Deck 1: An Introduction to Accounting

Question 1

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

A) Securities and Exchange Commission
B) U.S. Congress
C) International Accounting Standards Board
D) Financial Accounting Standards Board

Answer 1

Financial Accounting Standards Board

Question 2

Hazeltine Company issued common stock for $200,000 cash.What happened as a result of this event?

A) Assets increased.
B) Equity increased.
C) Claims increased.
D) Assets, claims, and equity all increased.

Answer 2

Assets, claims, and equity all increased.

Question 3

As of December 31,Year 2,Bristol Company had $100,000 of assets,$40,000 of liabilities and $25,000 of retained earnings.What percentage of Bristol's assets were obtained through investors?

A) 60%
B) 25%
C) 40%
D) 35%

Answer 3

35%

Question 4

Which resource providers lend financial resources to a business with the expectation of repayment with interest?

A) Consumers
B) Creditors
C) Investors
D) Owners

Question 5

Ballard Company reported assets of $500 and liabilities of $200.What amount will Ballard's report for stockholders' equity?

A) $300
B) $500
C) $700
D) Cannot be determined

Question 6

The Heritage Company is a manufacturer of office furniture.Which term best describes Heritage's role in society?

A) Conversion agent
B) Regulatory agency
C) Consumer
D) Resource owner

Question 7

Which of the following is an example of revenue?

A) Cash received as a result of a bank loan
B) Cash received from investors from the sale of common stock
C) Cash received from customers at the time services were provided
D) Cash received from the sale of land for its original selling price

Question 8

Which of the following statements is false regarding managerial accounting information?

A) It is often used by investors.
B) It is more detailed than financial accounting information.
C) It can include nonfinancial information.
D) It focuses on divisional rather than overall profitability.

Question 9

Algonquin Company reported assets of $50,000,liabilities of $22,000 and common stock of $15,000.Based on this information only,what is the amount of the company's retained earnings?

A) $7,000.
B) $57,000.
C) $13,000.
D) $87,000.

Question 10

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

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

Question 11

When a business provides services for cash,which elements of the accounting equation are affected?

A) Revenue and Expense
B) Cash and Revenue
C) Cash and Expense
D) Cash and Dividends

Question 12

Li Company paid cash to purchase land.What happened as a result of this business event?

A) Total assets decreased.
B) Total assets were unaffected.
C) Total equity decreased.
D) Both assets and total equity decreased.

Question 13

Stosch Company's balance sheet reported assets of $40,000,liabilities of $15,000 and common stock of $12,000 as of December 31,Year 1.Retained earnings on the December 31,Year 2 balance sheet is $18,000 and Stosch paid a $14,000 dividend during Year 2.What is the amount of net income for Year 2?

A) $17,000
B) $19,000
C) $13,000
D) $21,000

Question 14

A company's total assets increased during the period while its liabilities and common stock were unchanged.No dividends were declared or paid during the period.Which of the following would explain this situation?

A) Revenues were greater than expenses during the period.
B) Retained earnings were less than net income during the period.
C) No dividends were paid during the period.
D) The company must have purchased assets with cash during the period.

Question 15

Financial accounting standards are known collectively as GAAP.What does that acronym stand for?

A) Generally Accepted Accounting Principles
B) Generally Applied Accounting Procedures
C) Governmentally Approved Accounting Practices
D) Generally Authorized Auditing Principles

Question 16

On January 1,Year 2,Chavez Company had beginning balances as follows: total assets of $12,500,total liabilities of $4,500,and common stock of $3,000.During Year 2,Chavez paid dividends to its stockholders of $2,000.Given that retained earnings amounted to $6,000 at the end of Year 2,what was Chavez's net income for Year 2?

A) $3,000
B) $5,000
C) $7,000
D) $2,000

Question 17

At the time of liquidation,Fairchild Company reported assets of $200,000,liabilities of $120,000,common stock of $70,000 and retained earnings of $10,000.What is the maximum amount of Fairchild's assets that the shareholders are entitled to receive?

A) $200,000
B) $80,000
C) $90,000
D) $100,000

Question 18

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

A) Net income
B) Revenue
C) Assets
D) Cash

Question 19

Turner Company reported assets of $20,000 (including cash of $9,000),liabilities of $8,000,common stock of $7,000,and retained earnings of $5,000.Based on this information,what can be concluded?

