Deck 15: Basic Accounting: Concepts, techniques, and Conventions

Question 1

In a corporation,stockholders' equity has two parts called ________ and ________.

A) dividends; net profit
B) paid in capital; dividends
C) net profit; retained earnings
D) paid-in capital; retained earnings

Answer 1

D

Question 2

I want to know where a company stands financially at December 31,2014.Which financial statement should I use?

A) statement of cash flows
B) statement of stockholders' equity
C) statement of retained earnings
D) balance sheet

Answer 2

D

Question 3

Economic resources that a company owns and expects to provide future benefits are called ________.

A) stockholders' equity
B) assets
C) liabilities
D) retained earnings

Answer 3

B

Question 4

The main sections of the balance sheet include ________.

A) revenues, assets and liabilities
B) assets, liabilities and expenses
C) expenses, revenues and stockholders' equity
D) assets, liabilities and stockholders' equity

Question 5

Accounting information only helps assess past financial performance.

Question 6

The ownership claim arising from the reinvestment of previous profits is called ________.

A) net assets
B) stockholders' equity
C) investment income
D) retained earnings

Question 7

A transaction is any event that affects the financial position of an organization and requires recording.

Question 8

For a corporation,the excess of assets over liabilities are called ________.

A) retained earnings
B) paid-in capital
C) common stock
D) stockholders' equity

Question 9

The income statement summarizes a company's operating performance ________ and the balance sheet shows a company's financial position ________.

A) at a point in time; over a period of time
B) at a point in time; at a point in time
C) over a period of time; over a period of time
D) over a period of time; at a point in time

Question 10

An entity's economic obligations to nonowners are called ________.

A) owners' equity
B) liabilities
C) assets
D) retained earnings

Question 11

A corporation is not a separate legal entity from its owners.

Question 12

Which financial statement discloses the economic resources of the organization and the claims against those resources?

A) income statement
B) statement of cash flows
C) statement of retained earnings
D) balance sheet

Question 13

Liabilities are economic resources.

Question 14

What do liabilities and stockholders' equity have in common?

A) They are both held by nonowners of the company.
B) They are both held by owners of the company.
C) They are both creditors.
D) They are both claims on a company's assets

Question 15

Which financial statement summarizes the operating performance of a company over a period of time?

A) statement of cash flows
B) statement of stockholders' equity
C) balance sheet
D) income statement

Question 16

The statement of financial position is also called the ________.

A) income statement
B) statement of cash flows
C) statement of retained earnings
D) balance sheet

Question 17

Which of the following statements is FALSE?

A) Assets are economic resources that are expected to provide future benefits.
B) Liabilities are economic obligations or claims against the assets of an organization by nonowners.
C) Assets must always equal the sum of liabilities and owners' equity.
D) Owners' equity equals the sum of assets and liabilities.

Question 18

Any event that affects the financial position of an organization and requires recording is called a(n)________.

A) transaction
B) account
C) posting
D) recognition principle

Question 19

The balance sheet shows a company's financial status at only one point in time.

Question 20

The ownership claim arising from funds contributed by the owners of the business is called ________.

A) liabilities
B) retained earnings
C) note payable
D) paid-in capital

Question 21

A cash payment on accounts payable will ________.

A) increase assets and increase liabilities
B) increase assets and increase stockholders' equity
C) decrease assets and decrease liabilities
D) decrease assets and increase stockholders' equity

Question 22

Amounts owed to vendors for purchases on credit are called ________.Amounts due from customers for credit sales are called ________.

A) accounts payable; notes receivable
B) notes payable; notes receivable
C) accounts payable; accounts receivable
D) debt payable; debt receivable

Question 23

The acquisition of inventory on account will ________.

A) increase assets and decrease stockholders' equity
B) decrease assets and decrease liabilities
C) increase assets and increase liabilities
D) increase assets and increase stockholders' equity

Question 24

Owners' equity represents the excess cash a company has made.

Question 25

The acquisition of inventory for cash will ________.

A) increase liabilities and decrease stockholders' equity
B) decrease assets and decrease liabilities
C) increase assets and decrease liabilities
D) increase assets and decrease assets

Question 26

Consider a firm that provides services to customers.To record revenue,which of the following conditions must be met?

