpson Supply Company, $17,000; Allen Office Equipment, $14,500. The total assets for the SloMo Delivery Service are: A) $59,600. Answer: A A) Assets = Accounts Receivable, $11,350 + Prepaid Insurance, $400 + Equipment $26,200 + Cash, $21,650 = $59,600.

A) $59,600. A) Assets = Accounts Receivable, $11,350 + Prepaid Insurance, $400 + Equipment $26,200 + Cash, $21,650 = $59,600.

A business performed $8,000 of services. Their customer paid $3,000 of the amount right away but charged the remaining amount. To record this transaction, the business would: A) Debit Cash $3,000 and Debit Accounts Receivable $5,000 and Credit Fees Income $8,000 Answer: A

A) Debit Cash $3,000 and Debit Accounts Receivable $5,000 and Credit Fees Income $8,000

A business purchases equipment costing $5,500. They pay $1,500 right away and charge the remaining amount. To record this transaction, the business would: A) Debit Equipment $5,500; Credit Cash $1,500 and Credit Accounts Payable $4,000 Answer: A

A) Debit Equipment $5,500; Credit Cash $1,500 and Credit Accounts Payable $4,000

After transactions for the period have been recorded, a trial balance is prepared to verify the equality of total debits and total credits. A) True Answer: A

A) True

Al Dunn Bakery bought a new oven for $1,380. Al paid $300 as a cash down payment and will pay the balance in 30 days. Total assets increased by $1,080. A) True Answer: A

A) True

An account whose balance is transferred to the capital account at the end of an accounting period is a temporary account. A) True Answer: A

A) True

Credits increase Liabilities, Owner's Equity, and Revenue. A) True Answer: A

A) True

Increases in assets and expenses are both recorded with debits. A) True Answer: A

A) True

Increases in the owner's drawing account are recorded with debits. A) True Answer: A

A) True

Revenue is a component of owner's equity. A) True Answer: A

A) True

The amount of net income or net loss is needed to complete the statement of owner's equity. A) True Answer: A

A) True

The current system of accounting is called the double-entry system because a debit to one account is balanced by a credit to another account. A) True Answer: A

A) True

The entire process of analyzing, recording, and reporting business transactions is based on the fundamental accounting equation. A) True Answer: A

A) True

Utilities Expense would be debited when a company receives a bill for utilities that it will pay later. A) True Answer: A

A) True

When cash is paid to a creditor, the firm's liabilities decrease. A) True Answer: A

A) True

When preparing the trial balance, the total debits MUST equal the total credits. A) True Answer: A

A) True

The classification and normal balance of the accounts receivable account is: A) an asset with a debit balance. Answer: A

A) an asset with a debit balance.

When the owner withdraws cash for personal use, A) assets decrease and owner's equity decreases. Answer: A

A) assets decrease and owner's equity decreases.

The Statement of Owner's Equity is calculated as follows: A) beginning capital + net income - withdrawals + additional investments = ending capital Answer: A

A) beginning capital + net income - withdrawals + additional investments = ending capital

The corporations whose stock can be bought and sold on stock exchanges and in over-the-counter markets are referred to as A) publicly owned corporations. B) sole proprietorships. C) closely held corporations. D) privately owned corporations. Answer: A

A) publicly owned corporations.

Which of the following is NOT a type of information communicated by the financial statements? A) the types of products and services the business provides B) the equity, or value, of the business C) the amount of revenue earned by the business D) the amount spent on costs (expenses) of the business Answer: A

A) the types of products and services the business provides

A business purchases supplies on account. The entry to record this transaction is: B) Debit Supplies; Credit Accounts Payable Answer: B

B) Debit Supplies; Credit Accounts Payable

If the owner takes cash out of the business for personal use, the withdrawal should be recorded as an expense of the business. B) False Answer: B

B) False

If there is an excess of expenses over revenues, the excess represents a profit. B) False Answer: B

B) False

Increases in assets and revenue are both recorded with debits. B) False Answer: B

B) False

The expenses for a period are reported on the balance sheet. B) False Answer: B

B) False

When an owner invests assets in a business, the capital account is debited. B) False Answer: B

B) False

When cash is collected from accounts receivable, the total amount of assets increases. B) False Answer: B

B) False

When using the fundamental accounting equation, an accountant must make sure that total assets are always equal to total liabilities minus owner's equity. B) False Answer: B

B) False

Which statement below represents what GAAP stands for? A) Generally Approved Accounting Practices. B) General Accepted Accounting Principles. C) Generally Anticipated Accounting Principles. D) Generally Accepted Accounting Policies. Answer: B

B) General Accepted Accounting Principles.

Which of the following is not one of the formal financial statements that is made available to all users of the financial statements. B) Trial Balance Answer: B

B) Trial Balance

All financial statements submitted to the SEC by publicly owned corporations must include an auditor's report prepared by A) an internal auditor. B) an independent certified public accountant. C) the firm's managerial accountant. D) anyone in the accounting department. Answer: B

B) an independent certified public accountant.

When revenue is earned from charge account sales, the accountant: B) debits Accounts Receivable and credits a revenue account. Answer: B

B) debits Accounts Receivable and credits a revenue account.

A company issues periodic reports called A) audits. B) financial statements. C) tax returns. D) summaries. Answer: B

B) financial statements

Which of the following is NOT a type of information communicated by the financial statements? A) whether or not the business is profitable B) how long the business has been in operation C) how much the business owes others D) what types of assets business owns Answer: B

B) how long the business has been in operation

Ginger Yale Ice Company receives money from a customer on account. Recording this transaction will: B) increase Cash. Answer: B

B) increase Cash.

