Deck 1: An Introduction to Accounting

Question 1

Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts.
Patterson Co. paid $50,000 cash to purchase land.

Answer 1

(N) (N) (N) (N) (N) (N) (D)
Explanation: Purchasing land for cash is an asset exchange transaction that increases one asset (land) and decreases another asset (cash). It does not affect the income statement, and is reported as an investing activity in the statement of cash flows.

Question 2

Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts.
Vincent Co. provided services for $25,000 cash.

Answer 2

(I) (N) (I) (I) (N) (I) (I)
Explanation: This is an asset source transaction that increases the business's assets (cash). When a business provides services, it earns revenue. Revenue increases net income, which will increase equity (retained earnings) at the end of the accounting period. This event is reported as a cash flow from operating activities in the statement of cash flows.

Question 3

Give three examples of asset use transactions.

Answer 3

Paid loan, paid expense, and paid dividends to stockholders.
Explanation: Asset use transactions involve a decrease in assets (for example, cash) and will also result in a decrease in either liabilities (paid loan) or equity (paid expense or dividends).

Question 4

What financial statement elements are reported on a balance sheet?

Question 5

Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts.
Rodriguez Co. borrowed $20,000 cash from Century Bank.

Question 6

Who are the three distinct types of participants in a market? Briefly describe the role of each group of participants.

Question 7

How does providing services for cash affect the accounting equation? Is it considered an asset source, asset use, or asset exchange transaction?

Question 8

From what three sources does a business obtain its assets?

Question 9

Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts.
Walsh Co. paid a $50,000 cash dividend to its owners.

Question 10

Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts.
Greene Co. paid $211,000 cash in salaries to its employees.

Question 11

Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts.
Ferguson Co. issued common stock for $50,000 cash.

Question 12

Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts.
Vegas Co. issued a note to purchase a building.

Question 13

What is meant by the term "global GAAP"? How does it impact U.S. companies? What body is responsible for setting global standards?

Question 14

What is meant by the term "stakeholders?"

Question 15

Explain some of the accounting similarities and differences between not-for-profit organizations and for-profit businesses.

Question 16

Briefly distinguish between financial accounting and managerial accounting.

Question 17

How does the payment of cash dividends to stockholders affect the accounting equation? Is it considered an asset source, asset use, or asset exchange transaction?

Question 18

If the total equity claimed by owners of Ping Construction is $50,000 and liabilities are $25,000, what are total assets?

Question 19

What is meant by the term double-entry bookkeeping?

Question 20

Name the group that has the primary authority for establishing U.S. GAAP.

Question 21

"GAAP" stands for

A) Government Authorized Accounting Procedures.
B) Generally Applied Accounting Procedures.
C) Generally Accepted Accounting Principles.
D) Generally Authorized Auditing Principles.

Question 22

If Boyd Company reported assets of $500 and liabilities of $200, Boyd's total claims totaled

A) $300.
B) $500.
C) $700.
D) none of these.

Question 23

Which types of accounts are closed out to retained earnings at the end of an accounting period?

Question 24

If a corporation issues common stock for $20,000 cash, in which section of the statement of cash flows would this transaction be reported?

Question 25

Which of the following is not an element of the financial statements?

A) Cash
B) Revenue
C) Assets
D) Distributions

Question 26

If a company's total assets decreased while liabilities and common stock were unchanged, and no dividends were paid, then

A) cash flow from operating activities was greater than cash flow from investing activities.
B) retained earnings were less than net income during the period.
C) revenues were less than expenses.
D) the company must have purchased assets with cash.

Question 27

What does a company's statement of cash flow tell you about the company?

Question 28

The balance sheet of the Chesapeake Company contained the following accounts and balances: $$\begin{array} { | l | l | l | c | } \text { Cash } & \$ 600 & \text { Notes Payable } & \$ 300 \\\hline \text { Equily } & \$ 450 & \text { Land } & ?\end{array}$$ Based on the above information only, the amount or balance for Land must be

A) $450.
B) $750.
C) $150.
D) $1,350.