A) the firm must render the services only
B) the firm must render the services and receive cash or a promise of payment in the future
C) the firm must render the services and receive cash
D) the firm must promise to render the services in the future and receive cash

Question 27

The following information was extracted from the accounting records of Kristie Company:
$\begin{array} { l } \text {Paid-in Capital, December 31, 2014 }&\$87,000\\ \text { Retained Earnings, December 31, 2014 }&\$211,000\\ \text {Total Assets, December 31, 2014 }&\$455,000\\ \text { Revenues for year ended December 31, 2015}&\$200,000\\ \text {Expenses for year ended December 31, 2015 }&\$165,000\\ \text {Cash Dividends Declared }&\$0\\ \text {Total Assets, December 31, 2015 }&\$605,000\\ \text {Additional investments by owners in 2015 }&\$0\\\end{array}$

At December 31,2015,what is the total amount of liabilities?

A) $45,000
B) $150,000
C) $157,000
D) $272,000

Question 28

Cash collections from customers who purchased goods on credit will decrease ________.

A) Accounts Receivable
B) Accounts Payable
C) Cash
D) Retained Earnings

Question 29

Decreases in ownership claims arising from the delivery of goods are called ________.

A) revenues
B) profits
C) liabilities
D) expenses

Question 30

The following information was extracted from the accounting records of Vogel Company:
$$\begin{array} { l l } \text { beginning Paid-in Capital } & \$ 90,000 \\\text {beginning Retained Earnings } & \$ 300,000 \\\text { beginning Assets } & \$ 455,006 \\\text { Contributicns by owners } & \$ 0 \\\text { Revenues } & \$ 200,000 \\\text { Expenses } & \$ 155,000\end{array}$$
At the beginning of the period,what is the total amount of liabilities?

A) $65,000
B) $100,000
C) $155,000
D) $245,000

Question 31

Stockholders' equity is composed of paid-in capital and retained earnings.

Question 32

The following information was extracted from the accounting records of Brankov Company:
$$\begin{array} { l l } \text { beginning Paid-in Capital } & \$ 90,000 \\\text { beginning Retained Earning } & \$ 300,000 \\\text { beginning Assets } & \$ 455,000 \\\text { Contributions by Owners } & \$ 7 \\\text { Cash dividends declared } & \$ 0 \\\text { Revenues } & \$ 200,000 \\\text { Expenses } & \$ 155,000\end{array}$$
At the end of the period,what is the total amount of stockholders' equity?

A) $65,000
B) $135,000
C) $390,000
D) $435,000

Question 33

Which of the following statements report the amount of net income earned by a company for a period of time?

A) balance sheet and income statement only
B) income statement and statement of cash flows only
C) income statement, statement of retained earnings and statement of stockholders' equity
D) balance sheet and statement of cash flows only

Question 34

Which of the following explains the change in Retained Earnings from the beginning of the year to the end of the year?

A) revenues and expenses
B) contributions by owners
C) purchases of inventory
D) a purchase of a plant asset

Question 35

A sale of inventory results in a(n)________ in stockholders' equity equal to the selling price of the inventory.A sale of inventory also results in a(n)________ in stockholders' equity equal to the cost of the inventory sold.

A) decrease; increase
B) increase; increase
C) increase; decrease
D) decrease; decrease

Question 36

Increases in revenues will ________.Increases in expenses will ________ .

A) increase Retained Earnings; increase Retained Earnings
B) increase Retained Earnings; decrease Retained Earnings
C) decrease Paid in Capital; decrease Paid in Capital
D) increase assets; increase liabilities

Question 37

Liabilities are the entity's economic obligations to owners.

Question 38

Increases in ownership claims arising from the delivery of goods are called ________.

A) expenses
B) profits
C) assets
D) revenues

Question 39

A stockholders contributed $100,000 in exchange for stock in the company.What is the effect of this transaction?

A) assets increase and liabilities increase
B) assets increase and revenues increase
C) expenses increase and revenues increase
D) assets increase and paid-in capital increases

Question 40

For a corporation,assets must equal liabilities plus paid-in capital.

Question 41

The balance sheet is not linked to the income statement.

Question 42

For nonprofit organizations,the stockholders' equity section of the balance sheet is replaced with ________.

A) retained earnings
B) partners' capital
C) partners' withdrawals
D) net assets

Question 43

Amounts due from customers are called accounts payable.

Question 44

The excess of revenues over expenses is called a net profit.

Question 45

Which of the following is(are)a deficiency(deficiencies)of cash-basis accounting?

A) it omits key revenues and expenses from the balance sheet
B) it fails to match revenues and expenses to measure economic performance
C) it omits key assets and key liabilities from the balance sheet
D) B and C

Question 46

The following information was extracted from the accounting records of Yamaguchi Company:
$\begin{array} { l } \text {Paid-in Capital, December 31, 2014 }&\$87,000\\ \text { Retained Earnings, December 31, 2014}&\$211,000\\ \text { Total Assets, December 31, 2014}&\$455,000\\ \text {Revenues for year ended December 31, 2015 }&\$200,000\\ \text { Expenses for year ended December 31, 2015 }&\$165,000\\ \text {Total Assets, December 31, 2015 }&\$605,000\\ \text {Additional investments by owners in 2015 }&\$10,000\\\end{array}$

At December 31,2014,what is the total amount of liabilities?

