Accounting Chapter 1 and 2

Rush company had net income of $240 and average total assets of $2,000. Its return assets is A. 12% B. 120% C. 80% D 8%

A. 12%

A corporation is: A. a business legally separate from its owners B. controlled by the FASB C. Not responsible for its own acts and own debts D. The same as limited liability partnership

A. Business legally separate from its owners

rule that requires financial statements to assume that the business will continue operating instead of being closed or sold is the: A. Going concern assumption B. Business entity assumption C. objectivity principle D. Measurement principle

A. Going concern assumption

A company is considering purchasing a parcel of land that was originally acquire by the seller for $85,000. While the land is currently offered for sale at $150,000 it is considered by the purchaser as easily being worth $140,000 and is finally purchased for 137,000, the land should be recorded in the purchasers books at: A. $95,000 B. $137,000 C. $138,000 D. $140,000

B. !37,000

The description of the relation between company's assets, liabilities and equity which is expressed as Assets=Liabilities + equity A. income statement equation B. Accounting equation C. Business equation D. Return on equity ratio

B. Accounting Equation

Saddleback Company paid off $30,000 of its accounts payable in cash. What would be the effects of this transaction on the accounting equation? A. Assets increase $ 30,000; equity increases $30,000 B. Assets decrease $30,000; liabilities increase 30,000 C. Assets decrease 30,000; liabilities increase 30,000 D. Liabilities decrease 30,00 equity increase 30,000

B. Assets decrease $30,000; liabilities increase 30,000

The accounting concept that requires every business to be accounted from separately from other business entities, including its owner or owners is known as the: A. Time period assumption B. Business entity assumption C. Going concern assumption D. Revenue recognition principle

B. Business entity assumption

Which of the following accounting principles prescribes that a company record its expense incurred to generate the revenue reported. A. going concern assumption B. Expense recognition principle C. Measurement principle D. business entity assumption

B. Expense recognition principle

The Securities and Exchange Commission has given the task of setting GAAP to the : A. APM B. FASB C. AAA D.AICPA E. IASB

B. FASB

A Proprietorship A. is also called a sole proprietorship B. Has unlimited liability for its owner C. Has an indefinite business life D. Is a separate legal entity from its owners

B. Has unlimited liability for its owner

If a company uses $1,300 of its cash to purchases supplies, the effect on the accounting equation would be: A. Asset increase $1,300 and liabilities decrease 1,300 B. One asset increases $1,300 and another asset decrease $1,300 causing no effect C. Assets decrease $1,300 and equity decreases $ 1,300

B. One asset increase $1,300 and another asset decrease 1,300 causing no effect

The primary objective of financial accounting is to: A. Serve the decision-making needs of internal users B. Provided accounting information that serves external users C. Monitor consumer needs, tastes, and price concerns D. Provide information on both costs and benefits of looking after products and services

B. Provided accounting information that serves external users

When expense exceed revenues, the result is called A. net assets B. negative equity C. Net loss D. Net income

C. Net loss

The rule that requires revenue to be recognized when goods or services provided to customers and at the amount expected to be received rom the customer is called: A. Going concern assumption B. Measurement Principle C. Revenue Recognition Principle D. Objectivity principle

C. Revenue Recognition Principle

Mayfly Company collected $42,000 cash on its accounts receivable. The effects of this transaction as reflected in the accounting equation are: A. total assets decrease and equity increases B. Both total assets and total liabilities decrease C. Total assets, Total liabilities, and total equity are unchanged D. Both total assets and equity are unchanged and liabilities increase

C. Total assets, total liabilities and total equity are unchanged

Which of the following factors is not a component of the fraud triangle A. opportunity B. Pressure C. Rationalization D. All of the above are components of the triangle

D

If a company receives 12,000 from a client for services provided, the effect on the accounting equation would be A.Assets decreases $12,000 and equity decreases 12,000 B. Assets increase 12,000 and liabilities decrease 12,000 C. Assets increase 12,000 and liabilities increase 12,000 D. Assets increase 12,000 and equity increases 12,000

D. Assets increase 12,000 and equity increases 12,000

If Dallas company billed a client for 10,000 consulting work complete the accounts receivable asset increase by 10,000 A. Accounts payable decreases 10,000 B. Accounts payable increases 10,000 C. cash increases 10,000 D. Revenue increases 10,000

D. Revenue increases 10,000

Revenue is properly recognized: A. when the customer makes an oder B. only if the transaction creates an account receivable C. When goods or services are provided to customers and at the amount expected to be received from the customer D. when goods or services are provided to customers and at the amount expected to received rom the customer

D. when goods or services are provided to customers and at the amount expected to received rom the customer

Which of the following decreases equity: A. investing activities B. Assets C. Accounts receivable D. Revenues E. Expenses

E. Expenses

Assets equation

Equity + Liabilities