Chapter 1 Quiz

All of the following statements are true except one. Which is a false statement? A. Bookkeeping is only a small part of accounting. B. The organization that formulates generally accepted accounting principles is the Financial Accounting Standards Board. C. Accounting is an information system that measures, processes, and communicates financial information. D. A proprietorship is a business with several owners.

D. A proprietorship is a business with several owners.

Which item(s) is (are) generally reported on a balance sheet? A. Retained Earnings B. Inventory C. Accounts Payable D. All of the above

D. All of the above

The going-concern assumption recognizes that: A. Net income is at best an estimate B. All financial statements cover a fiscal year C. The value of an asset may vary from month to month D. The company way continue indefinitely E. A company's major objective is to earn a profit

D. The company way continue indefinitely

Which of the financial statement(s) cover(s)a period of time? A. Only the income statement B. Only the balance sheet C. Only the statement of retained earnings D. both A and C

D. both A and C

The valuation of assets on the balance sheet is generally based on: A. Selling price B. What it would cost to replace the asset C. Current fair market value as established by independent appraisers D. Historical Cost

A. Selling price

During the year, Dobson Company's stockholders' equity decreased from $30,000 to $28,000. The firm had a $5,000 net income for the period. If dividends equal $10,000, how much did the owner's invest in the business during the year? A. $7,000 B. $13,000 C. $3,000 D. $5,000

B. $13,000

The nature of an asset is BEST described as: A. Something with physical form which is valued at cost in accounting records. B. An economic resource owned by a business and expected to benefit future operations. C. An economic resource representing cash or the right to receive cash in the near future. D. Something owned by a business that has a ready market value.

B. An economic resource owned by a business and expected to benefit future operations.

The accounting equation can be expressed as: A. Assets + Liabilities = Owner's Equity B. Assets = Liabilities - Owner's Equity C. Assets - Liabilities = Owner's Equity D. Owner's Equity - Assets = Liabilities

C. Assets - Liabilities = Owner's Equity

Benson company had a total asset of $300,000 and total stockholders' equity of $100,000 at the beginning of the year. During the year assets increased by $50,000, and liabilities decreased by $40,000. Stockholders' equity at the end of the year is: A. $90,000 B. $110,000 C. $140,000 D. $150,000 E. $190,000

E. $190,000

The payment of an account payable: A. Decreases total assets B. Increases total liabilities C. Increases the owner's equity in the business D. Decreases the owner's equity in the business

A. Decreases total assets

Additional investment in a company would have what effect on the accounting equation? A. Increase assets and increase liabilities B. Increase assets and decrease stockholders' equity C. Increase assets and increase stockholders' equity D. Decrease assets and decrease liabilities

C. Increase assets and increase stockholders' equity

Sherill's Decorating company collects $1,000 owed by a client for services previously performed. This transaction would: A. Increase stockholders' equity by $1,000 B. Decrease stockholders' equity by $1,000 C. Increase assets by $1,000 D. Cause no change in total assets

C. Increase assets by $1,000

During the year, Samper Investments has $60,000 in revenues, $40,000 in expenses, $10,000 in purchases of capital stock by the new owners, $3,000 in dividend payments, and $15,000 in payments on accounts payable. Stockholders' equity changes by: A. +$27,000 B. +$42,000 C. +$12,000 D. -$8,000

D. -$8,000