Accounting Chap. 1 & 2

Ten years ago a corporation purchased a building for $100,000. At that time, the corporation felt that the business was worth $125,000. The current market value of the business is $500,000. The building has been assessed at $475,000 for property tax purposes. At which amount should the corporation record the building in its accounting records? A) $100,000 B) $125,000 C) $475,000 D) $500,000

A) $100,000

Performed services for $4,000 on account; received cash on account, $8,000; paid $900 for repair expense; paid $1,800 to a supplier that it owed from the previous month. What is the combined effect on Cash of the June transactions? A) $5,300 increase B) $5,300 decrease C) $8,000 increase D) $2,700 decrease

A) $5,300 increase, Explanation: A) Cash = $8,000 - $900 - $1,800 = $5,300 increase

________ represent the right to receive cash in the future from customers for goods sold or for services performed. A) Accounts Receivable B) Accounts Payable C) Equity D) Expenses

A) Accounts Receivable

19) A business collects cash from a customer for services that were performed one month earlier. Which of the following accounts is debited? A) Cash B) Accounts Receivable C) Service Revenue D) Accounts Payable

A) Cash

5.) Which of the following accounts decreases with a credit? A) Cash B) Owner, Capital C) Accounts Payable D) Notes Payable

A) Cash

Which of the following appears on both the statement of owner's equity and the balance sheet? A) Ending capital account B) Total assets C) Total revenues D) Net income

A) Ending capital account

Which of the following organizations is responsible for the creation and governance of accounting standards in the United States? A) Financial Accounting Standards Board B) Institute of Management Accountants C) American Institute of Certified Public Accountants D) Securities and Exchange Commission

A) Financial Accounting Standards Board

7) Which of the following statements is true of the Owner's Capital account? A) It is an equity account that has a normal credit balance. B) It is a liability account that has a normal credit balance. C) It is a liability account that has a normal debit balance. D) It is an equity account that has a normal debit balance.

A) It is an equity account that has a normal credit balance.

Which of the following is a major reason why corporate ownership is popular in the United States? A) Stockholders have limited liability for the debts of the corporation. B) Most corporations are small- or medium-sized. C) The life of a corporation is limited by the death of the owner. D) A corporation is usually managed by the owners.

A) Stockholders have limited liability for the debts of the corporation.

York Casting Services started the year with total assets of $120,000 and total liabilities of $60,000. The revenues and the expenses for the year amounted to $150,000 and $50,000, respectively. During the year, the owner did not make any additional contributions, but had withdrawals of $75,000. Calculate the amount of increase or decrease in owner's equity for the year. A) a $25,000 increase B) a $85,000 increase C) a $60,000 decrease D) a $75,000 increase

A) a $25,000 increase, Explanation: A) Equity (at the beginning of the year) = $120,000 - $60,000 = $60,000 Equity (at the end of the year) = Equity (beginning balance) - Withdrawals + Revenues - Expenses Change in owner's equity for the

Star Homes Company just recorded a transaction in its books. If this transaction increased the total liabilities by $10,000, then ________. A) assets must increase, or equity must decrease by $10,000 B) either assets or equity must decrease by $10,000 C) both assets and equity must each decrease by $5,000 D) assets must decrease by $10,000

A) assets must increase, or equity must decrease by $10,000

Lorna Smith decided to start her own CPA practice as a professional corporation, Smith CPA PC. Her corporation purchased an office building for $35,000 that her real estate agent said was worth $50,000 in the current market. The corporation recorded the building as a $50,000 asset because Lorna believes that is the real value of the building. Which of the following concepts or principles of accounting is being violated? A) cost principle B) economic entity assumption C) monetary unit assumption D) going concern assumption

A) cost principle

Managerial accounting provides information to ________. A) internal decision makers B) outside investors and lenders C) creditors D) taxing authorities

A) internal decision makers

21) Which of the following journal entries would be recorded if a business purchased office supplies on account in a previous accounting period and now makes a cash payment of $750 to the supplier to settle the account? A) Cash 750 Accounts Payable 750 B) Accounts Payable 750 Cash 750 C) Cash 750 Office Supplies 750 D) Accounts Payable 750 Office Supplies 750

B) Accounts Payable 750 Cash

22) The following transactions for the month of March have been journalized and posted to the proper accounts. Mar. 1 The business received a $9,000 cash contribution from the owner. Mar. 2 Paid the first month's rent of $600. Mar. 3 Purchased equipment by paying $4,000 cash and executing a note payable for $5,000. Mar. 4 Purchased office supplies for $600 cash. Mar. 5 Billed a client for $10,000 of design services completed. Mar. 6 Received $8,000 on account for the services previously recorded. What is the balance in Accounts Receivable? A) $8,000 B) $2,000 C) $5,000 D) $10,000