Question 29

"IASB" stands for

A) Internal Accounting Standards Board.
B) Internationally Authorized Statements Board.
C) International Accounting Standards Board.
D) Initial Accounting Statements Bureau.

Question 30

Which resource provider typically receives first priority when resources are divided as part of a business's liquidation?

A) The company's managers
B) Stockholders
C) Creditors
D) Owners

Question 31

Which of the following items is an example of revenue?

A) Cash received from a bank loan
B) Cash received from customers at the time services were provided
C) Cash investments made by owners
D) All of these

Question 32

Name and briefly describe each of the four financial statements.

Question 33

The Jefferson Company is a manufacturer of antique reproduction furniture. Which term best describes Jefferson's role in society?

A) Consumer
B) Regulatory Agency
C) Conversion Agent
D) Resource Owner

Question 34

Vandever Company's balance sheet reported assets of $42,000, liabilities of $15,000 and common stock of $12,000 as of December 31, 2012. If Retained Earnings on the December 31, 2013 balance sheet is $18,000 and Vandever paid a $14,000 dividend during 2013, then the amount of net income for 2013 was which of the following?

A) $17,000
B) $15,000
C) $3,000
D) None of these

Question 35

Which of the following groups has the primary responsibility for establishing generally accepted accounting principles for business entities in the United States?

A) Internal Revenue Service.
B) U.S. Congress.
C) Financial Accounting Standards Board.
D) International Accounting Standards Board.

Question 36

Managerial accounting provides information primarily to which of the following groups or individuals?

A) Internal users
B) Shareholders
C) External users
D) Internal users and Shareholders

Question 37

Varghese Company paid cash to purchase land. As a result of this accounting event

A) total assets decreased.
B) total assets were unaffected.
C) total equity decreased.
D) none of these.

Question 38

Which type of accounting information is intended to satisfy the needs of external users of accounting information?

A) Cost accounting
B) Financial accounting
C) Tax accounting
D) Managerial accounting

Question 39

Define the term "accounting period." How does this term relate to the "matching concept" as it pertains to the income statement?

Question 40

Hacienda Company issued common stock for $250,000 cash. As a result of this event,

A) assets increased.
B) retained earnings increased.
C) equity increased.
D) assets increased and equity increased.

Question 41

The year-end financial statements of Greenway Company contained the following elements and corresponding amounts: Assets = $20,000; Liabilities = ?; Common Stock = $5,000; Revenue = $11,000; Dividends = $750; Beginning Retained Earnings = $3,750; Ending Retained Earnings = $7,000.
The amount of liabilities reported on the end-of-period balance sheet was

A) $10,750.
B) $11,250.
C) $8,000.
D) $8,750.

Question 42

Which of the following statements is true?

A) Balance sheet accounts are referred to as nominal accounts.
B) Balance sheet accounts are referred to as permanent accounts.
C) Dividends are permanent accounts.
D) All of these statements are true.

Question 43

On January 1, 2013, Baird Company had beginning balances as lows:
Assets = $2,250
Liabilities = $620
Common Stock = $800
During 2013, Baird paid dividends to its stockholders of $900. Given that ending retained earnings was $600, what was Baird's net income for the 2013 accounting period?

A) $770
B) $830
C) $1,250
D) $500

Question 44

As of December 31, 2013, Bloch Company had $3,800 of assets, $1,600 of liabilities and $700 of retained earnings. The balance in the common stock account on the December 31, 2013 balance sheet was

A) $2,900.
B) $3,800.
C) $1,500.
D) none of these.

Question 45

In which section of a statement of cash flows would the payment of cash dividends be reported?

A) Financing activities.
B) Operating activities.
C) Purchasing activities.
D) Investing activities.

Question 46

Which of the following is NOT an asset use transaction?

