Question 1

Flitter reported net income of $17,500 for the past year. At the beginning of the year the company had $200,000 in assets and $50,000 in liabilities. By the end of the year, assets had increased to $300,000 and liabilities were $75,000. Calculate its return on assets:

Accepted Answer

The answer of Flitter reported net income of $17,500 for...

Question 2

Doc's Ribhouse had beginning equity of $52,000; net income of $35,000, and withdrawals by the owner of $12,000. The owner made no investments during the year. Calculate the ending equity.

Accepted Answer

Ending Equity = Beginning Equity + Net Income - Withdrawals
Ending Equity = 52,000 + 35,000 - 12,000
Ending Equity = $75,000

Question 3

Grandmark Printing pays $2,000 rent to the landlord of the building where its facilities are located. How does this transaction affect the accounting equation for Grandmark?

Accepted Answer

Rent is an expense and decreases the company's assets (cash) and equity (retained earnings). Therefore, the accounting equation would be affected by decreasing both assets and equity by $2,000.

Question 4

All of the following are classified as liabilities except:

Accepted Answer

Accounts Receivable are actually assets, as they represent money owed to the company by customers who have not yet paid for goods or services received. All other options (A, B, C, and D) are classified as liabilities because they represent amounts owed by the company to others.

Question 5

Savvy Sightseeing had beginning equity of $72,000; revenues of $90,000, expenses of $65,000, and withdrawals by owners of $9,000. Calculate the ending equity.

Accepted Answer

Ending Equity = Beginning Equity + Revenues - Expenses - Withdrawals 
                  = $72,000 + $90,000 - $65,000 - $9,000 
                  = $88,000

Question 6

A company's balance sheet shows: cash $24,000, accounts receivable $30,000, equipment $50,000, and equity $72,000. What is the amount of liabilities?

Accepted Answer

The accounting equation is Assets = Liabilities + Equity. The total assets are $24,000 (cash) + $30,000 (accounts receivable) + $50,000 (equipment) = $104,000. Given equity is $72,000, liabilities = $104,000 - $72,000 = $32,000.

Question 7

A company's balance sheet shows: cash $22,000, accounts receivable $16,000, office equipment $50,000, and accounts payable $17,000. What is the amount of owner's equity?

Accepted Answer

Owner's equity is calculated as total assets minus total liabilities. Total assets are $22,000 (cash) + $16,000 (accounts receivable) + $50,000 (office equipment) = $88,000. Total liabilities are $17,000 (accounts payable). Therefore, owner's equity is $88,000 - $17,000 = $71,000.

Question 8

A company reported total equity of $145,000 at the beginning of the year. The company reported $210,000 in revenues and $165,000 in expenses for the year. Liabilities at the end of the year totaled $92,000. What are the total assets of the company at the end of the year?

Accepted Answer

Total equity at the beginning of the year + net income for the year (revenues - expenses) = total equity at the end of the year
$145,000 + ($210,000 - $165,000) = total equity at the end of the year
$145,000 + $45,000 = total equity at the end of the year
Total equity at the end of the year = $190,000
Total assets at the end of the year = total equity at the end of the year + liabilities at the end of the year
Total assets at the end of the year = $190,000 + $92,000 = $282,000

Question 9

The accounting equation for Ying Company shows a decrease in its assets and a decrease in its equity. Which of the following transactions could have caused that effect?

Accepted Answer

When advertising expense is paid in cash, it decreases assets (cash) and decreases equity (retained earnings) due to the expense recognition.

Question 10

All of the following are classified as assets except:

Accepted Answer

Accounts Payable is classified as a liability, not an asset. The other options listed are all examples of assets.

Question 11

The accounting equation for Long Company shows an increase in its assets and an increase in its liabilities. Which of the following transactions could have caused that effect?

Accepted Answer

Purchasing equipment on credit would increase the assets of Long Company (equipment) and also increase its liabilities (accounts payable to the supplier of the equipment). The other transactions listed would only affect either assets or liabilities, not both.

Question 12

If a company has excess space in its building that it rents to another company for $700, what is the effect on the accounting equation during the first month?

Accepted Answer

Renting out excess space creates a revenue for the company. Revenue increases equity, and since the rent is being paid in cash, the cash balance also increases. Therefore, assets would increase by $700 (cash), and equity would increase by $700 (revenue from rent).

Question 13

Atkins Company collected $1,750 as payment for the amount owed by a customer from services provided the prior month on credit. How does this transaction affect the accounting equation for Atkins?

Accepted Answer

The transaction involves collecting cash (an asset) and reducing accounts receivable (another asset) by the same amount, resulting in no net change in total assets.

Question 14

Billington Corp. borrows $80,000 cash from Second National Bank. How does this transaction affect the accounting equation for Billington?

Accepted Answer

When Billington Corp. borrows $80,000, its assets increase by $80,000 due to the cash received, and its liabilities increase by $80,000 due to the obligation to repay the loan.

Question 15

Rico's Taqueria had cash inflows from operating activities of $27,000; cash outflows from investing activities of $22,000, and cash outflows from financing activities of $12,000. Calculate the net increase or decrease in cash.

