2401 Final Exam

A company's balance sheet shows: cash $22,000, account receivable $16,000, office equipment $50,000, and accounts payable $17,000. What is the amount of stockholder's equity? A) $17,000 B) $29,000 C) $71,000 D) $88,000 E) $105,000

C. $71,000

The balance sheet equation is: A) Revenues minus expenses equal net income. B) Debits equal credits. C) The bookkeeping phase of accounting. D) Another name for the accounting equation. E) Assets minus liabilities and equity.

D. Another name for the accounting equation

Determine the net income of a company for which the following information is available for the month of May. Employee salaries expense...........$180,000 Interest expense..............................$10,000 Rent expense..................$20,000 Consulting revenue.........................$400,000 A) $190,000 B) $210,000 C) $230,000 D) $610,000

A. $190,000

Resources owned or controlled by a company that are expected to yield benefits are: A) Assets B) Revenues C) Liabilities D) Owner's equity E) Expenses

A. Assets

If the liabilities of a company increased $74,000 during a period of time and equity in the company decreased $19,000 during the same period, what was the effect on the assets? A) Assets would have increased $55,000 B) Assets would have decreased $55,000 C) Assets would have increase $19,000 D) Assets would have decreased $19,000 E) None of the above

A. Assets would have increased $55,000

A financial statement providing information that helps users understand a company's financial status, and which lists the types and amounts of assets, liabilities, and equity as of a specific date, is called a(n): A) Balance sheet. B) Income statement. C) Statement of cash flows. D) Statement of owner's equity. E) Financial Status Statement.

A. Balance sheet

Accounts payable appear on which of the following statements? A) Balance sheet. B) Income statement. C) Statement of owner's equity. D) Statement of cash flows. E) Transaction statement.

A. Balance sheet

Distributions of earnings by a corporation to its stockholders are called: A) Dividends. B) Expenses. C) Assets. D) Retained Earnings. E) Net Income.

A. Dividends

If the assets of a business increased $89,000 during a period of time and its liabilities increased $67,000 during the same period, equity in the business must have: A) Increased $22,000 B) Decreased $22,000 C) Increased $89,000 D) Decreased $156,000 E) Increased $156,000

A. Increased $22,000

A corporation: A) Is a legal entity separate and distinct from its owners. B) Is controlled by the FASB. C) Has shareholders who have unlimited liability for the acts for the acts of the corporation. D) Is the same as a limited liability partnership. E) All of the above.

A. Is a legal entity separate and distinct from its owners

Net income: A) Occurs when revenues exceed expenses. B) Is the same as revenue. C) Equals resources owned or controlled by a company. D) Occurs when expenses exceed assets. E) Represents assets taken from a company for an owner's personal use.

A. Occurs when revenues exceed expenses

If a parcel of land that was originally purchased for $85,000 is offered for sale at $150,000, is assessed for tax purposes at $95,000, is recognized by its purchasers as easily being worth $140,000, and is purchased for $137,000, the land should be recorded in the purchaser's books at: A) $95,000 B) $137,000 C) $138,500 D) $140,000 E) $150,000

B. $137,000

If assets are $365,000 and equity is $120,000, then liabilities are: A) $120,000 B) $245,000 C) $365,000 D) $485,000 E) $610,000

B. $245,000

If assets are $99,000 and liabilities are $32,000, then equity equals: A) $32,000 B) $67,000 C) $99,000 D) $131,000 E) $198,000

B. $67,000

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

B. Accounting equation

Assets created by selling goods and services on credit are: A) Accounts payable B) accounts receivable C) Liabilities D) Expenses E) Equity

B. Accounts receivable

Photometer 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: $30,000 increase; liabilities: no effects; equity: $30,000 increase B) Assets: $30,000 decrease; liabilities: $30,000 decrease; equity: no effects C) Assets: $30,000 decrease; liabilities: $30,000 increase; equity: no effects D) Assets: no effects; liabilities: $30,000 decrease; equity: $30,000 increase E) Assets: $30,000 decrease; liabilities: no effects; equity: $30,000 decrease

B. Assets: $30,000 decrease; liabilities: $30,000 decrease; equity: no effects

Net income is: A) Assets minus liabilities. B) The excess of revenues over expenses. C) An asset. D) The same as revenue. E) The excess of expenses over equity.

B. The excess of revenues over expenses

Use the following information as of December 31 to determine equity. Liabilities................$141,000 Cash.........................$57,000 Equipment.............$206,000 Buildings.................$175,000 A) $57,000 B) $141,000 C) $297,000 D) $438,000 E) $579,000

C. $297,000

The assets of a company total $700,000; the liabilities, $200,000. What are the claims of the owners? A) $900,000 B) $700,000 C) $500,000 D) $200,000 E) It is impossible to determine unless the amount of this owner's investment is known.

