ACCT Module 1 Quiz

Match the financial statement that reports each of the following.

Assets-- Balance sheet Net income-- Income statement Investing Activities-- Statement of Cash Flows

Profits earned by a company that have been paid to shareholders are called ______.

Dividends

True or false: If an asset increased, it must be the case that either a liability or shareholders' equity account also increased by the same amount.

False

Expenses appear on the ______.

Income statement

Net income=

Operating Income - Interest Expense

The statement of cash flows reports the ______.

cash collected and cash paid during the period

Net Change in cash=

cash from operating + cash from investing + cash from financing

The statement of shareholders' equity reports the ______. -changes that occurred in shareholders' equity during the accounting period -cash collected and cash paid during the period -economic resources, obligations, and net worth -revenues minus expenses for the accounting period

changes that occurred in shareholders' equity during the accounting period

Enterprise-wide resource planning systems (ERP) ______.

includes both financial and non-financial information for all areas of the business

The general ledger system ______.

includes the accounting part of the integrated information system

Businesses earn profits by ______. (Select all that apply.) A corporation earns profits for its shareholders by ______. (Select all that apply.) -borrowing from creditors -selling goods or services at more than they cost -issuing stock to owners for cash -having revenues greater than expenses

selling goods or services at more than they cost having revenues greater than expenses

Liabilities are the same as

"creditors' claims"

Financing Activity examples

-Issued a note payable -Issued stock -Paid a $100 dividend to its shareholders. -Repaid a $5,000 loan to the bank (creditor). -Received $40,000 from its owners in exchange for stock.

Which of the following are true about an accounting system? (Select all that apply.) -It provides access to private corporations' accounting data, -but not publicly-traded corporations. -It captures information about the operating, investing and financing activities of a company. -It reports results of business activities for publicly-traded corporations, but not private corporations. -Its purpose is to analyze, record, and summarize business activities.

-It captures information about the operating, investing and financing activities of a company. -Its purpose is to analyze, record, and summarize business activities.

Indicate the form of organization with which each of the following characteristics is associated. More than one form of organization may apply to some of them. The ownership is represented by shares of stock. The business exposes the owner(s) to unlimited liability

-The ownership is represented by shares of stock-- Corporation -The business exposes the owner(s) to unlimited liability-- Sole Proprietorship/Partnership

nterest Expense on Notes Payable is recorded with an increase to Interest Expense, which decreases shareholders' equity, and ______. (Select all that are true.) -a decrease to Interest Expense, a liability, if the interest is owed -an increase to Interest Payable, a liability, if the interest is owed -an increase to Cash, an asset, if the interest is owed -an increase to Interest Payable, which decreases shareholders' equity, if the interest is paid -a decrease to Cash, an asset, if the interest is paid

-an increase to Interest Payable, a liability, if the interest is owed -a decrease to Cash, an asset, if the interest is paid

Depreciating a noncurrent asset, such as Equipment, over its useful life records the ______. (Select all that apply.) -getting of Cash -giving an IOU called Accumulated Depreciation -getting service, Accumulated Depreciation -use of Cash -getting use of or service from an asset, Depreciation Expense -giving up some of the asset's usefulness, Accumulated Depreciation

-getting use of or service from an asset, Depreciation Expense -giving up some of the asset's usefulness, Accumulated Depreciation

Show the effect of the transaction: Hot Diggity Dog, Inc., paid $10 of May's interest on the note payable, plus it paid off the $2,000 note payable.

Assets: (2,010) Cash Liabilities: (2,000) Note Payable Stock: No effect Retained Earnings: (10) Interest Expense

Show the effect of the transaction: Wursthaus, Inc., paid a $30 cash dividend to its owners.

Assets: (30) cash Retained Earnings: (30) dividends

Show the effect of the transaction: Wursthaus, Inc., paid its employee, Tom, $400 for the work he performed in January.

Assets: (400 Cash) Liabilities: No effect Stock: No effect Retained Earnings: (400 wage expense)

Show the effect of the transaction: Cap & Trade, Inc., sold 300 baseball caps that cost $6 each to customers for $3,000 cash.

Assets: 3,000 Cash; (1,800) Inventory Liabilities: No effect SE: 3,000 Sales Revenue; (1,800) Cost of Goods Sold

Which financial statement reports the noncurrent assets owned?

Balance Sheet

Which one of the following financial statements reports information about a company at a single point in time?

Balance Sheet

Which of the following are line items found on the balance sheet? (Select all that apply.) Sales Revenue Cash Interest Expense Equipment Stock

Cash equipment stock

Operating Income=

Gross Profit - Operating Expenses

Which financial statement reports how much was sold during the period?

Income Statement

If a company borrows money by issuing a note payable at the beginning of the accounting period, as a result, it will report ________.

