Deck 1: An Introduction to Accounting

Question 1

A company's retained earnings at the beginning and ending of the accounting period were $48,000 and $55,000,respectively.If the company had revenues of $61,000 and expenses of $50,000,the amount of cash dividends paid must have been

A) $2,000.
B) $9,000.
C) $3,000.
D) $4,000.

Answer 1

D

Question 2

A business's equity comes from

A) its creditors.
B) investments by owners.
C) amounts earned by the business.
D) both B and C

Answer 2

D

Question 3

Rowena Company spent cash to purchase equipment.As a result of this event,

A) total liabilities increased.
B) total assets increased.
C) net income increased.
D) total assets were unchanged.

Answer 3

D

Question 4

Which of the following items would be an example of revenue?

A) cash investments made by owners
B) cash received from a bank loan
C) cash received from customers for services provided
D) all of these

Question 5

Retained Earnings is

A) a part of a company's assets.
B) a category or type of liability.
C) a part of stockholders' equity.
D) a result of asset use transactions.

Question 6

Generally accepted accounting principles (GAAP)are measurement rules for

A) managerial accounting.
B) financial accounting.
C) tax accounting.
D) determining the market rate of return on a company's stock.

Question 7

The claims side of the accounting equation

A) lists the resources that a business owns or controls.
B) lists the sources of the business's assets.
C) must balance out to zero.
D) indicates the amount of profit that a business has earned.

Question 8

The claims of a business's creditors are called

A) assets.
B) liabilities.
C) equity.
D) revenue.

Question 9

Resources that a business uses to operate the business are called

A) assets.
B) equity.
C) revenues.
D) liabilities.

Question 10

The broad categories of information reported on a business's financial statements are referred to as

A) accounts.
B) elements of the financial statements.
C) components.
D) assets.

Question 11

Ohio Company provided services to a customer for $1,700 cash.As a result of this event,

A) total assets decreased.
B) total liabilities increased.
C) retained earnings increased.
D) cash flows from financing activities increased.

Question 12

During 2010,Cruz Company earned $5,000 in cash revenue,incurred $3,200 in cash expenses,and paid $500 in cash dividends to its owners.Based on this information,

A) retained earnings increased by $1,300 during the year.
B) net income was $1,300 for 2010.
C) the net cash flow from operating activities was $1,300 for the year.
D) total assets increased by $1,800 during 2010.

Question 13

As of December 31,2009,Bueno Company had $1,000 in liabilities,$8,000 in common stock,and $2,500 in retained earnings.The total amount of assets on that date is

A) $10,000.
B) $12,500.
C) $11,500.
D) $7,500.

Question 14

Accounting information focused on the needs of external users is

A) financial accounting.
B) managerial accounting.
C) claims accounting.
D) not-for-profit accounting.

Question 15

A stockholder in a corporation would use ___ to learn about the company.

A) financial accounting information
B) managerial accounting information
C) not-for-profit accounting information
D) both A and C

Question 16

The accounting equation may be written,

A) Revenues - Expenses = Net Income
B) Assets = Liabilities
C) Liabilities = Equity
D) Assets = Claims

Question 17

A creditor

A) provides financial resources to a business in exchange for an ownership interest.
B) provides labor resources to a business.
C) lends financial resources to a business.
D) is a resource user.

Question 18

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

A) the US Congress
B) the Securities and Exchange Commission
C) the Financial Accounting Standards Board
D) the Internal Revenue Service

Question 19

An investor provides resources to a business in exchange for

A) physical resources.
B) priority of claims in event of liquidation.
C) an ownership interest in the business.
D) a promise that the resources will be repaid at a given date.

Question 20

The balance sheet for Raymond Company shows total assets of $4,000,liabilities of $1,500,and retained earnings of $1,200.Based on this information,the amount of common stock must be

A) $1,300.
B) $5,500.
C) $4,200.
D) $1,700.

Question 21

Liabilities are shown on the

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

Question 22

Bridges Company earned $4,000 in cash revenues,paid cash expenses of $3,450,and paid a cash dividend of $300 to its owners.It engaged in no other transactions during the period.Which of the following statements is true?

