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| 1 | |
Which of the following is often called the statement of financial position? |
| | A) | Balance sheet |
| | B) | Income Statement |
| | C) | Statement of Cash Flows |
| | D) | Statement of Owners' Equity |
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| 2 | |
Which of the following refers to the relationship of one financial statement to another? |
| | A) | Articulation. |
| | B) | Association. |
| | C) | Relative compliance. |
| | D) | An accounting principle. |
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| 3 | |
The body of a balance sheet consists how many distinct sections? |
| | A) | Two |
| | B) | Three |
| | C) | Four |
| | D) | Varying number |
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| 4 | |
If assets total $400,000 and owners' equity totals $250,000, then total liabilities must be |
| | A) | $450,000 |
| | B) | $550,000 |
| | C) | $150,000 |
| | D) | $250,000 |
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| 5 | |
Owners' equity is divided into how many parts? |
| | A) | Two |
| | B) | Three |
| | C) | Four |
| | D) | Five |
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| 6 | |
Consider the following:
| Assets | $300,000 | | Liabilities | $90,000 | | Capital stock | $120,000 |
What is the dollar amount of retained earnings? |
| | A) | $210,000 |
| | B) | $30,000 |
| | C) | $180,000 |
| | D) | $90,000 |
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| 7 | |
Consider the following items shown randomly:
| Cash | $30,000 | | Buildings | $900,000 | | Accounts receivable | $120,000 | | Supplies | $5,000 | | Notes payable | $40,000 | | Accounts payable | $15,000 | | Capital stock | $1,000 |
Which item and its balance would be shown first in the balance sheet? |
| | A) | Capital stock |
| | B) | Accounts payable |
| | C) | Cash |
| | D) | Buildings |
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| 8 | |
Which accounting concept, principle, or assumption is based in the notion that the owners are separate and distinct from the business? |
| | A) | Cost principle |
| | B) | Business entity principle |
| | C) | Going-concern assumption |
| | D) | Objectivity principle |
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| 9 | |
Which accounting concept, principle, or assumption is based in the notion that the enterprise has an indefinite life span? |
| | A) | Cost principle |
| | B) | Business entity principle |
| | C) | Going-concern assumption |
| | D) | Objectivity principle |
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| 10 | |
When a company purchases for $50,000 cash an asset with a market value of $52,000, which accounting concept, principle, or assumption specifically requires that the asset be reported at $50,000 in the balance sheet? |
| | A) | Cost principle |
| | B) | Business entity principle |
| | C) | Going-concern assumption |
| | D) | Objectivity principle |
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| 11 | |
Some liquid assets are reported in the balance sheet at the amount that is expected when the assets are converted into cash. This valuation is known as which of the following? |
| | A) | Discounted value of the assets |
| | B) | Net realizable value of the assets |
| | C) | Depreciated value of the assets |
| | D) | Established value of the assets |
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| 12 | |
Reporting assets at historical cost even during periods of inflation or deflation is adherence to which of the following? |
| | A) | Cost principle |
| | B) | Objectivity principle |
| | C) | Going-concern assumption |
| | D) | Stable-dollar assumption. |
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| 13 | |
In which order are liabilities usually listed in the balance sheet |
| | A) | The order in which they were incurred |
| | B) | The order of smallest to largest |
| | C) | Alphabetical order |
| | D) | The order in which they are expected to be repaid |
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| 14 | |
In accounting, the word accrued refers to the payment of expenses: |
| | A) | that has been deferred. |
| | B) | that has occurred. |
| | C) | that will not be made. |
| | D) | at the time of payment. |
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| 15 | |
Owners' equity in a business comes from which of the following? |
| | A) | Investments in cash by the owners |
| | B) | Investments in assets other than cash by the owners |
| | C) | Earnings from profitable operations of the business |
| | D) | All of the above |
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| 16 | |
Which of the following decreases owners' equity? |
| | A) | Payments of cash to the owners |
| | B) | Payments of assets other than cash to the owners |
| | C) | Losses from unprofitable operations of the business |
| | D) | All of the above |
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| 17 | |
The accounting equation can be expressed as which of the following? |
| | A) | Assets plus liabilities equal owners' equity |
| | B) | Assets plus owners' equity equals liabilities |
| | C) | Assets equal liabilities plus owners' equity |
| | D) | Either (A) or (C) |
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| 18 | |
A cash investment in the business in exchange for capital stock results in which of the following? |
| | A) | An increase in assets and an increase in owners' equity |
| | B) | An increase in assets and a decrease in owners' equity |
| | C) | A decrease in assets and an increase in owners' equity |
| | D) | A decrease in assets and a decrease in owners' equity |