A) Paying cash to purchase land
B) Paying cash expenses
C) Paying off the principal of a loan
D) All of these are asset use transactions

Question 47

Which of the following statements regarding cash transactions is true?

A) Purchasing land for cash results in no net change in assets.
B) Issuance of stock to owners increases assets.
C) Expense transactions increase assets.
D) Purchasing land for cash results in no net change in assets and Issuance of stock to owners increases assets.

Question 48

During 2013, Bledsoe Company earned $6,700 of cash revenue, paid cash dividends of $950 to owners and paid $5,000 for cash expenses. Liabilities were unchanged. Which of the following accurately describes the effect of these events on the elements of the company's financial statements?

A) Assets increased by $7,700.
B) Assets increased by $750.
C) Equity increased by $2,700.
D) Assets increased by $750 and Equity increased by $2,700.

Question 49

A company mistakenly recorded a cash purchase of land as an expense. As a result of this error

A) Assets were understated and equity was overstated.
B) Assets and equity were understated.
C) Assets and equity were overstated.
D) Assets were overstated and equity was understated.

Question 50

The year-end financial statements of Greenway Company contained the following elements and corresponding amounts: Assets = $20,000; Liabilities = ?; Common Stock = $5,000; Revenue = $11,000; Dividends = $750; Beginning Retained Earnings = $3,750; Ending Retained Earnings = $7,000.
Based on this information, the amount of expenses on Greenway's income statement was

A) $7,000.
B) $7,750.
C) $14,000.
D) $3,250.

Question 51

The transaction, "earned cash revenue," affects which two accounts?

A) Revenue and Salaries Expense
B) Cash and Notes Payable
C) Cash and Revenue
D) Cash and Dividends

Question 52

Which of the following could describe the effects of an asset exchange transaction on a company's financial statements?

A)

B)

C)

D)

Question 53

Jacks Company had a net increase in cash from operating activities of $8,000 and a net decrease in cash from financing activities of $1,000. If the beginning and ending cash balances for the company were $3,000 and $11,000, then net cash change from investing activities was:

A) an outflow or decrease of $1,000.
B) an inflow or increase of $2,000.
C) an inflow or increase of $1,000.
D) zero.

Question 54

Borrowing cash from the bank is an example of which type of transaction?

A) Asset exchange
B) Claims use
C) Asset use
D) Asset source

Question 55

In which section of a statement of cash flows would the payment of cash dividends be reported?

A) Financing activities.
B) Operating activities.
C) Purchasing activities.
D) Investing activities.

Question 56

Which of the following items appears in the investing activities section of the statement of cash flows?

A) Cash outflow for the purchase of a computer.
B) Cash inflow from the issuance of common stock.
C) Cash outflow for the payment of dividends.
D) Cash inflow from interest revenue.

Question 57

Which of the following financial statements provides information about a company as of a specific point in time?

A) Income statement
B) Statement of changes in equity
C) Statement of cash flows
D) Balance sheet

Question 58

At the end of 2013, retained earnings for the Bisk Company was $1,750. Revenue earned by the company in 2013 was $2,000, expenses paid during the period were $1,100, and dividends paid during the period were $500. Based on this information alone, retained earnings at the beginning of 2013 was

A) $850.
B) $2,150.
C) $1,350.
D) $4,000.

Question 59

The total equity of Timberlake Company at the beginning of 2013 amounted to $5,500. During 2013 the company reported net income of $1,800 and paid a $500 dividend. If retained earnings at the end of 2013 is $2,200, what was beginning common stock?

A) $3,300
B) $2,800
C) $1,300
D) $4,600

Question 60

Which of the following describes the effects of an asset use transaction on a company's financial statements?

A)

B)

C)

D)

Question 61

During 2013, Chi Company earned $950 of cash revenue, paid $600 of cash expenses, and paid a $100 cash dividend to its owners. Based on this information alone,

A) net income amounted to $350.
B) total assets increased by $250.
C) cash inflow from operating activities was $350.
D) all of these are correct.