A) 25% of Turner's assets are the result of prior earnings.
B) $5,000 is the maximum dividend that can be paid to shareholders.
C) 40% of Turner's assets are the result of borrowing from creditors.
D) 25% of Turner's assets are from prior earnings, $5,000 is the maximum possible dividend, and 40% of assets are the result of borrowed resources.

Question 20

International accounting standards are formulated by the IASB.What does that acronym stand for?

A) Internationally Accepted Standards Board
B) International Accounting Standards Board
C) International Accountability Standards Bureau
D) International Accounting and Sustainability Board

Question 21

Tandem Company borrowed $32,000 of cash from a local bank.Which of the following choices accurately reflects how this event affects the accounting equation?
$\begin{array}{|c|c|c|c|c|c|c|c|}\hline & \text { Assets } & = & \text { Liabilities } & + & \begin{array}{c}\text { Common } \\\text { Stock }\end{array} & + & \begin{array}{c}\text { Retained } \\\text { Earnings }\end{array} \\\hline \text { A } & \text { NA } & = & 32,000 & + & \text { NA } & + & 32,000 \\\hline \mathrm{B} . & 32,000 & = & \mathrm{NA} & + & 32,000 & + & \mathrm{NA} \\\hline \mathrm{C} . & 32,000 & = & \mathrm{NA} & + & \mathrm{NA} & + & 32,000 \\\hline \mathrm{D} . & 32,000 & = & 32,000 & + & \mathrm{NA} & + & \mathrm{NA} \\\hline\end{array}$

A) Option A
B) Option B
C) Option C
D) Option D

Question 22

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

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

Question 23

[The following information applies to the questions displayed below.]
The financial statements of Calloway Company prepared at the end of the current year contained the following elements and corresponding amounts: Assets = $50,000; Liabilities = ?; Common Stock = $15,000; Revenue = $22,000; Dividends = $1,500; Beginning Retained Earnings = $3,500; Ending Retained Earnings = $7,500.

-What was the amount of total liabilities reported on the balance sheet as of the end of the current year?

A) $27,500
B) $31,500
C) $35,000
D) $42,500

Question 24

Which of the following cash transactions would not affect total assets?

A) Borrowing cash from a bank
B) Issuing common stock for cash
C) Purchasing land for cash
D) Providing services for cash

Question 25

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

A) The net cash inflow from operating activities was $100.
B) The net cash outflow for investing activities was $200.
C) The net cash inflow from operating activities was $300.
D) The net cash outflow for investing activities was $100.

Question 26

Glavine Company repaid a bank loan with cash.The cash flow from this event should be reported as:

A) an outflow for investing activities on the Statement of Cash Flows
B) an outflow for financing activities on the Statement of Cash Flows
C) an inflow for investing activities on the Statement of Cash Flows
D) an inflow for operating activities on the Statement of Cash Flows

Question 27

Yi Company provided services to a customer for $5,500 cash.Based on this information alone,which of the following statements is true?

A) Total assets increased and total equity decreased.
B) Total assets were unchanged.
C) Liabilities decreased and net income increased.
D) Total assets increased and net income increased.

Question 28

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

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

Question 29

During Year 2,Millstone Company provided $6,500 of services for cash,paid cash dividends of $1,000 to owners,and paid $4,000 cash for expenses.Liabilities were unchanged.Which of the following statements accurately describes the effect of these events on the elements of the company's financial statements?

A) Assets increased by $6,500.
B) Assets increased by $1,500.
C) stockholders' equity increased by $2,500.
D) Assets increased by $5,500.

Question 30

At the end of Year 2,retained earnings for the Baker Company was $3,500.Revenue earned by the company in Year 2 was $1,500,expenses paid during the period were $800,and dividends paid during the period were $500.Based on this information alone,what was the amount of retained earnings at the beginning of Year 2?

A) $3,300
B) $3,700
C) $2,800
D) $3,800

Question 31

[The following information applies to the questions displayed below.]
The financial statements of Calloway Company prepared at the end of the current year contained the following elements and corresponding amounts: Assets = $50,000; Liabilities = ?; Common Stock = $15,000; Revenue = $22,000; Dividends = $1,500; Beginning Retained Earnings = $3,500; Ending Retained Earnings = $7,500.

-Based on this information,what was the amount of expenses reported on Calloway's income statement for the current year?

