Principles of Accounting 160

On December 31 of the current year, a company reported the following items on its balance sheet: Cash $10,500; Accounts receivable $5,200; Supplies $2,300; Land $102,400; Accounts payable $12,000; Notes payable $56,000. What amount should be reported as owner's equity?

A) $108,400 *B) $52,400 (O.E=A-L)* C) $120,400 D) $188,400

A company reported revenue of $100,000 and a net loss of $12,000. What amount was reported as expenses?

*A) $112,000* B) $12,000 C) $88,000 D) $100,000

Which of the following is an example of a liability account?

*A) Accounts Payable* B) Supplies C) Accounts Receivable D) Land

A company pays $2,000 cash on account to a creditor. Which of the following journal entry is correct to record this transaction?

*A) Debit accounts payable $2,000; credit cash $2,000.* B) Debit cash $2,000; credit accounts payable $2,000. C) Debit owner's equity $2,000; credit cash $2,000. D) Debit supplies $2,000; credit cash $2,000.

The primary responsibility for setting the rules of accounting rests with the:

*A) Financial Accounting Standards Board (FASB).* B) Generally Accepted Accounting Principles (GAAP). C) Security and Exchange Commission (SEC). D) American Institute of CPAs (AICPA).

Notes payable is an example of a(n):

*A) Liability.* B) Revenue. C) Asset. D) Expense.

All balance sheet accounts start the period with the ending balances from the prior period.

*TRUE* / FALSE

An increase in assets is shown on the left side of the T-account, which is referred to as a debit?

*TRUE* / FALSE

The cost principle does not allow increases in asset values.

*TRUE* / FALSE

A company purchases land for $45,000 cash. What is the effect on the accounting equation?

A) Assets increase $45,000; no effect on liabilities; equity increases $45,000. B) Assets decrease $45,000; liabilities decrease $45,000; no effect on equity. *C) No effect on the accounting equation because assets increase and decrease by the same amount.* D) Assets increase $45,000; liabilities increase $45,000; no effect on equity.

Which one of the following accounts normally has a credit balance?

A) Cash B) Land *C) Fees earned* D) Wage expense

Mendel Co. paid $8,000 cash for land. Which of the following is the correct journal entry to record this transaction?

A) Debit cash $8,000; credit land $8,000. *B) Debit land $8,000; credit cash $8,000.* C) Debit accounts payable $8,000; credit land $8,000. D) Debit land $8,000; credit accounts receivable $8,000.

A credit is used to record a(n):

A) Decrease in a liability account. B) Increase in an asset account. C) Decrease in an owner's equity account. *D) Increase in a liability account.*

The governmental agency that supervises the work of the Financial Accounting Standards Board (FASB) is known as the:

A) Generally Accepted Accounting Principles (GAAP). *B) Securities and Exchange Commission (SEC).* C) Public Company Accounting Oversight Board (PCAOB). D) American Institute of CPAs (AICPA).

A company purchases $800 worth of supplies on account. What is one effect on the accounting equation?

A) Increase of $800 to owners' equity. B) Decrease of $800 to liabilities. *C) Increase of $800 to assets.* D) No effect on the equation since the purchase was on account

Sues Bookstore paid $2,200 for supplies. Which of the following will occur?

A) Liabilities increase by $2,200. B) Expenses increase by $2,200. C) Assets increase by $2,200. *D) No effect on the accounting equation.*

Inventory is an example of a(n):

A) Liability. B) Revenue. C) Expense. *D) Asset.*

The income statement reports:

A) Revenues, assets and expenses. *B) Net income or loss for the period.* C) Only sales amounts paid in cash. D) The financial position on a particular date.

Which financial statement links together the Income Statement and the Balance Sheet?

A) Statement of cash flows *B) Statement of owner's equity* C) Statement of operations D) Statement of financial position

Which of the following is not a required element of the title on a financial statement?

A) The company's name B) The reporting date or period C) The name of the financial statement *D) The preparer's name*

Which of the following statements is false?

A) The normal balance in accounts receivable is a debit. B) The normal balance in accounts payable is a credit. *C) The normal balance in owner's equity is a debit.* D) The normal balance in owner's equity is a credit.

Asset accounts are increased with a credit.

TRUE / *FALSE*

Debiting a liability account increase it.

TRUE / *FALSE*

On a balance sheet, assets are listed in alphabetical order.

TRUE / *FALSE*

The correct order to prepare the financial statements is: 1) Balance Sheet, 2) Income Statement, 3) Statement of Cash Flows, and 4) Statement of Owner's Equity.

TRUE / *FALSE*

The difference between assets and liabilities is called profit.

TRUE / *FALSE*

Wages payable is an example of an expense.

TRUE / *FALSE*

When a company buys supplies, expenses increase.

TRUE / *FALSE*