C. $500,000

Expense: A) Increase equity. B) Are gross increases in equity from a company's earning activity. C) Are the costs of assets or services use to earn revenues. D) Occur when equity exceeds revenue. E) Are creditors' claims on assets.

C. Are the costs of assets or services use to earn revenues

The income statement reports all of the following except: A) Revenues earned by a business. B) Expenses incurred by a business. C) Assets owned by a business. D) Net income or loss earned by a business. E) The time period over which the earnings occurred.

C. Assets owned by a business.

The excess of expenses over revenues for a period is: A) Net assets. B) Equity. C) Net loss. D) Net income. E) A liability.

C. Net loss

A balance sheet lists: A) The types and amounts of the revenues and expenses of a business. B) Only the information about what happened to equity during a time period. C) The types and amounts of assets, liabilities, and equity of a business as of a specific date. D) The inflows and outflows of cash during the period. E) The assets and liabilities of a company but not the owner's equity.

C. The types and amounts of assets, liabilities, and equity of a business as of a specific date.

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

C. Total assets and equity decrease

On June 30 of the current year, the assets and liabilities of Phoenix Phildell are as follows: Cash $20,500; Accounts Receivable, $7,250; Supplies, $650; Equipment, $12,000; Accounts Payable, $9,300. What is the amount of stockholders' equity as of July 1 of the current year? A) $8,300 B) $13,050 C) $20,500 D) $31,100 E) $40,400

D. $31,100

If equity is $300,000 and liabilities are $192,000, then assets equal: A) $108,000 B) $192,000 C) $300,000 D) $492,000 E) $792,000

D. $492,000

How would the accounting equation of Boston Company be affected by the billing of a client for $10,000 of consulting work completed? A) +$10,000 accounts receivable, -$10,000 accounts payable B) +$10,000 accounts receivable, +$10,000 accounts payable C) +$10,000 accounts receivable, +$10,000 cash D) +$10,000 accounts receivable, +$10,000 revenue E) +$10,000 accounts receivable, -$10,000 revenue

D. +$10,000 accounts receivable, +$10,000 revenue

Assets = Liabilities + Equity is known as the: A) Income statement equation. B) Cost principle. C) Objectivity principle. D) Accounting equation. E) Transaction principle.

D. Accounting equation

The financial statement that reports whether the business earned a profit and also lists the types and amounts of the revenues and expenses is called: A) A balance sheet. B) A statement of owner's equity. C) A statement of cash flows. D) An income statement E) A statement of financial position.

D. An income statement

If the liabilities of a business increased $75,000 during a period of time and the owner's equity in the business decrease $30,000 during the same period, the assets of the business must have: A) Decreased $105,000 B) Decreased $45,000 C) Increased $30,000 D) Increased $45,000 E) Increased $105,000

D. Increased $45,000

Net Income: A) Decreases equity. B) Represents the amount of assets owners put into a business C) Equals assets minus liabilities D) Is the excess of revenues over expenses. E) Represents owners' claims against assets.

D. Is the excess of revenues over expenses

Revenues are: A) The same as net income. B) The excess of expenses over assets. C) Resources owned or controlled by a company. D) The gross increase in equity from a company's earning activities. E) The costs of assets or services used.

D. The gross increase in equity from a company's earning activities

The rules adopted by the accounting profession as guides in preparing financial statements are: A) Comprised of both general and specific principles. B) Known as generally accepted accounting principles. C) Abbreviated as GAAP. D) Intended to make information in financial statements relevant, reliable, and comparable. E) All of the above.

E. All of the above

Which of the following statements is true about assets? A) They are economic resources owned or controlled by the business. B) They are expected to provide future benefits to the business. C) They appear on the balance sheet. D) Claims on them are shared between creditors and owners. E) All of the above.

E. All of the above

Zion Company has assets of $500,000, liabilities of $250,000 and equity of $250,000. It buys office equipment on credit for $75,000. The effects of this transaction include: A) Assets increase by $75,000 and expenses increase by $75,000 B) Assets increase by $75,000 and expenses decrease by $75,000 C) Liabilities increase by $75,000 and expenses decrease by $75,000 D) Assets decrease by $75,000 and expenses decrease by $75,000 E) Assets increase by $75,000 and liabilities increase by $75,000

E. Assets increase by $75,000 and liabilities increase by $75,000

If a company paid $38,000 of its accounts payable in cash, what was the effect on the assets, liabilities and equity? A) Assets would decrease $38,000, liabilities would decrease $38,000 and equity would decrease $38,000 B) Assets would decrease $38,000, liabilities would decrease $38,000 and equity would increase $38,000 C) Assets would decrease $38,000, liabilities would decrease $42,000 and equity would not change D) There would be no effect on the accounts because the accounts are affected by the same amount. E) None of the above.

E. None of the above