Interest Expense on the income statement

On December 1, Burrows, Inc., borrowed money from a bank. The bank requires Burrows to pay the interest and the principal at the end of six months. As a result, the year-ended December 31 financial statements will report ______. (Select all that apply.)

Interest Expense on the income statement Notes Payable on the balance sheet

Identify what a company gives and gets when it invests in equipment by paying cash and signing a two-year note. (Select all that apply It gets cash. It gets a promissory note. It gets equipment. It gives equipment. It gets shares. It gives shares. It gives cash. It gives a promissory note.

It gets equipment. It gives cash. It gives a promissory note.

Match each item below with the appropriate description using each one only once. Manufacturer Merchandiser Service Firm

Manufacturer-- produces goods Merchandiser-- purchases goods from a wholesaler Service Firm-- consulting company

Retained Earnings appears on the ______. Income Statement More than one of these statements Statement of Cash Flows Statement of Shareholders' Equity Balance Sheet

More than one of these statements

Select all of the statements that are true. Net Income equals Revenues minus Expenses. Net Losses decrease Retained Earnings. When Revenues are less than Expenses, a Net Loss is reported. Net Income increases Retained Earnings. Net Income decreases Retained Earnings. Net Income equals Assets minus Liabilities.

Net Income equals Revenues minus Expenses. Net Losses decrease Retained Earnings. When Revenues are less than Expenses, a Net Loss is reported. Net Income increases Retained Earnings.

Signing a contract and promising to pay has what kind of an effect on an accounting equation?

No effect

What is the effect on total assets when a company purchases a cash register for a cash payment of $1,200?

No effect on assets. Because assets increase for equipment-- $1,200 and decrease again because we paid cash--- ($1,200).

Operating Activity examples

Paid $500 to its employees. Paid $100 for advertising in the local paper. collecting cash from customers Paid $200 for supplies to be used on customers over the next two months. Received $500 from its customers.

Which of the following will result in a decrease to assets and shareholders' equity? (Select all that apply.) Payment for interest incurred during the period Payment of land purchased during the period Payment of wages incurred during the period Payment of utilities incurred during the period

Payment for interest incurred during the period Payment of wages incurred during the period Payment of utilities incurred during the period

Investing activities examples

Purchased a barber's chair and sink for $35,000. Purchased $100,000 of land.

Income Statement

Reports a summary of all revenues minus all expenses during a period

Statement of Cash Flows

Reports a summary of cash collected and cash paid during a period

Notes (or footnotes)

Reports additional information needed to better understand the financial statements

Balance Sheet

Reports the assets, liabilities and shareholders' equity of a company at a specific point in time

Statement of Shareholders' Equity

Reports the changes that took place in the amount of the owners' investment during a period

Gross Profit=

Sales Revenue - Cost of Goods Sold

Pete Zah invested $30,000 in Last Piece, Inc., in exchange for its stock. Last Piece now has ______.

Stock

Which of the following are found on the Statement of Shareholders' Equity? (Select all that apply.) Stock Land Notes Payable Retained Earnings

Stock Retained Earnings

Match the financial statement that reports each of the following. Supplies Supplies Expense Cash Paid for Supplies

Supplies-- Balance sheet Supplies Expense-- Income Statement Cash Paid for Supplies-- Statement of Cash Flows

Why do businesses exist? To maximize profits To maximize expenses To maximize legal liability To maximize owners' wealth

To maximize profits To maximize owners' wealth

What is the effect on total liabilities when a company buys land in exchange for a 20-year note payable?

Total liabilities will increase.

Liabilities are ______

amounts that the company owes to creditors

Financial statements can be prepared ______. (Select all that apply.)

annually, quarterly, and monthly

The entry to record the issuance of stock causes an increase in _______. assets and shareholders' equity assets and decrease in shareholders' equity assets and liabilities

assets and shareholders' equity

Ending Retained Earnings=

beginning retained earnings + net income - dividends

The expensing of a noncurrent asset, such as Equipment, over its useful life causes a(n) ______.

decrease in shareholders' equity decrease in assets

The expensing of a noncurrent asset, such as Equipment, over its useful life is called ______.

depreciation

Revenues are ______.

earned by delivering goods or services to customers

A chart of accounts is a ______. list of account titles used by companies so that transaction items are consistently named list of daily transactions another name for the balance sheet summary of each account's activity and its ending balance

list of account titles used by companies so that transaction items are consistently named

Walmart is primarily a ______ service firm manufacturing company merchandising company

merchandising company

Dividends are ______. (Select all that apply.) -not an expense incurred to earn revenue -company profits that are paid to shareholders -amounts owed to creditors -required amounts owed to shareholders -reported on the Income Statement

not an expense incurred to earn revenue company profits that are paid to shareholders

An asset is an amount ______, while a liability is an amount ______.

owned; owed

Net Income equals _______.

revenues minus expenses

The heading of an income statement should include ______. (Select all that apply.)

the accounting period covered by the statement the title "Income Statement" the name of the business