The financial activities of a business and the financial activities of the owners should be A) combined only if the owner wants them to be. B) kept totally and completely separate. C) combined in the firm's accounting records. D) reported in different parts of the firm's accounting records. Answer: B

B) kept totally and completely separate.

Amounts that a business must pay in the future are known as: B) liabilities. Answer: B

B) liabilities

The ending capital balance appears on what financial statement(s) B) statement of owner's equity and the balance sheet. Answer: B

B) statement of owner's equity and the balance sheet.

The balance sheet shows: B) the financial position of a business at a given time. Answer: B

B) the financial position of a business at a given time.

The income statement shows: B) the results of operations for a period of time. Answer: B

B) the results of operations for a period of time.

On a statement of owner's equity, beginning capital is $152,000, Drawing for the year is $65,000, and the ending capital is $191,000. What is the amount of Net Income for the year? C) $104,000 Answer: C *Ending Capital,$191,000+Drawing,$65,000-Beginning Capital,$152,000=Net Income, $104,000*

C) $104,000 *Ending Capital,$191,000+Drawing,$65,000-Beginning Capital,$152,000=Net Income, $104,000*

On a statement of owner's equity, beginning capital is $30,000, Net Income for the year is $11,000 and Drawing for the year is $6,000, the ending capital amount would be: C) $35,000. Answer: C Beginning Capital, $30,000 + Net Income, $11,000 - Drawing, $6,000 = Ending Capital, $35,000.

C) $35,000. Beginning Capital, $30,000 + Net Income, $11,000 - Drawing, $6,000 = Ending Capital, $35,000.

If during the year total assets increase by $75,000 and total liabilities decrease by $16,000, by how much did owner's equity increase/decrease? C) $91,000 increase Answer: C (75,000 + 16,000 = 91,000)

C) $91,000 increase (75,000 + 16,000 = 91,000)

A business receives a bill for utilities but decides to pay it next month. The business would record the receipt of the bill by: C) Debiting Utilities Expense; Crediting Accounts Payable Answer: C

C) Debiting Utilities Expense; Crediting Accounts Payable

If the income statement covered a six-month period ending on November 30, 2019, the third line of the income statement heading would read: C) Six-month Period Ended November 30, 2019. Answer: C

C) Six-month Period Ended November 30, 2019.

Which of the following is a true statement in regards to the International Accounting Standards Board? A) The IASB develops all accounting principles to be used in the United States B) The IASB has the authority to audit financial statements of all US corporations C) The IASB deals with issues caused by the lack of uniform accounting principles existing in different countries D) The IASB was created by the American Accounting Association Answer: C

C) The IASB deals with issues caused by the lack of uniform accounting principles existing in different countries

Owners are not personally responsible for the debts of the business if the form of business organization is a A) partnership. B) nonprofit organization. C) corporation. D) sole proprietorship Answer: C

C) corporation.

The Financial Accounting Standards Board is responsible for A) auditing financial statements. B) making recommendations to the Securities and Exchange Commission. C) developing generally accepted accounting principles. D) establishing accounting systems for businesses. Answer: C

C) developing generally accepted accounting principles.

Managerial accountants usually do which of the following? A) prepare and audit tax returns B) investigate companies for possible violations of law C) prepare internal reports for management D) audit financial statements Answer: C

C) prepare internal reports for management

The financial statement that is prepared first is: C) the income statement. Answer: C

C) the income statement.

The following are all government agencies except the A) IRS. B) FBI. C) SEC. D) AICPA. Answer: D

D) AICPA.

An independent accountant who is licensed by the state and provides accounting services to the public for a fee is a A) CMA. B) CIA. C) CFE. D) CPA. Answer: D

D) CPA.

If a business issued a check for $1,000 to pay for two months rent in advance, what is the effect on the firms' assets, liabilities and owner's equity. D) Cash will decrease Answer: D

D) Cash will decrease

Identify the form of business that is considered a separate legal entity. A) a sole proprietorship B) a partnership C) a limited liability partnership D) a corporation Answer: D

D) a corporation

The classification and normal balance of the salaries expense account is: D) an expense with a debit balance. Answer: D

D) an expense with a debit balance.

When equipment is purchased on credit, D) assets and liabilities increase. Answer: D

D) assets and liabilities increase.

When the owner writes a company check to pay the company's electric bill, D) assets and owner's equity decrease. Answer: D

D) assets and owner's equity decrease.

The owner's investment or equity in a business is called: D) capital. Answer: D

D) capital.

Which of the following represents the proper sequence for preparing the financial statements? D) income statement, statement of owner's equity, balance sheet Answer: D

D) income statement, statement of owner's equity, balance sheet

Identify the advantages of forming a business as an S Corporation. A) owner is personally responsible for debts of the business and earnings are reported directly on owner's personal tax return B) treated as a separate legal entity and owners avoid double taxation C) owners have limited liability and corporation's earnings are tax free D) owners avoid double taxation and owners have limited liability Answer: D

D) owners avoid double taxation and owners have limited liability

The "Net Income" or "Net Loss" is transferred from the income statement to the D) statement of owner's equity. Answer: D

D) statement of owner's equity.

Accounting Answer: The process of planning, recording, analyzing, and interpreting financial information of a business.

The process of planning, recording, analyzing, and interpreting financial information of a business.

Accounting Standards Codification Answer: The source of authoritative U.S. GAAP

The source of authoritative U.S. GAAP