A) $18,500
B) $13,000
C) $16,500
D) $10,000

Question 32

Which of the following is not an example of an asset use transaction?

A) Paying cash dividends
B) Paying cash expenses
C) Paying off the principal of a loan
D) Paying cash to purchase land

Question 33

Which of the following describes the effects of an asset use transaction on the accounting equation?
$\begin{array}{|c|c|c|c|c|c|}\hline & \text { Assets } & = & \text { Liab. } & + & \text { Equity } \\\hline \mathrm{A} & + & = & + & + & \text { NA } \\\hline \mathrm{B} & - & = & \mathrm{NA} & + & - \\\hline \mathrm{C} . & +- & = & \mathrm{NA} & + & \mathrm{NA} \\\hline \mathrm{D} . & \mathrm{NA} & = & + & + & \mathrm{NA} \\\hline\end{array}$

A) Option A
B) Option B
C) Option C
D) Option D

Question 34

Retained earnings at the beginning and ending of the accounting period were $300 and $800,respectively.Revenues of $1,100 and dividends paid to stockholders of $200 were reported during the period.What was the amount of expenses reported for the period?

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

Question 35

During Year 2,Chico Company earned $1,950 of cash revenue,paid $1,600 of cash expenses,and paid a $150 cash dividend to its owners.Based on this information alone,which of the following statements is not true?

A) Net income amounted to $350.
B) Total assets increased by $200.
C) Cash inflow from operating activities was $350.
D) Cash inflow from operating activities was $200.

Question 36

Which of the following could describe the effects of an asset exchange transaction on a company's total assets,total liabilities and total equity?
$\begin{array}{|c|c|c|c|c|c|}\hline & \text { Assets } & = & \text { Liab. } & + & \text { Equity } \\\hline \mathrm{A} & \mathrm{NA} & = & \mathrm{NA} & + & \mathrm{NA} \\\hline \mathrm{B} . & + & = & \mathrm{NA} & + & + \\\hline \mathrm{C} . & - & = & \mathrm{NA} & + & - \\\hline \mathrm{D} . & \mathrm{NA} & = & \mathrm{NA} & + & +- \\\hline\end{array}$

A) Option A
B) Option B
C) Option C
D) Option D

Question 37

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

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

Question 38

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) Income statement
D) Statement of cash flows

Question 39

Jackson Company had a net increase in cash from operating activities of $10,000 and a net decrease in cash from financing activities of $2,000.If the beginning and ending cash balances for the company were $4,000 and $11,000,what was the net cash change from investing activities?

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 40

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

A) Investing activities.
B) Operating activities.
C) Financing activities.
D) Dividends are not reported on the statement of cash flows.

Question 41

[The following information applies to the questions displayed below.]
Packard Company engaged in the following transactions during Year 1, its first year of 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 $650 of revenues.
4) Paid expenses of $250.
"5) Paid a $50 dividend.
During Year 2, Packard 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.

-What is the amount of total stockholders' equity that will be reported on Packard's balance sheet at the end of Year 1?

A) $1,350
B) $900
C) $250
D) $1,300

Question 42

Expenses are reported on which of the following financial statement(s)?

A) Income statement
B) Balance sheet
C) Statement of changes in stockholders' equity
D) Income statement and statement of changes in stockholders' equity

Question 43

[The following information applies to the questions displayed below.]
Packard Company engaged in the following transactions during Year 1, its first year of 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 $650 of revenues.
4) Paid expenses of $250.
"5) Paid a $50 dividend.
During Year 2, Packard 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.

-What is the net cash inflow from operating activities that will be reported on Packard's statement of cash flows for Year 1?

A) $400
B) $650
C) $350
D) $820

Question 44

Santa Fe Company was started on January 1,Year 1,when it acquired $9,000 cash by issuing common stock.During Year 1,the company earned cash revenues of $4,500,paid cash expenses of $3,750,and paid a cash dividend of $250.Which of the following is true based on this information?

A) The December 31, Year 1 balance sheet would show total equity of $8,750.
B) The Year 1 income statement would show net income of $500.
C) The Year 1 statement of cash flows would show net cash inflow from operating activities of $4,500.
D) The Year 1 statement of cash flows would show a net cash inflow from financing activities of $8,750.

Question 45

[The following information applies to the questions displayed below.]
Packard Company engaged in the following transactions during Year 1, its first year of 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 $650 of revenues.
4) Paid expenses of $250.
"5) Paid a $50 dividend.
During Year 2, Packard 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.