B) $2,000

The net income of Avid Camera Services is $25,000. The beginning and ending owner's equity balances were $34,000 and $53,000, respectively. The owner made no additional contributions. Calculate the amount of owner's withdrawals. A) $16,000 B) $6,000 C) $9,000 D) $8,000

B) $6,000, Explanation: B) Stockholders' Equity Beginning Balance $34,000 Add: Net Income 25,000 Less: Stockholders' Equity Ending Balance 53,000 Owner's Withdrawals $6,000

3.) Which of the following is provided in a typical chart of accounts? A) Account balance B) Account number C) Dates of transactions D) Transaction amounts

B) Account number

17) A business makes a cash payment of $12,000 to a supplier for supplies purchased two weeks earlier. Which of the following accounts is debited? A) Cash B) Accounts Payable C) Supplies D) Accounts Receivable

B) Accounts Payable

18) A business renders services to a customer for $26,000 on account. Which of the following accounts is debited? A) Cash B) Accounts Receivable C) Service Revenue D) Accounts Payable

B) Accounts Receivable

Which of the following is true of assets? A) Assets include cash, merchandise inventory, and accounts payable. B) Assets are something of value the business owns or controls. C) Assets do not need to provide future benefit to the business. D) Assets can be recorded at the expected cost if acquired at a bargain.

B) Assets are something of value the business owns or controls.

Fitch Supply Services received $1,000 cash from a customer; the amount was owed to the business from the previous month. What is the effect of this transaction on the accounting equation? A) Accounts Receivable increases and Service Revenue increases B) Cash increases and Accounts Receivable decreases C) Cash increases and Service Revenue increases D) Cash increases and Accounts Payable decreases

B) Cash increases and Accounts Receivable decreases

20) The owner withdrew cash from the business. Which of the following accounts is debited? A) Cash B) Owner, Withdrawals C) Accounts Payable D) Common Stock

B) Owner, Withdrawals

11) Which of the following is a source document that provides the evidence and data for accounting transactions? A) Journal B) Sales invoice C) Ledger D) Trial balance

B) Sales invoice

The owner makes a withdrawal from Aventis Company. How does this transaction affect the accounting equation? A) The assets, liabilities, and equity remain the same. B) The assets decrease and equity decreases. C) The assets increase and liabilities decrease. D) The assets decrease and equity increases.

B) The assets decrease and equity decreases.

Which of the following statements is true of a sole proprietorship? A) A sole proprietorship joins two or more individuals as co-owners. B) The sole proprietor is personally liable for the liabilities of the business. C) A sole proprietorship is taxed separately from the owner. D) A sole proprietorship has to pay business income taxes.

B) The sole proprietor is personally liable for the liabilities of the business.

The field of accounting that focuses on providing information for external decision makers is ________. A) managerial accounting B) financial accounting C) cost accounting D) nonmonetary accounting

B) financial accounting

14) After initially recording a transaction, the data is then transferred to the ________. A) chart of accounts B) ledger C) trial balance D) journal

B) ledger

Assume MetAmbit Company had a net income of $2,200 for the year ending December 2016. Its beginning and ending total assets were $34,500 and $18,500, respectively. Calculate MetAmbit's return on assets (ROA). (Round your percentage answer to two decimal places.) A) 6.38% B) 11.89% C) 8.30% D) 4.15%

C) 8.30%,

25) Which of the following statements is true of a trial balance? A) A trial balance is the first step in the accounting cycle. B) A trial balance is also known as a balance sheet. C) A trial balance is a list of all accounts with their balances. D) A trial balance is also known as the chart of accounts.

C) A trial balance is a list of all accounts with their balances.

23) A business has the following transactions: * The business receives $15,000 cash and issues common stock to stockholders. * The business purchases $600 of office supplies on account. * The business purchases $3,000 of furniture on account. * The business renders services to various clients totaling $15,000 on account. * The business pays $1,500 for salaries expense and $4,500 for rent expense. * The business pays $800 to a supplier for the office supplies purchased earlier. * The business collects $4,000 from one of its clients for services rendered earlier in the month. At the end of the month, all journal entries are posted to the ledger. Accounts Receivable will appear as which of the following? A) Accounts Receivable 4,000 15,000 11,000 Bal. B) Accounts Receivable 15,000 Bal. 15,000 C) Accounts Receivable 15,000 4,000 Bal. 11,000 D) Accounts Receivable 15,000 4,000 11,000 Bal.