A) $45,000
B) $150,000
C) $157,000
D) $272,000

Question 47

When a company purchases inventory for cash,the net effect on the amount of total assets is zero.

Question 48

For nonprofit organizations,the income statement is ________.

A) used
B) replaced with the statement of stockholders' equity
C) replaced with the statement of activities
D) replaced with the statement of cash flows

Question 49

Under accrual basis accounting,we record expenses when ________.

A) a company pays cash to a supplier
B) a company incurs a liability
C) a company uses resources
D) a company pays cash to anyone

Question 50

Revenue and expense accounts are permanent stockholders' equity accounts.

Question 51

Patrick Company had the following transactions:
1)The owner started the company by investing $10,000 of cash.
2)The company paid $2,000 for six months of rent.The rent was paid in advance.
3)The company acquired $3,300 in inventory and put one-third of the purchase on account.The company paid $2,200 cash.
4)The company sold inventory costing $1,400 for $2,900 on account.
After all these transactions,what is the balance in the cash account?

A) $1,600
B) $2,900
C) $5,800
D) $8,000

Question 52

Cudahy Company had the following transactions:
1)The owner started the company by investing $10,000 of cash.
2)The company paid $2,000 for six months of rent.The rent was paid in advance.
3)The company acquired $3,000 in inventory for cash.
4)The company sold inventory costing $1,400 for $2,900 on account.
After all these transactions,what is the balance in the cash account?

A) $2,100
B) $3,500
C) $5,000
D) $8,000

Question 53

The cash basis of accounting recognizes the impact of transactions in the period when ________.

A) revenues and expenses occur
B) cash is received or disbursed
C) the accounting equation changes
D) assets or liabilities change

Question 54

Under accrual basis accounting,we record revenue when ________.

A) cash is received from customers
B) cash is received for any reason
C) it meets the criteria for revenue recognition
D) a company receives cash from a customer on account

Question 55

The income statement measures performance over a given amount of time.

Question 56

Revenues do not affect stockholders' equity.

Question 57

The following transactions occurred at Clarkson Company:
1.The company acquired $200 of inventory on credit.
2.The company rendered services billed at $100 on account.
3.The company paid $175 in accounts payable.
4.The company's owner invested $375 in cash.
5.The company acquired equipment costing $575 on account.
6.The company paid $25 for inventory.
Required:
In the chart below,indicate if each transaction increases,decreases or has no effect on Assets,Liabilities and Stockholders' Equity.

Question 58

The activity of Sterling Company for the month of April is presented below:
$\begin{array} { l } \text { Cost of goods sold}&\$ 62,000\\ \text {Cash purchases of inventory }&\$25,000 \\ \text {Credit purchases of inventory }&\$50,000 \\ \text {Cash paid for credit purchase of inventory }&\$22,000 \\ \text { Cash dividend paid}&\$7,000 \\ \text { Wages earned and paid}&\$14,000 \\ \text {Wages earned and unpaid }&\$ 2,000\\ \text { Rent paid for April, May and June}&\$6,000 \\\end{array}$

Using the accrual basis of accounting,the total expenses for Sterling Company for the month of April is ________.

A) $62,000
B) $78,000
C) $80,000
D) $86,000

Question 59

Nicholson Company sold inventory costing $1,000 for $3,000 on account.Nicholson Company operates under the accrual basis.What effect will the transaction have on the liabilities and owners' equity of the company?

A) liabilities will decrease by $2,000
B) liabilities will increase by $2,000
C) owners' equity will increase by $2,000
D) owners' equity will increase by $3,000

Question 60

A cash payment of accounts payable does not affect stockholders' equity.

Question 61

On June 1,2012,a company borrows $100,000 on a 10% note due to a bank in one year.What amount of interest expense is reported for the year ending December 31,2012?

A) $5,000
B) $5,833
C) $1,000
D) $10,000

Question 62

The activity of Vegas Company for the month of April is given below:
$\begin{array} { l } \text { Cash purchases of inventory}&\$45,000 \\ \text {Credit purchases of inventory }&\$ 50,000\\ \text { Cash payment for credit purchases of inventory}&\$ 12,000\\ \text { Cash dividend paid}&\$7,000 \\ \text { Wages earned and paid}&\$ 12,000\\ \text {Wages earned and unpaid }&\$2,000 \\ \text {Rent paid for April, May and June }&\$ 9,000\\\end{array}$

Using the cash basis of accounting,the total expenses for Vegas Company for the month of April are ________.