-The amount of total liabilities on Packard's Year 1 balance sheet is

A) $200
B) $340
C) $420
D) $670

Question 46

[The following information applies to the questions displayed below.]
Packard Company engaged in the following transactions during Year 1, its first year of 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 $650 of revenues.
4) Paid expenses of $250.
"5) Paid a $50 dividend.
During Year 2, Packard 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.

-The amount of assets on Packard's Year 2 balance sheet is

A) $2,115.
B) $440.
C) $2,215.
D) $395.

Question 47

Mayberry Company paid $30,000 cash to purchase land.What happened as a result of this business event?

A) Total equity was not affected.
B) The net cash flow from investing activities decreased.
C) Total assets were not affected.
D) Total assets and total equity were not affected, and net cash flow from investing activities decreased.

Question 48

[The following information applies to the questions displayed below.]
Yowell Company began operations on January 1, Year 1. During Year 1, 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 $39,000
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 for work completed during the year, $21,000

-What is Yowell's net cash flow from operating activities?

A) Inflow of $6,000
B) Inflow of $9,000
C) Inflow of $18,000
D) Inflow of $30,000

Question 49

[The following information applies to the questions displayed below.]
Lexington Company engaged in the following transactions during Year 1, its first year in operation: (Assume all transactions are cash transactions.)
1) Acquired $6,000 cash from issuing common stock.
2) Borrowed $4,400 from a bank.
3) Earned $6,200 of revenues.
4) Incurred $4,800 in expenses.
"5) Paid dividends of $800.
Lexington Company engaged in the following transactions during Year 2: (Assume all transactions are cash transactions.)"
1) Acquired an additional $1,000 cash from the issue of common stock.
2) Repaid $2,600 of its debt to the bank.
3) Earned revenues, $9,000.
4) Incurred expenses of $5,500.
5) Paid dividends of $1,280.

-What was the amount of liabilities on Lexington's balance sheet at the end of Year 2?

A) $1,000.
B) $1,800.
C) ($2,600).
D) $480.

Question 50

[The following information applies to the questions displayed below.]
Yowell Company began operations on January 1, Year 1. During Year 1, 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 $39,000
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 for work completed during the year, $21,000

-What is Yowell's net income?

A) $9,000
B) $30,000
C) $18,000
D) $6,000

Question 51

Which of the following would be reported in the cash flow from financing activities section of a statement of cash flows?

A) Paid cash for dividends
B) Received cash for common stock
C) Sold land for cash
D) Paying cash for dividends and receiving cash from common stock

Question 52

[The following information applies to the questions displayed below.]
Lexington Company engaged in the following transactions during Year 1, its first year in operation: (Assume all transactions are cash transactions.)
1) Acquired $6,000 cash from issuing common stock.
2) Borrowed $4,400 from a bank.
3) Earned $6,200 of revenues.
4) Incurred $4,800 in expenses.
"5) Paid dividends of $800.
Lexington Company engaged in the following transactions during Year 2: (Assume all transactions are cash transactions.)"
1) Acquired an additional $1,000 cash from the issue of common stock.
2) Repaid $2,600 of its debt to the bank.
3) Earned revenues, $9,000.
4) Incurred expenses of $5,500.
5) Paid dividends of $1,280.

-What was the net cash flow from financing activities reported on Lexington's statement of cash flows for Year 2?

A) $2,880 outflow
B) $2,880 inflow
C) $1,000 outflow
D) $1,000 inflow

Question 53

As of December 31,Year 1,Mason Company had $500 cash.During Year 2,Mason earned $1,200 of cash revenue and paid $800 of cash expenses.What is the amount of cash that will be reported on the balance sheet at the end of Year 2?

A) $900
B) $400
C) $1,700
D) $2,500

Question 54

Robertson Company paid $1,850 cash for rent expense.What happened as a result of this business event?

A) Total equity decreased.
B) Liabilities decreased.
C) The net cash flow from operating activities decreased.
D) Both total equity and net cash flow for operating activities decreased.