A) The cash flow from financing activities was $0.
B) The net cash flow from operating activities was an inflow or increase of $550.
C) The net cash flow from operating activities was an inflow or increase of $250.
D) The cash flow from investing activities was an increase of $250.

Question 23

Most assets must be reported on the balance sheet at

A) their current replacement cost.
B) fair market value.
C) an amount estimated by the company's management.
D) historical cost.

Question 24

An asset source transaction

A) increases one asset and decreases another.
B) increases an asset and increases a liability or equity.
C) increases an asset and decreases a liability or equity.
D) decreases an asset and increases a liability.

Question 25

Which of the following transactions is an asset source transaction?

A) acquired office supplies by signing a short-term note payable
B) paid cash to purchase land
C) paid cash for operating expenses
D) paid cash dividends to owners

Question 26

An asset use transaction

A) increases one asset and decreases another.
B) decreases an asset and decreases a liability or equity.
C) increases an asset and decreases a liability or equity.
D) increases an asset and increases a liability or equity.

Question 27

If a company receives cash for providing services to customers,that transaction is

A) an asset source transaction.
B) an asset use transaction.
C) an asset exchange transaction.
D) either A or C

Question 28

If a company's expenses are greater than its revenues for the year,

A) its assets increased during the period.
B) the company incurred a net loss during the period.
C) the company's liabilities must have increased.
D) the company's stockholders' equity must have decreased during the period.

Question 29

Wayne Company purchased equipment for $45,000 cash.As a result of this event,Wayne had a

A) $45,000 cash outflow from financing activities.
B) $45,000 cash inflow from financing activities.
C) $45,000 cash outflow from investing activities.
D) $45,000 cash outflow from operating activities.

Question 30

Chen Company paid $3,000 cash for utility expenses.What kind of transaction is this?

A) asset source transaction
B) asset use transaction
C) asset exchange transaction
D) claims source transaction

Question 31

In 1998,Parker Corporation purchased land for $130,000.In 2010,Parker Company had the land appraised,and its value was estimated to be $190,000.Also during 2010,another company offered Parker $145,000 for the parcel of land.When the balance sheet is prepared at the end of 2010,at what dollar amount should the land be reported?

A) $190,000
B) $145,000
C) $130,000
D) None of these

Question 32

Which of the following items would appear on a balance sheet?

A) Notes Payable
B) Dividends
C) Expenses
D) Revenues

Question 33

The term "articulation"

A) requires that asset decreases (expenses)be matched with asset increases (revenues).
B) refers to the requirement that separate financial statements be prepared for separate entities.
C) means that a business's financial statements are prepared for specified periods of time.
D) indicates that there are interrelationships among a business's financial statements.

Question 34

The amount of land owned by a business appears on which financial statement?

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

Question 35

Pardee Company earned $25,000 of cash revenue.What kind of transaction is this?

A) asset use transaction
B) asset exchange transaction
C) asset source transaction
D) claims source transaction

Question 36

An asset decrease resulting from consumption of resources to earn revenue is

A) a net loss.
B) a liability.
C) an expense.
D) an asset source transaction.

Question 37

Which of the following is NOT an asset use transaction?

A) paying cash dividends
B) paying cash to purchase land
C) paying off the principal on a loan
D) paying salaries to employees

Question 38

Which of the following transactions is an asset use transaction?

A) payment of cash dividends to owners
B) paying cash to acquire furniture
C) acquiring cash by issuing stock to owners
D) providing services to customers for cash

Question 39

Accounting information is said to be reliable if

A) it is based on recent information.
B) it was prepared by someone with good credentials in accounting,such as a certified public accountant.
C) it can be independently verified.
D) it complies with rules and standards of the Internal Revenue Service.

Question 40

Which of the following items would appear in the financing activities section of a statement of cash flows?

A) received cash revenue from customers
B) paid cash for dividends
C) purchased equipment for cash
D) paid cash for utility bill

Question 41

Bond Company experienced an accounting event that affected its financial statements as indicated below: Which of the following accounting events could have caused these effects on Bond's financial statements?