C) Accounts Receivable 15,000 4,000 Bal. 11,000

Which of the following statements best defines financial statements? A) Financial statements are the information systems that record monetary and nonmonetary business transactions. B) Financial statements are the verbal statements made to business news organizations by chief financial officers. C) Financial statements are documents that report on a business in monetary terms, providing information to help people make informed business decisions. D) Financial statements are plans and forecasts for future time periods based on information from past financial periods.

C) Financial statements are documents that report on a business in monetary terms, providing information to help people make informed business decisions.

15) Which of the following sequences is the normal sequence of flow of accounting data? A) Ledger → Journal → Source document B) Journal → Source document → Ledger C) Source document → Journal → Ledger D) Source document → Ledger → Journal

C) Source document → Journal → Ledger

The owners' claims to the assets of the business are called ________. A) return on assets B) expenses C) equity D) debt

C) equity

12) Transactions are first record in a ________. A) chart of accounts B) trial balance C) journal D) ledger

C) journal

6) Which one of the following account groups will decrease with a debit? A) assets and expenses B) revenues and expenses C) liabilities and revenues D) assets and liabilities

C) liabilities and revenues

The equity of Autumn Company is $130,000 and the total liabilities are $40,000. The total assets are ________. A) $260,000 B) $80,000 C) $90,000 D) $170,000

D) $170,000, Explanation: D) Assets = Liabilities + Equity Assets = 130,000 + 40,000 = 170,000

9) The Accounts Receivable account of Rosewood Company has the following postings: Calculate the ending balance of the account. A) $33,000 debit B) $27,000 debit C) $6,000 credit D) $21,000 debit

D) $21,000 debit

Best Plumbing Company provides plumbing services. Selected transactions of Best Plumbing Company are described as follows: a) Received a $9,000 cash contribution from the owner, June Sharon. b) Paid $6,000 cash for equipment to be used for plumbing repairs. c) Borrowed $9,000 from a local bank and deposited the money in the checking account. d) Paid $800 rent for the year. e) Paid $200 cash for plumbing supplies to be used next year. f) Completed a plumbing repair project for a local lawyer and received $6,000 cash. Calculate the net income. Assume plumbing supplies of $200 are left. A) $600 B) $5,800 C) $6,000 D) $5,200

D) $5,200, Explanation: D) Net income = Revenues - Expenses Net income = $6,000 - $800 = $5,200

24) Which of the following sequences states the order in which accounts are listed on a trial balance? A) Equity → Assets → Liabilities B) Liabilities → Assets → Equity C) Assets → Equity → Liabilities D) Assets → Liabilities → Equity

D) Assets → Liabilities → Equity

Which financial statement includes a specific date in its heading? A) Statement of owner's equity B) Statement of cash flows C) Income statement D) Balance sheet

D) Balance sheet

GAAP refer to guidelines for accounting information in the United States. The acronym GAAP in this statement refers to ________. A) Globally Accepted and Accurate Policies B) Global Accommodation Accounting Principles C) Generally Accredited Accounting Policies D) Generally Accepted Accounting Principles

D) Generally Accepted Accounting Principles

16) A business renders services to a client and issues a sales invoice. The amount will be collected from the customer at a later time. Which of the following is true at the time the invoice is issued? A) Equity will decrease. B) Total liabilities will increase. C) Total assets will decrease. D) Net income will increase.

D) Net income will increase.

1.)Which of the following is an asset account? A) Salaries Expense B) Accounts Payable C) Service Revenue D) Prepaid Expense

D) Prepaid Expense

2.)________ represents a debt owed for renting a building currently. A) Prepaid Rent B) Rent Payable C) Rent Revenue D) Rent Expense

D) Rent Expense

4.)A shortened form of the ledger is called a ________. A) trial balance B) balance sheet C) chart of accounts D) T-account

D) T-account

8) For Expenses, the category of account and its normal balance is ________. A) equity and a credit balance B) assets and a debit balance C) assets and a credit balance D) equity and a debit balance

D) equity and a debit balance

Genity Company records business transactions in dollars and disregards changes in the value of a dollar over time. Which of the following accounting assumptions does this represent? A) economic entity assumption B) going concern assumption C) accounting period assumption D) monetary unit assumption

D) monetary unit assumption

13) Journalizing a transaction involves ________. A) calculating the balance in an account using journal entries B) posting the account balances in the chart of accounts C) preparing a summary of account balances D) recording the data only in the journal

D) recording the data only in the journal

The Sarbanes-Oxley Act (SOX) ________. A) requires independent accountants to take responsibility for the accuracy and completeness of the financial reports B) created the SEC C) ensures that financial scandals will no longer occur D) requires companies to take responsibility for the accuracy and completeness of their financial reports

D) requires companies to take responsibility for the accuracy and completeness of their financial reports