Question 55

[The following information applies to the questions displayed below.]
Lexington Company engaged in the following transactions during Year 1, its first year in operation: (Assume all transactions are cash transactions.)
1) Acquired $6,000 cash from issuing common stock.
2) Borrowed $4,400 from a bank.
3) Earned $6,200 of revenues.
4) Incurred $4,800 in expenses.
"5) Paid dividends of $800.
Lexington Company engaged in the following transactions during Year 2: (Assume all transactions are cash transactions.)"
1) Acquired an additional $1,000 cash from the issue of common stock.
2) Repaid $2,600 of its debt to the bank.
3) Earned revenues, $9,000.
4) Incurred expenses of $5,500.
5) Paid dividends of $1,280.

-What is the amount of total assets that will be reported on Lexington's balance sheet at the end of Year 1?

A) $11,000
B) $12,000
C) $1,600
D) $7,600

Question 56

Liabilities are reported on which of the following financial statement(s)?

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

Question 57

[The following information applies to the questions displayed below.]
Packard Company engaged in the following transactions during Year 1, its first year of 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 $650 of revenues.
4) Paid expenses of $250.
"5) Paid a $50 dividend.
During Year 2, Packard 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.

-What is Packard Company's net cash flow from financing activities for Year 2?

A) $220 outflow
B) $320 outflow
C) $5 inflow
D) $225 inflow

Question 58

[The following information applies to the questions displayed below.]
Yowell Company began operations on January 1, Year 1. During Year 1, 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 $39,000
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 for work completed during the year, $21,000

-What is Yowell's ending notes payable balance?

A) $0
B) $25,000
C) ($15,000)
D) $10,000

Question 59

Dividends paid by a company are reported on which of the following financial statement(s)?

A) Income statement
B) Statement of changes in stockholders' equity
C) Statement of cash flows
D) Statement of changes in stockholders' equity and statement of cash flows

Question 60

[The following information applies to the questions displayed below.]
Lexington Company engaged in the following transactions during Year 1, its first year in operation: (Assume all transactions are cash transactions.)
1) Acquired $6,000 cash from issuing common stock.
2) Borrowed $4,400 from a bank.
3) Earned $6,200 of revenues.
4) Incurred $4,800 in expenses.
"5) Paid dividends of $800.
Lexington Company engaged in the following transactions during Year 2: (Assume all transactions are cash transactions.)"
1) Acquired an additional $1,000 cash from the issue of common stock.
2) Repaid $2,600 of its debt to the bank.
3) Earned revenues, $9,000.
4) Incurred expenses of $5,500.
5) Paid dividends of $1,280.

-What was the amount of retained earnings that will be reported on Lexington's balance sheet at the end of Year 1?

A) $6,200
B) $5,400
C) $1,400
D) $600

Question 61

Chico Company experienced an accounting event that affected its accounting equation as indicated below:
$$\begin{array} { | c | c | c | c | c | c | c | } \hline \text { Assets } & = & \text { Liabilities } & + & \begin{array} { c } \text { Commnn } \\\text { Strok }\end{array} & + & \begin{array} { c } \text { Retained } \\\text { Eurnings }\end{array} \\\hline + & = & \text { NA } & + & + & + & \text { NA } \\\hline\end{array}$$
Which of the following accounting events could have caused these effects on Chico's statements?

A) Issued common stock.
B) Paid cash expenses.
C) Borrowed money from a bank.
D) Paid a cash dividend.

Question 62

Jackson Company paid $500 cash for salary expenses.Which of the following accurately reflects how this event affects the company's accounting equation?
$\begin{array}{|c|c|c|c|c|c|}\hline & \text { Assets } & = & \text { Liab. } & + & \text { Equity } \\\hline \text { A } & 500 & = & 500 & + & \text { NA } \\\hline \text { B. } & (500) & = & \text { NA } & + & (500) \\\hline \text { C. } & (500) & = & (500) & + & \text { NA } \\\hline \text { D. } & (500) & = & \text { NA } & + & 500 \\\hline\end{array}$

A) Option A
B) Option B
C) Option C
D) Option D

Question 63

Indicate whether each of the following statements about markets is true or false.
________ a)Financial resources can be provided to a business by conversion agents.
________ b)Resource owners are the businesses that transform resources into products that satisfy consumer desires.
________ c)Labor resources include both the physical and intellectual labor of a business's employees.
________ d)Conversion agents purchase their resources from resource owners.
________ e)Consumers are the main providers of resources in any market.

