Ch.1

Which of the following is false? a.Managerial accounting provides information that is useful for external users, such as creditors when deciding whether to lend money to the business. b.Managerial accounting gathers and reports information that is relevant to the decision-making needs of management. c.Managerial accounting information may include sensitive information not shared with those outside the organization. d.Managerial accounting provides timely information to help managers make daily decisions.

Managerial accounting provides information that is useful for external users, such as creditors when deciding whether to lend money to the business.

Marvin Company negotiated the purchase of a new building for $250,000. Marvin paid a $100,000 cash down payment and will pay off the remainder over seven years. What effect does this transaction have on the accounting equation? a.$150,000 net increase in assets and $150,000 increase in liabilities b.$100,000 net decrease in assets and $150,000 decrease in liabilities c.$250,000 net increase in assets and $150,000 increase in liabilities d.$100,000 net increase in assets and $100,000 increase in liabilities

a.$150,000 net increase in assets and $150,000 increase in liabilities

Liabilities and owner's equity of a company are $150,000 and $30,000, respectively. Determine assets using the accounting equation. a.$180,000 b.$150,000 c.$30,000 d.$120,000

a.$180,000

Clayton Company purchased a new welder for $3,500. Clayton paid $1,000 cash down and will pay the remainder in 60 days. What effect does this transaction have on the accounting equation?

a.$2,500 net increase in assets and $2,500 increase in liabilities

Ramos Inc. has total assets of $1,000 and total liabilities of $450 on December 31, 20Y6. Assume that assets increased by $130 and liabilities decreased by $25 during 20Y7. What would owner's equity be as of December 31, 20Y7? a.$705 b.$1,295 c.$550 d.$655

a.$705

The numerator in the calculation of the ratio of liabilities to owner's equity is a.Total Liabilities. b.Total Assets. c.Total Owner's Equity. d.Total Liabilities minus Total Owner's Equity.

a.Total Liabilities.

The denominator in the calculation of the ratio of liabilities to owner's equity is a.Total Owner's Equity. b.Total Assets. c.Total Liabilities. d.Total Liabilities minus Total Owner's Equity.

a.Total Owner's Equity.

Four companies and their ratio of liabilities to owner's equity are as follows:Fred Company 0.88Yabba Company 0.44Dabba Company 1.22Doo Company 0.66To which of the four companies would a supplier be most eager to extend credit? a.Yabba Company b.Fred Company c.Doo Company d.Dabba Company

a.Yabba Company

Which financial statement reports financial data based on the matching concept? a.income statement b.balance sheet c.statement of cash flows d.statement of owner's equity

a.income statement

The statement that reports net income or loss for a certain period in time is the a.income statement. b.statement of cash flows. c.balance sheet. d.statement of owner's equity.

a.income statement.

Cool Taste Company purchased $1,500 of supplies with cash. What effect does this transaction have on the accounting equation? a.no overall effect on the components of the accounting equation b.$1,500 increase in assets and $1,500 increase in liabilities c.$1,500 decrease in assets and $1,500 decrease in owner's equity d.$1,500 increase in assets and $1,500 increase in owner's equity

a.no overall effect on the components of the accounting equation

Assets are the a.resources owned by the business. b.personal property of the owners. c.rights of owners over the business. d.rights of creditors over the business.

a.resources owned by the business.

All of the following are incorrect as to the rights of creditors regarding a business's assets except: a.the rights of creditors come before the rights of stockholders. b.the rights of creditors come after the rights of owners. c.the rights of stockholders precede the rights of creditors. d.the rights of creditors and the rights of owners are equal.

a.the rights of creditors come before the rights of stockholders

Assets and liabilities of a company are $150,000 and $30,000, respectively. Determine owner's equity using the accounting equation.

b.$120,000

Given the following information, determine net income. The capital balance on January 1, 20Y6, equals $25,000; investments and withdrawals during 20Y6 total $53,000 and $28,350, respectively; and the capital balance at December 31, 20Y6, equals $64,850. a.$41,500 b.$15,200 c.$43,550 d.None of these choices are correct.

b.$15,200

As of May 31, Mallard Company reported the following on its financial statements: Total assets$300,000 Total liabilities$200,000 Total owner's equity$100,000 Mallard's ratio of liabilities to owner's equity is a.0.50. b.2.00. c.0.33. d.0.67.

b.2.00.

__________ sell products purchased from other businesses. a.Manufacturing businesses b.Merchandising businesses c.Service businesses d.Enterprise businesses

b.Merchandising businesses

The following data were taken from Reynolds Company's balance sheet: Dec. 31, 20Y7Dec. 31, 20Y6Total liabilities$240,000$210,000Total owner's equity$160,000$150,000Which of the following best explains the change in creditors' risk from 20Y6 to 20Y7? a.Risk did not change. b.Risk increased. c.Risk decreased. d.Not enough information is provided to answer this question.

b.Risk increased.