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| 19 | |
Office equipment was purchased for cash. What effect did this transaction have in the financial position of the company? |
| | A) | Assets, decrease; Liabilities, no change; Owners' Equity, decrease. |
| | B) | Assets, decrease; Liabilities, increase; Owners' Equity, no change. |
| | C) | Assets, no change; Liabilities, no change; Owners' Equity, no change. |
| | D) | Assets, increase; Liabilities, increase; Owners' Equity, no change. |
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| 20 | |
Office equipment was purchased by issuing a check for $10,000 and a note payable for the balance of $60,000. What effect did this transaction have in the financial position of the company? |
| | A) | Assets, no change; Liabilities, no change; Owners' Equity, no change. |
| | B) | Assets, decrease; Liabilities, increase; Owners' Equity, no change. |
| | C) | Assets, decrease; Liabilities, no change; Owners' Equity, decrease. |
| | D) | Assets, increase; Liabilities, increase; Owners' Equity, no change. |
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| 21 | |
Consider the following:
| Assets | Liabilities | Owners' Equity | | A | No Change | No Change | No Change | | B | Decrease | Increase | No Change | | C | Decrease | No Change | No Change | | D | Increase | Increase | No Change |
Office supplies of $14,000 were purchased on account. Use the chart above and select the effect this transaction had in the financial position of the company. |
| | A) | Line A |
| | B) | Line B |
| | C) | Line C |
| | D) | Line D |
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| 22 | |
Consider the following:
| Assets | Liabilities | Owners' Equity | | A | No Change | No Change | No Change | | B | Decrease | Increase | Decrease | | C | Decrease | No Change | No Change | | D | Increase | Increase | Increase |
Office supplies of $2,000 were sold to a neighboring business that paid cash for the supplies. Use the chart above and select the effect this transaction had in the financial position of the company. |
| | A) | Line A |
| | B) | Line B |
| | C) | Line C |
| | D) | Line D |
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| 23 | |
Consider the following:
| Assets | Liabilities | Owners' Equity | | A | No Change | No Change | No Change | | B | Decrease | Increase | No Change | | C | Decrease | No Change | Decrease | | D | Increase | Increase | No Change |
The company collected an account receivable of $6,200. Use the chart above and select the effect this transaction had in the financial position of the company. |
| | A) | Line A |
| | B) | Line B |
| | C) | Line C |
| | D) | Line D |
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| 24 | |
Consider the following:
| Assets | Liabilities | Owners' Equity | | A | No Change | No Change | No Change | | B | Decrease | Decrease | No Change | | C | Decrease | No Change | Decrease | | D | Increase | Increase | No Change |
The company paid a $5,000 installment on a note payable of $45,000. Use the chart above and select the effect this transaction had in the financial position of the company. |
| | A) | Line A |
| | B) | Line B |
| | C) | Line C |
| | D) | Line D |
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| 25 | |
Consider the following:
| Assets | Liabilities | Owners' Equity | | A | No Change | No Change | No Change | | B | Decrease | Decrease | No Change | | C | Decrease | No Change | Decrease | | D | Increase | No Change | Increase |
The company provided computer repair services of $800 to a customer who charged the services on account. Use the chart above and select the effect this transaction had in the financial position of the company. |
| | A) | Line A |
| | B) | Line B |
| | C) | Line C |
| | D) | Line D |
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| 26 | |
Consider the following:
| Assets | Liabilities | Owners' Equity | | A | No Change | No Change | No Change | | B | Decrease | Decrease | No Change | | C | Decrease | No Change | Decrease | | D | Increase | No Change | Increase |
The company paid its employees their weekly wages of $950. Use the chart above and select the effect this transaction had in the financial position of the company. |
| | A) | Line A |
| | B) | Line B |
| | C) | Line C |
| | D) | Line D |
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| 27 | |
A balance sheet, or statement of financial position, is |
| | A) | an expansion of the basic accounting equation. |
| | B) | used to report the results of business operations over a period of time. |
| | C) | composed of four distinct major sections. |
| | D) | prepared ahead of the income statement. |
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| 28 | |
The income statement |
| | A) | is a summary of revenues and expenses. |
| | B) | is used to report the results of operations over a specific period of time. |
| | C) | explains, in part, how the company's financial position changed over a specific time period. |
| | D) | is all of the above. |
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| 29 | |
Which of the following transactions would appear in the statement of cash flows as an operating activity? |
| | A) | Purchase of land |
| | B) | Payment for the purchase of a building |
| | C) | Investment by the owner |
| | D) | Cash paid for expenses |
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| 30 | |
Which of the following transactions would appear in the statement of cash flows as a financing activity? |
| | A) | Purchase of equipment for production |
| | B) | Cash received from revenue transactions |