Question 64

Frank Company earned $15,000 of cash revenue.Which of the following accurately reflects how this event affects the company's accounting equation?
$\begin{array}{|c|c|c|c|c|c|c|c|} \hline& \text { Assets } & = & \text { Liabilities } & + & \begin{array}{c}\text { Common } \\\text { Stock }\end{array} & + & \begin{array}{c}\text { Retained } \\\text { Earnings }\end{array} \\\hline \text { A } & 15,000 & = & \text { NA } & + & 15,000 & + & \text { NA } \\\hline \text { B. } & 15,000 & = & \text { NA } & + & 7,500 & + & 7,500 \\\hline \text { C. } & 15,000 & = & \text { NA } & + & \text { NA } & + & 15,000 \\\hline \text { D. } & 15,000 & = & 15,000 & + & \text { NA } & + & \text { NA } \\\hline\end{array}$

A) Option A
B) Option B
C) Option C
D) Option D

Question 65

Indicate whether each of the following statements about liabilities is true or false.
________ a)Expenses are reported on the balance sheet.
________ b)The acquisition of a bank loan increases both assets and liabilities.
________ c)The accounting equation requires that liabilities be equal to equity.
________ d)The amount of a company's liabilities is equal to the difference between its assets and its equity.
________ e)Liabilities are reported on the statement of cash flows of a business.

Question 66

Which of the following would not describe the effects of an asset source transaction on the accounting equation?
$$\begin{array} { | l | c | l | c | c | c | c | c | } \hline & \text { Assets } & = & \text { Linbilities } & + & \begin{array} { c } \text { Corrunon } \\\text { Strek }\end{array} & + & \begin{array} { c } \text { Retained } \\\text { Earnings }\end{array} \\\hline \text { A } & + & = & + & + & \text { NA } & + & \text { NA } \\\hline \text { B. } & + & = & \text { NA } & + & \text { NA } & + & + \\\hline \text { C. } & + & = & \text { NA } & + & + & + & \text { NA } \\\hline \text { D. } & + - & = & \text { NA } & + & \text { NA } & + & \text { NA } \\\hline\end{array}$$

A) Option A
B) Option B
C) Option C
D) Option D

Question 67

Which of the financial statements are required by the Generally Accepted Accounting Principles (GAAP)?

A) Income Statement
B) Statement of Changes in stockholders' equity
C) Statement of Cash Flows
D) Balance Sheet
E) All of these financial statements are required by GAAP

Question 68

What is the process of dividing up assets and allocating them to resource providers (creditors and investors)?

A) Equity distribution
B) Stock repayment
C) Liquidation
D) Utilization

Question 69

Delta Company experienced an accounting event that affected its financial statements as indicated below:
$$\begin{array} { | c | c | c | c | c | c | c | } \hline \text { Assets } & = & \text { Liabilities } & + & \begin{array} { c } \text { Common } \\\text { Stnck }\end{array} & + & \begin{array} { c } \text { Retained } \\\text { Earnings }\end{array} \\\hline - & = & \mathrm { NA } & + & \mathrm { NA } & + & - \\\hline\end{array}$$
Which of the following accounting events could have caused these effects on Delta's statements?

A) Purchased land for cash.
B) Incurred a cash expense.
C) Borrowed money from a bank.
D) Earned cash revenue.

Question 70

Perez Company paid a $300 cash dividend.Which of the following accurately reflects how this event affects the company's financial statements?
$$\begin{array} { | l | c | l | c | c | c | c | c | } \hline & \text { Assets } & = & \text { Liabilities } & + & \begin{array} { c } \text { Common } \\\text { Stack }\end{array} & + & \begin{array} { c } \text { Retained } \\\text { Earnings }\end{array} \\\hline \text { A } & 300 & = & 300 & + & \text { NA } & + & \text { NA } \\\hline \text { B. } & ( 300 ) & = & \text { NA } & + & ( 300 ) & + & \text { NA } \\\hline \text { C } & ( 300 ) & = & \text { NA } & + & \text { NA } & + & ( 300 ) \\\hline \text { D. } & 300 & = & \text { NA } & + & \text { NA } & + & 300 \\\hline\end{array}$$