Included on the balance sheet are

b.assets, liabilities, and owner's equity.

Assets of a company may include a.personal property of the owners. b.cash, inventory, buildings, and equipment. c.the rights of creditors. d.All of these choices are correct.

b.cash, inventory, buildings, and equipment.

Money earned by a business for selling goods or services to its customers represents

b.revenues

Each of the following transactions affects owner's equity except a.a sale on account. b.the purchase of land with cash. c.a withdrawal of cash by the owner. d.an investment by the owner.

b.the purchase of land with cash.

Liabilities are a.the rights of customers. b.the rights of creditors. c.the rights of owners. d.None of these choices are correct.

b.the rights of creditors.

Corporations refer to total owner's equity as a.total assets. b.total stockholders' equity. c.total liabilities. d.total revenue.

b.total stockholders' equity.

Given the following information, determine the amount of cash on the balance sheet, assuming that the company has only three assets. Liabilities equal $3,050; owner's equity equals $25,000; supplies equal $1,500; and land equals $22,500. a.$2,050 b.$7,050 c.$4,050 d.None of these choices are correct.

c.$4,050

Equipment with a sales price of $100,000 is purchased at a discount of 10% by Aaron Company. At what value should the equipment be recorded in Aaron Company's records? a.$10,000 b.$100,000 c.$90,000 d.None of these choices are correct.

c.$90,000

Which of the following does not represent the accounting equation? a.Assets - Liabilities = Owner's Equity b.Assets = Liabilities + Owner's Equity c.Assets + Owner's Equity = Liabilities d.Assets - Owner's Equity = Liabilities

c.Assets + Owner's Equity = Liabilities

Which of the following statements about GAAP is not true? a.GAAP is the principles and concepts that the management of a company uses to record and report its financial information. b.GAAP is a standard set of principles that allows for the comparison of financial performance. c.GAAP allows a company's management to record and report data as it sees fit. d.GAAP impacts how companies report and what they report.

c.GAAP allows a company's management to record and report data as it sees fit.

Which of the following concepts requires that economic data be recorded in dollars in the United States? a.Cost concept b.Business entity concept c.Unit of measure concept d.Objectivity concept

c.Unit of measure concept

The statement that provides the financial position of a company as of a specific date is the a.income statement. b.statement of cash flows. c.balance sheet. d.statement of owner's equity.

c.balance sheet

All business transactions can be stated in terms of a.changes in owner's equity. b.changes in cash. c.changes in the elements of the accounting equation. d.None of these choices are correct.

c.changes in the elements of the accounting equation.

The area of accounting concerned with providing internal users with information is called a.public accounting. b.internal accounting. c.managerial accounting. d.financial accounting.

c.managerial accounting.

The ratio of liabilities to owner's equity is a tool used to assess a company's ability to a.improve its operating performance. b.beat its competitors. c.pay its creditors. d.All of these choices are correct.

c.pay its creditors.

The amounts needed to calculate the ratio of liabilities to owner's equity can be found on

c.the balance sheet.

On August 1, Harvey Company offered to pay $13,000 for equipment that was advertised as being sold for $19,000 by Carrone Company. The equipment had a retail value of $23,000 on that day. On August 10, Carrone Company offered to sell the equipment for $14,700, and Harvey Company agreed to buy at that price. At what value will Harvey Company record the equipment on the books? a.$19,000 b.$23,000 c.$13,000 d.$14,700

d.$14,700

Cool Taste Company recorded $5,000 in sales on account for the week. What effect does this transaction have on the accounting equation? a.$5,000 increase in assets and $5,000 decrease in owner's equity b.$5,000 increase in assets and $5,000 increase in liabilities c.no effect on the accounting equation d.$5,000 increase in assets and $5,000 increase in owner's equity

d.$5,000 increase in assets and $5,000 increase in owner's equity

Which of the following statements is not true? a.The two sides of the accounting equation are always equal. b.The effect of every transaction is an increase or a decrease in one or more of the accounting equation elements (assets, liabilities, and owner's equity). c.The owner's equity is increased by amounts invested by the owner and is decreased by withdrawals by the owner. d.All of these statements are true.

d.All of these statements are true.

Emily owns three businesses: a dry cleaner, a market, and a candy store. The dry cleaner has revenue of $5,000; the market has revenue of $10,000; and the candy store has revenue of $7,000. Under the business entity concept, Emily should record

d.None of these choices are correct.

Paying an amount on account reduces a.an expense. b.owner's equity. c.net income. d.the amount owed on a liability.

d.the amount owed on a liability.

Owner's equity can best be defined as

the rights of owners.