A) $35,000
B) $78,000
C) $80,000
D) $95,000

Question 63

On January 1,Latinovich Company paid $16,000 for rent.The rent covers the period January 1 through April 30.Latinovich Company recorded Prepaid Rent of $16,000.What is the balance in the Prepaid Rent account on April 1?

A) 0
B) $4,000
C) $8,000
D) $12,000

Question 64

Under the accrual basis of accounting,the impact of transactions is recorded when cash is received or paid.

Question 65

On May 1,Gomez Company paid $36,000 for rent.The rent covers the period May 1 through August 31.Gomez Company recorded Prepaid Rent of $36,000.What is the balance in the Prepaid Rent account on June 1?

A) $0
B) $9,000
C) $18,000
D) $27,000

Question 66

Journal entries for the expiration of unexpired assets are usually made before the related cash flows.

Question 67

Given below are the activities of the Phoenix Company:
$\begin{array} { l } \text {Owners invested cash in business }&\$20,000 \\ \text {Credit sales }&\$ 80,000\\ \text {Cash sales }&\$20,000\\ \text { Cash collections from credit customers}&\$56,000 \\ \text {Purchased inventory on account }&\$ 37,000\\\end{array}$

Using the accrual basis of accounting,the total revenues for Phoenix Company are ________.

A) $46,000
B) $90,000
C) $100,000
D) $173,000

Question 68

On April 1,2012,Company Z lends $200,000 to Company Y on a 8% note.For the six months ending June 30,2012,what amount of interest revenue will Company Z report on this note?

A) $4,000
B) $8,000
C) $12,000
D) $16,000

Question 69

An example of an explicit transaction is ________.

A) recording depreciation expense
B) paying cash for three months' rent in advance
C) accruing wages expense at the end of the month
D) accruing interest expense at the end of the year

Question 70

Adjusting entries at the end of an accounting period record explicit transactions.

Question 71

Source documents are associated with ________.

A) Generally Accepted Accounting Principles
B) implicit transactions
C) explicit transactions
D) compound entries

Question 72

On May 1,Gonzalez Company paid $36,000 for rent.The rent covers the period May 1 through August 31.Gonzalez Company recorded Prepaid Rent of $36,000.What is the Rent Expense for the period,May 1 through June 30?

A) $0
B) $9,000
C) $18,000
D) $27,000

Question 73

On July 1,Singh Company paid 6 months' insurance in advance.The policy covers the period of July 1 through December 31.The total payment was $5,400.At the time of the payment,the company set up the Prepaid Insurance account for $5,400.What is the balance in the Prepaid Insurance account on August 31?

A) 0
B) $1,800
C) $2,700
D) $3,600

Question 74

On July 1,2012,Slowinski Company borrows $100,000 on a 10% note due to a bank in one year.The accounts of Slowinski Company are affected by the adjusting entry at December 31,2012 in which of the following ways?

A) increase assets and decrease expenses
B) increase assets and increase liabilities
C) increase expenses and increase liabilities
D) increase expenses and increase stockholders' equity

Question 75

Given below are the activities of the Tamara Company:
$\begin{array} { l } \text {Credit sales }&\$90,000 \\ \text { Cash sales}&\$50,000 \\ \text {Cash collections from credit customers }&\$ 36,000\\ \text {Purchased inventory on account }&\$27,000 \\\end{array}$

Using the cash basis of accounting,the total revenues for Tamara Company are ________.

A) $56,000
B) $86,000
C) $90,000
D) $173,000

Question 76

An example of an implicit transaction is cash received on account.

Question 77

On April 1,2012,Company X lends $200,000 to Company Y on a 8% note.On April 1,2012,which of the following accounts of Company X will be affected by this transaction?

A) Cash and Note Payable
B) Cash and Note Receivable
C) Cash and Interest Revenue
D) Cash and Interest Expense

Question 78

Under the cash basis of accounting,expenses are matched with the revenues they help generate.

Question 79

On March 1,a landlord received $10,000 rent for the month of April.On April 1,the landlord will ________.

A) decrease Cash and increase Rent Revenue
B) decrease Cash and increase Unearned Rent Revenue
C) decrease Paid-in Capital and increase Interest Revenue
D) decrease Unearned Rent Revenue and increase Rent Revenue

Question 80

On March 1,a landlord received $10,000 rent for the month of April.On March 1,the landlord will ________.

A) increase Cash and increase Rent Revenue
B) increase Cash and increase Unearned Rent Revenue
C) increase Cash and increase Paid-in Capital
D) increase Rent Expense and decrease Cash