A) Option A
B) Option B
C) Option C
D) Option D

Question 71

Garrison Company acquired $23,000 by issuing common stock.Which of the following accurately reflects how this event affects the company's accounting equation?
$$\begin{array} { | c | c | c | c | c | c | c | c | } \hline & \text { Assets } & = & \text { Liabilities } & + & \begin{array} { c } \text { Commnn } \\\text { Stuck }\end{array} & + & \begin{array} { c } \text { Retained } \\\text { Earnings }\end{array} \\\hline \text { A } & 23,000 & = & \text { NA } & + & 23,000 & + & \text { NA } \\\hline \text { B. } & \text { NA } & = & 23,000 & + & ( 23,000 ) & + & \text { NA } \\\hline \text { C } & \text { NA } & = & \text { NA } & + & 23,000 & + & ( 23,000 ) \\\hline \text { D. } & 23,000 & = & \text { NA } & + & \text { NA } & + & 23,000 \\\hline\end{array}$$

A) Option A
B) Option B
C) Option C
D) Option D

Question 72

Indicate whether each of the following statements about the types of transactions is true or false.
________ a)An asset source transaction increases total assets and increases claims to assets.
________ b)The issuance of stock to owners for cash would be an example of an asset exchange transaction.
________ c)Purchasing equipment for cash is an example of an asset use transaction.
________ d)Paying a dividend to stockholders is an example of an asset use transaction.
________ e)Making a payment on a bank loan is an example of an asset exchange transaction.

Question 73

What does negative retained earnings indicate?

A) The company has lost some or all of the owners' investment
B) The company experienced a large cash outflow during the year
C) The company's liabilities are greater than its assets
D) The company's common stock is negative

Question 74

Reynolds Company experienced an accounting event that affected its financial statements as indicated below:
$$\begin{array} { | c | c | c | c | c | } \hline \text { Assets } & = & \text { Liabilities } & + & \begin{array} { c } \text { Stockholders' } \\\text { Equity }\end{array} \\\hline + & = & \text { NA } & + & + \\\hline\end{array}$$
Which of the following accounting events could have caused these effects on Reynolds' accounting equation?

A) Paid a cash dividend.
B) Earned cash revenue.
C) Borrowed money from a bank.
D) The information provided does not represent a completed event.

Question 75

Which of the following could represent the effects of an asset source transaction on the accounting equation?
$$\begin{array} { | c | c | c | c | c | c | } \hline & \text { Assets } & = & \text { Linbilities } & + & \begin{array} { c } \text { Stackholders' } \\\text { Equity }\end{array} \\\hline \text { A } & + & = & + & + & \text { NA } \\\hline \text { B. } & - & = & \text { NA } & + & - \\\hline \text { C. } & + - & = & \text { NA } & + & \text { NA } \\\hline \text { D. } & \text { NA } & = & + & + & - \\\hline\end{array}$$

A) Option A
B) Option B
C) Option C
D) Option D

Question 76

Indicate whether each of the following statements about financial statements is true or false.
________ a)A cash dividend paid to stockholders is reported in the investing activities section of the statement of cash flows.
________ b)A cash dividend paid to stockholders is reported on the statement of changes in stockholders' equity.
________ c)A cash dividend paid to stockholders is reported on the income statement.
________ d)The balance sheet reports the ending balances of permanent accounts as of the last day of the accounting period.
________ e)Changes in retained earnings during the accounting period are reported on the income statement.

Question 77

The statement of changes in stockholders' equity presents

A) an explanation of the changes in the beginning and ending balances of stockholders' equity.
B) a comparison of the benefits and the sacrifices a company experiences from its operations.
C) information in three categories including operating, investing, and financing activities.
D) a list of a company's assets and the sources of those assets.

Question 78

Indicate whether each of the following statements about accounting information is true or false.
________ a)Financial accounting is primarily intended to satisfy the information needs of internal stakeholders.
________ b)Managerial accounting information includes financial and nonfinancial information.
________ c)The accounting information intended to satisfy the needs of a company's employees is managerial accounting information.
________ d)GAAP requires that companies adhere to financial accounting standards.
________ e)Managerial accounting information is usually less detailed than financial accounting information.

Question 79

A net loss occurs when

A) expenses are greater than revenues
B) liabilities are greater than assets
C) cash inflow is less than cash outflow
D) the ending cash balance is lower than the beginning cash balance

Question 80

Indicate whether each of the following statements about retained earnings is true or false.
________ a)A dividend paid to stockholders decreases retained earnings.
________ b)Issuing common stock for cash increases retained earnings.
________ c)The amount of net income for a period must equal retained earnings.
________ d)The purchase of a truck decreases retained earnings.
________ e)Net income increases retained earnings.