| | C) | Investment by the owner(s) |
| | D) | Cash paid for expenses |
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| 31 | |
The beginning balance of cash was $0. The ending balance of cash is $45,600. In the statement of cash flows, cash flows from operating activities were a positive $24,000, and the cash flows used by investing activities was a negative $6,000. The cash flows from financing activities were which of the following? |
| | A) | Negative cash flow of $28,400 |
| | B) | Positive cash flow of $27,600 |
| | C) | Negative cash flow of $45,600 |
| | D) | Positive cash flow of $18,000 |
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| 32 | |
The company sold for $44,000 a piece of equipment that was used in production, collecting a down payment of $10,000 and a note receivable for the balance to be paid in the subsequent accounting period. In the statement of cash flows, this transaction would be: |
| | A) | reported as an investing activity of $44,000. |
| | B) | reported as an operating activity of $44,000. |
| | C) | reported as an investment activity of $44,000. |
| | D) | disclosed as a noncash investing and financing transaction. |
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| 33 | |
Articulationrefers to the relationship among the financial statements. What item in the income statement ties that statement to the balance sheet? |
| | A) | Revenues |
| | B) | Expenses |
| | C) | Net income |
| | D) | all of the above |
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| 34 | |
Articulation refers to the relationship among the financial statements. What item in the balance sheet ties that statement to the statement of cash flows? |
| | A) | Revenues |
| | B) | Net income |
| | C) | Beginning cash |
| | D) | Ending cash |
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| 35 | |
The current assets of the company total $60,000. The current liabilities of the company total $15,000. What is the current ratio? |
| | A) | .40 |
| | B) | .04 |
| | C) | 4.0 |
| | D) | 40.0 |
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| 36 | |
Current liabilities are $23,000 and the current ratio is 0.7. What is the total of the current assets? |
| | A) | $161,000 |
| | B) | $32,857 |
| | C) | $328,571 |
| | D) | $16,100 |
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| 37 | |
Generally accepted accounting principles can be applied to the financial statements of which of the following? |
| | A) | Sole proprietorships |
| | B) | Partnerships |
| | C) | Corporations |
| | D) | All of the above |
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| 38 | |
Under which form of business are the owners directly responsible for the debts of the business? |
| | A) | Sole proprietorships, only |
| | B) | Partnerships, only |
| | C) | Corporations, only |
| | D) | Sole proprietorships and partnerships |
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| 39 | |
Under which form of business does the business entity concept not apply? |
| | A) | Sole proprietorships |
| | B) | Partnerships |
| | C) | Corporations |
| | D) | None |
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| 40 | |
In the short run, what distinguishes liquidity from profitability? |
| | A) | There are no distinguishable differences. |
| | B) | Profitability increases owners' equity, liquidity does not. |
| | C) | Creditors are more interested in profitability than liquidity. |
| | D) | Owners have an interest in profitability but not in liquidity. |
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| 41 | |
Which of the following is true about liquidity, in the short run? |
| | A) | A company can be profitable and have liquidity. |
| | B) | A company can be unprofitable and have liquidity. |
| | C) | A company can be unprofitable and not have liquidity. |
| | D) | All of the above are true. |
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| 42 | |
Notes to the financial statements about law suits, pledged assets, contractual commitments, and due dates on large liabilities that help the users interpret the financial statements are required under an important generally accepted accounting principle (GAAP) known as which of the following? |
| | A) | Window dressing |
| | B) | Disclosure |
| | C) | Cost |
| | D) | Going-concern |
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| 43 | |
Pledged assets are assets that have which feature? |
| | A) | A useful life of more than one year |
| | B) | Promised to employees upin their retirement |
| | C) | Used as collateral to secure a loan |
| | D) | Pledged to stockholders for cash dividends |
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| 44 | |
In following the concept of adequate disclosure, which would be disclosed in footnotes to the financial statements? |
| | A) | Pending lawsuits |
| | B) | Pledged assets |
| | C) | Receivables from company officers |
| | D) | All of the above |
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| 45 | |
Measures taken by management to make the company appear as strong as possible in its financial statements are called which of the following? |
| | A) | Adequate disclosure |
| | B) | Generally accepted accounting principles |
| | C) | Improvements to the accounting equation |
| | D) | Window dressing |
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| 46 | |
A 'strong' statement of cash flows would show that the major sources of cash came from which of the following? |
| | A) | Investing activities |
| | B) | Operating activities |
| | C) | Financing activities |
| | D) | Owners |
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