A) paid a cash dividend
B) earned cash revenue
C) borrowed money from a bank
D) none of these

Question 42

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

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question 43

Expenses are shown on the

A) income statement.
B) statement of changes in stockholders' equity.
C) balance sheet.
D) all of these.

Question 44

Which financial statement reports the results of a business's operations?

A) income statement
B) statement of changes in equity
C) balance sheet
D) statement of cash flows

Question 45

What was the cash flow from financing activities?

A) an inflow of $60,000
B) an inflow of $52,000
C) an inflow of $36,000
D) an inflow of $48,000

Question 46

Dividends paid by a company are shown on the

A) income statement.
B) balance sheet.
C) statement of changes in stockholders' equity.
D) all of these.

Question 47

ABC Company acquired $23,000 by issuing common stock to investors.Which of the following choices accurately reflects how this event would affect the company's financial statement?

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question 48

MNO Company paid $500 cash for salary expenses.Which of the following choices accurately reflects how this event would affect the company's financial statements?

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question 49

What amount of cash did Hardin have at the end of 2010?

A) $48,000
B) $56,000
C) $52,000
D) $67,000

Question 50

Assuming that Hardin engaged in no transactions during the year other than those listed above,what was the amount of net income or loss for the year?

A) $19,000 net income
B) $15,000 net income
C) $12,000 net income
D) $11,000 net loss

Question 51

Ruiz Company sold land for $25,000 cash.The original cost of the land was $25,000.Select the answer that indicates how this event would affect the company's financial statements.

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question 52

STU Company borrowed $32,000 of cash from a local bank.Which of the following choices accurately reflects how this event would affect the company's financial statements?

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question 53

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

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question 54

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

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question 55

What was the cash flow from investing activities?

A) an outflow of $15,000
B) an outflow of $19,000
C) an inflow of $65,000
D) an outflow of $23,000

Question 56

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

A) statement of changes in equity
B) balance sheet
C) income statement
D) statement of cash flows

Question 57

Illinois Company experienced an accounting event that affected its financial statements as indicated below: Which of the following accounting events could have caused these effects on the company's financial statements?

A) paid a cash dividend
B) earned cash revenue
C) borrowed money from a bank
D) none of these

Question 58

Radium Company earned $15,000 of cash revenue.Which of the following choices accurately reflects how this event would affect the company's financial statements?

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question 59

Parrot Company paid a $300 cash dividend.Which of the following choices accurately reflects how this event would affect the company's financial statements?

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question 60

What was the cash flow from operating activities?

A) an inflow of $4,000
B) an inflow of $19,000
C) an inflow of $11,000
D) an inflow of $15,000

Question 61

A business can obtain resources through its earnings activities.

Question 62

Investors in a business expect to receive a share of the income earned by the business.

Question 63

Accounting is an information system that reports on the activities of an organization.

Question 64

The sources of a business's assets are liabilities and distributions to owners.

Question 65

The Financial Accounting Standards Board is the primary authority for establishing accounting standards for businesses in the United States.

Question 66

A business and a person who owns the business are separate reporting entities.

Question 67

The account,"Land," is a subclassification of the "Liabilities" element of the financial statements.

Question 68

The accounting equation may be written,"Assets = Claims" or "Assets = Liabilities + Equity."

Question 69

An asset source transaction increases a business's assets and the claims to assets.

Question 70

Accounts are subclassifications of the various elements of the financial statements.

Question 71

Both liabilities and equity are sources of a business's assets.

Question 72

An asset exchange transaction does not affect the total amount of liabilities and equity of a business.

Question 73

A business's creditors have a priority claim to its assets in the event of liquidation.

Question 74

Investors and creditors use accounting information to identify the businesses they wish to provide resources to.

Question 75

The historical cost concept requires that most assets be reported at the amount paid for them.

Question 76

A business's equity is the future obligations of the entity.

Question 77

Issuance of common stock is an asset use transaction.

Question 78

The accounting term "reliability" means that information is consistent from one accounting period to the next.

Question 79

The difference between asset increases and asset decreases from operating a business is called income or earnings.

Question 80

An asset exchange transaction does not affect the total amount of assets of an entity.