Question 62

Callahan Company earned $1,500 of cash revenue, paid $1,000 for cash expenses, and paid a $200 cash dividend to its owners. Which of the following statements is true?

A) The net cash flow from operating activities was $500.
B) The net cash flow from investing activities was an outflow or decrease of $200.
C) The net cash flow from operating activities was $300.
D) Cash flows from financing activities were unchanged.

Question 63

Yi Company began operations on January 1, 2013. During 2013, the company engaged in the following cash transactions:
1) issued stock for $40,000
2) borrowed $25,000 from its bank
3) provided consulting services for $38,000
4) paid back $15,000 of the bank loan
5) paid rent expense for $9,000
6) purchased equipment costing $12,000
7) paid $3,000 dividends to stockholders
8) paid employees' salaries, $21,000
What is Yi's net cash flow from investing activities?

A) Inflow of $40,000
B) Outflow of $37,000
C) Inflow of $28,000
D) Outflow of $12,000

Question 64

Yi Company began operations on January 1, 2013. During 2013, the company engaged in the following cash transactions:
1) issued stock for $40,000
2) borrowed $25,000 from its bank
3) provided consulting services for $38,000
4) paid back $15,000 of the bank loan
5) paid rent expense for $9,000
6) purchased equipment costing $12,000
7) paid $3,000 dividends to stockholders
8) paid employees' salaries, $21,000
What is Yi's cash flow from financing activities?

A) Inflow of $37,000
B) Outflow of $15,000
C) Inflow of $47,000
D) Outflow of $3,000

Question 65

Grant Company purchased a delivery van for cash. The cash flow from this event should be shown on the statement of cash flows as

A) an operating activity that increases cash.
B) a financing activity that decreases cash.
C) an investing activity that decreases cash.
D) an operating activity that decreases cash.

Question 66

Yi Company began operations on January 1, 2013. During 2013, the company engaged in the following cash transactions:
1) issued stock for $40,000
2) borrowed $25,000 from its bank
3) provided consulting services for $38,000
4) paid back $15,000 of the bank loan
5) paid rent expense for $9,000
6) purchased equipment costing $12,000
7) paid $3,000 dividends to stockholders
8) paid employees' salaries, $21,000
What is Yi's net cash flow from investing activities?

A) Inflow of $40,000
B) Outflow of $37,000
C) Inflow of $28,000
D) Outflow of $12,000

Question 67

Which financial statement matches asset increases from operating a business with asset decreases from operating the business?

A) Balance sheet.
B) Statement of changes in equity.
C) Statement of cash flows.
D) Income statement.

Question 68

Petras Company engaged in the following transactions during 2012, its first year in operations: (Assume all transactions are cash transactions)
1) Acquired $950 cash from the issue of common stock.
2) Borrowed $420 from a bank.
3) Earned $600 of revenues.
4) Paid expenses of $250.
5) Paid a $50 dividend.
During 2013, Petras engaged in the following transactions: (Assume all transactions are cash transactions)
1) Issued an additional $325 of common stock.
2) Repaid $220 of its debt to the bank.
3) Earned revenues of $750.
4) Incurred expenses of $360.
5) Paid dividends of $100.
Petras Company's net cash inflow from operating activities for 2012 is

A) $600.
B) $550.
C) $350.
D) $300.

Question 69

Yi Company began operations on January 1, 2013. During 2013, the company engaged in the following cash transactions:
1) issued stock for $40,000
2) borrowed $25,000 from its bank
3) provided consulting services for $38,000
4) paid back $15,000 of the bank loan
5) paid rent expense for $9,000
6) purchased equipment costing $12,000
7) paid $3,000 dividends to stockholders
8) paid employees' salaries, $21,000
What is Yi's cash flow from financing activities?