Accepted Answer

The net cash flow is calculated by adding cash inflows and subtracting cash outflows: $27,000 (inflows) - $22,000 (investing outflows) - $12,000 (financing outflows) = -$7,000, indicating a $7,000 decrease in cash.

Question 16

Charlie's Chocolates' owner made investments of $50,000 and withdrawals of $20,000. The company has revenues of $83,000 and expenses of $64,000. Calculate its net income.

Accepted Answer

To calculate the net income, we need to subtract the total expenses from the total revenues:
Net income = Revenues - Expenses
Net income = $83,000 - $64,000
Net income = $19,000

Investments and withdrawals are not taken into account in the calculation of net income. Therefore, choices A, B, D, and E are incorrect. The correct answer is C, $19,000.

Question 17

Dawson Electronic Services had revenues of $80,000 and expenses of $50,000 for the year. Its assets at the beginning of the year were $400,000. At the end of the year assets were worth $450,000. Calculate its return on assets.

Accepted Answer

Return on assets (ROA) is calculated as Net Income divided by Average Total Assets. Net Income is $80,000 - $50,000 = $30,000. Average Total Assets = ($400,000 + $450,000) / 2 = $425,000. ROA = $30,000 / $425,000 = 0.0706 or 7.1%.

Question 18

If the assets of a company increase by $55,000 during the year and its liabilities increase by $25,000 during the same year, then the change in equity of the company during the year must have been:

Accepted Answer

The change in equity can be calculated using the accounting equation: Assets = Liabilities + Equity. If assets increase by $55,000 and liabilities increase by $25,000, then equity must have increased by $30,000 ($55,000 - $25,000 = $30,000). Therefore, the answer is C) An increase of $30,000.

Question 19

Which of the following accounts is not included in the calculation of a company's ending owner's equity?

Accepted Answer

Cash is a balance sheet account and does not affect owner's equity directly. Owner's equity is calculated using the formula: Owner's Equity = Beginning Owner's Equity + Owner Investments + Revenues - Expenses - Withdrawals. The other accounts listed (Revenues, Expenses, Owner Investments, and Withdrawals) are all components of this calculation.

Question 20

All of the following are classified as assets except:

Accepted Answer

Accounts Payable is a liability, as it represents money owed by the company to its creditors. The others are assets as they represent resources owned by the company.

Quiz 1: Accounting in Business

Flitter reported net income of $17,500 for the past year. At the beginning of the year the company had $200,000 in assets and $50,000 in liabilities. By the end of the year, assets had increased to $300,000 and liabilities were $75,000. Calculate its return on assets:

Doc's Ribhouse had beginning equity of $52,000; net income of $35,000, and withdrawals by the owner of $12,000. The owner made no investments during the year. Calculate the ending equity.

Grandmark Printing pays $2,000 rent to the landlord of the building where its facilities are located. How does this transaction affect the accounting equation for Grandmark?

All of the following are classified as liabilities except:

Savvy Sightseeing had beginning equity of $72,000; revenues of $90,000, expenses of $65,000, and withdrawals by owners of $9,000. Calculate the ending equity.

A company's balance sheet shows: cash $24,000, accounts receivable $30,000, equipment $50,000, and equity $72,000. What is the amount of liabilities?

A company's balance sheet shows: cash $22,000, accounts receivable $16,000, office equipment $50,000, and accounts payable $17,000. What is the amount of owner's equity?

A company reported total equity of $145,000 at the beginning of the year. The company reported $210,000 in revenues and $165,000 in expenses for the year. Liabilities at the end of the year totaled $92,000. What are the total assets of the company at the end of the year?

The accounting equation for Ying Company shows a decrease in its assets and a decrease in its equity. Which of the following transactions could have caused that effect?

All of the following are classified as assets except:

The accounting equation for Long Company shows an increase in its assets and an increase in its liabilities. Which of the following transactions could have caused that effect?

If a company has excess space in its building that it rents to another company for $700, what is the effect on the accounting equation during the first month?

Atkins Company collected $1,750 as payment for the amount owed by a customer from services provided the prior month on credit. How does this transaction affect the accounting equation for Atkins?

Billington Corp. borrows $80,000 cash from Second National Bank. How does this transaction affect the accounting equation for Billington?

Rico's Taqueria had cash inflows from operating activities of $27,000; cash outflows from investing activities of $22,000, and cash outflows from financing activities of $12,000. Calculate the net increase or decrease in cash.

Charlie's Chocolates' owner made investments of $50,000 and withdrawals of $20,000. The company has revenues of $83,000 and expenses of $64,000. Calculate its net income.

Dawson Electronic Services had revenues of $80,000 and expenses of $50,000 for the year. Its assets at the beginning of the year were $400,000. At the end of the year assets were worth $450,000. Calculate its return on assets.

If the assets of a company increase by $55,000 during the year and its liabilities increase by $25,000 during the same year, then the change in equity of the company during the year must have been:

Which of the following accounts is not included in the calculation of a company's ending owner's equity?

All of the following are classified as assets except: