Intuit Practice Exams

Which of the following statements best describes the difference between assets and liabilities?

Assets are what a company owns, and liabilities are what a company owes

A company withdraws $15,000 of cash from the business for personal use. How does this transaction affect the accounting equation?

Assets decrease by $15,000 and equity decreases by $15,000

The owner of a small nail salon invests $10,000 of their own cash in the business. How does this transaction affect the accounting equation?

Assets increase by $10,000 and equity increases by $10,000

A fitness company issues 500 shares of common stock for $10 each. How does this transaction affect the accounting equation?

Assets increase by $5,000 and equity increases by $5,000

Paying interest on a loan

Decrease assets, decrease equity

Which of the following are considered non-current liabilities?

-Monthly lease payment on a 10-year lease -Employee pension -Bonds with a maturity of 5 years

What is the term for the money or assets given to the business by the owner or partners?

Capital contributions

Which of the following forms is used by businesses to report payroll information on salaries, wags, tips, and taxes to the federal government quarterly?

Form 941

Issuing shares of common stock

Increase assets, increase equity

Borrowing money from a bank

Increase assets, increase liabilities

Which of the following is an example of a non-current liability?

Mortgage payable

Which of the following statements is true about exempt and non-exempt employees under the Fair Labor Standards Act (FLSA)?

Non-exempt employees are subject to overtime pay benefits, while exempt employees are not

Which type of business has no owners, only founders or board members, and has net assets instead of equity?

Non-profit organization

Which of the following forms is used by independent contractors to provide their tax identification number (TIN) to the businesses that hire them?

W-9

A manufacturing company needs to purchase a piece of new equipment for $50,000. In June, the company obtains a 5-year loan from the local credit union with an interest rate of 6% per annum, compounded monthly. The loan requires equal monthly payments of $966.64, starting from the end of the first month. The company records the loan using the amortization method. What is the journal entry that the company should make at the end of the first month to record the loan payment?

Debit interest expense $246.58, debit notes payable $720.06, credit cash $966.64

Johan runs a small woodworking business and sells his products to customers on credit. He also buys wood, paint, varnish, and other supplies from various suppliers on credit. At the end of the month, he records his transaction in his accounting system. Which of the following transactions will increase his liabilities?

He buys $800 worth of wood from a new supplier on credit