A) Inflow of $37,000
B) Outflow of $15,000
C) Inflow of $47,000
D) Outflow of $3,000

Question 70

Yi Company began operations on January 1, 2013. During 2013, the company engaged in the following cash transactions:
1) issued stock for $40,000
2) borrowed $25,000 from its bank
3) provided consulting services for $38,000
4) paid back $15,000 of the bank loan
5) paid rent expense for $9,000
6) purchased equipment costing $12,000
7) paid $3,000 dividends to stockholders
8) paid employees' salaries, $21,000
What is Yi's net cash flow from operating activities?

A) Inflow of $5,000
B) Inflow of $8,000
C) Inflow of $17,000
D) Inflow of $33,000

Question 71

Petras Company engaged in the following transactions during 2012, its first year in operations: (Assume all transactions are cash transactions)
1) Acquired $950 cash from the issue of common stock.
2) Borrowed $420 from a bank.
3) Earned $600 of revenues.
4) Paid expenses of $250.
5) Paid a $50 dividend.
During 2013, Petras engaged in the following transactions: (Assume all transactions are cash transactions)
1) Issued an additional $325 of common stock.
2) Repaid $220 of its debt to the bank.
3) Earned revenues of $750.
4) Incurred expenses of $360.
5) Paid dividends of $100.
Petras Company's net cash inflow from operating activities for 2012 is

A) $600.
B) $550.
C) $350.
D) $300.

Question 72

Retained Earnings at the beginning and ending of the accounting period was $300 and $700, respectively. If revenues were $1,100 and dividends paid to stockholders were $200, expenses for the period must have been

A) $500.
B) $400.
C) $900.
D) $700.

Question 73

Which financial statement matches asset increases from operating a business with asset decreases from operating the business?

A) Balance sheet.
B) Statement of changes in equity.
C) Statement of cash flows.
D) Income statement.

Question 74

Grant Company purchased a delivery van for cash. The cash flow from this event should be shown on the statement of cash flows as

A) an operating activity that increases cash.
B) a financing activity that decreases cash.
C) an investing activity that decreases cash.
D) an operating activity that decreases cash.

Question 75

Yi Company began operations on January 1, 2013. During 2013, the company engaged in the following cash transactions:
1) issued stock for $40,000
2) borrowed $25,000 from its bank
3) provided consulting services for $38,000
4) paid back $15,000 of the bank loan
5) paid rent expense for $9,000
6) purchased equipment costing $12,000
7) paid $3,000 dividends to stockholders
8) paid employees' salaries, $21,000
What is Yi's net cash flow from operating activities?

A) Inflow of $5,000
B) Inflow of $8,000
C) Inflow of $17,000
D) Inflow of $33,000

Question 76

Young Company provided services to a customer for $6,500 cash. As a result of this event,

A) total assets decreased.
B) total liabilities increased.
C) net income increased.
D) cash flow from financing activities increased.

Question 77

During 2013, Chi Company earned $950 of cash revenue, paid $600 of cash expenses, and paid a $100 cash dividend to its owners. Based on this information alone,

A) net income amounted to $350.
B) total assets increased by $250.
C) cash inflow from operating activities was $350.
D) all of these are correct.

Question 78

Young Company provided services to a customer for $6,500 cash. As a result of this event,

A) total assets decreased.
B) total liabilities increased.
C) net income increased.
D) cash flow from financing activities increased.

Question 79

Callahan Company earned $1,500 of cash revenue, paid $1,000 for cash expenses, and paid a $200 cash dividend to its owners. Which of the following statements is true?

A) The net cash flow from operating activities was $500.
B) The net cash flow from investing activities was an outflow or decrease of $200.
C) The net cash flow from operating activities was $300.
D) Cash flows from financing activities were unchanged.

Question 80

Retained Earnings at the beginning and ending of the accounting period was $300 and $700, respectively. If revenues were $1,100 and dividends paid to stockholders were $200, expenses for the period must have been

A) $500.
B) $400.
C) $900.
D) $700.