Question 1

Chase starts a new auto detailing business. He obtains a loan for $10,000 and uses the funds to build a small workshop in his backyard and to buy tools and supplies. At this point, his assets are _____, liabilities are _____, and owners' equity is _____.

Accepted Answer

Assets = Liabilities + Owners' Equity

At the start of the business, Chase's assets are the value of the loan he received, which is $10,000. This is also his liabilities, as he owes the full amount to the lender.

Since this is a new business and Chase is the sole owner, there is no additional equity yet. Therefore, his owners' equity is $0.

Using the accounting equation, we can see that:

$10,000 (Assets) = $10,000 (Liabilities) + $0 (Owners' Equity)

Therefore, choice B is the correct answer.

Question 2

How would trademarks and copyrights be listed on a company's balance sheet?

Accepted Answer

Trademarks and copyrights are considered intangible assets and would be listed under this category on the company's balance sheet.

Question 3

If total liabilities were subtracted from total assets, what would be the residual value?

Accepted Answer

The residual value after subtracting total liabilities from total assets is the owners' equity. This represents the portion of the company's assets that are owned by the shareholders or owners of the company.

Question 4

If assets of Martin's Pet Store are $107,000 and owners' equity is $75,000, which of the following statements is correct?

Accepted Answer

Since Assets = Liabilities + Owners' Equity, we can solve for liabilities by rearranging the equation to be: Liabilities = Assets - Owners' Equity. Plugging in the given values, we get: Liabilities = $107,000 - $75,000 = $32,000. Therefore, D is the correct choice.

Question 5

Suppose a local catering company owes $15,000 on a van it uses for deliveries. The owner's equity is $72,000. What must the value be of the company's owner's equity?

Accepted Answer

The answer of Suppose a local catering company owes $15,000...

Question 6

Which of the following is the correct order for the balance sheet?

Accepted Answer

The correct order for the balance sheet is assets, liabilities, and then owners' equity. This order represents the business's resources, its obligations, and the residual interest of its owners. Option A is incorrect because it incorrectly lists owners' equity before liabilities. Option B is incorrect because "financial position" is not a standard section of the balance sheet. Option D is incorrect because it places assets before owners' equity.

Question 7

The owner of a small consulting business paid for a new copy machine on his company credit card. This item is listed as which of the following on the company's balance sheet?

Accepted Answer

The answer of The owner of a small consulting business...

Question 8

What is another name for the statement of financial position?

Accepted Answer

The statement of financial position is also known as the balance sheet. Choices A, B, and C are incorrect as they refer to different financial statements. The income statement is a financial statement that shows a company's revenue and expenses over a certain time period. The statement of owners' equity shows changes in the owner's equity section of the balance sheet. The earnings statement is not a commonly used term in accounting.

Question 9

Assets = liabilities + owners' equity is the equation for information reported on which of the following?

Accepted Answer

The equation Assets = liabilities + owners' equity is used to calculate the balance sheet, which shows the company's assets (what it owns), liabilities (what it owes), and owners' equity (the residual interest in the assets after deducting liabilities).

Question 10

Pepperidge Farm stores items like flour, salt, and sugar as raw materials it will use to produce a variety of food items. These raw materials are listed as which of the following on the company's balance sheet?

Accepted Answer

Raw materials like flour, salt, and sugar used in production are considered part of a company's inventory, which is an asset, not equipment, owner's equity, short-term loans, or liabilities. However, the correct classification for these items would actually be inventory under current assets, not equipment. My initial response was incorrect in specifying equipment as the right choice. Raw materials are indeed assets but should be specifically categorized under inventory.

Question 11

What are the debts owed by a business called?

Accepted Answer

Debts owed by a business are referred to as liabilities.

Question 12

A local specialty gift store had to borrow money from a local bank to purchase Christmas merchandise to sell in the store. What is this debt owed to the bank called?

Accepted Answer

The debt owed to the bank is called a liability, which is something that a person or company owes to another party. Debit and credit refer to types of transactions or accounts, while owners' equity refers to an individual's or company's ownership stake in an asset.

Question 13

What are the components of the balance sheet?

Accepted Answer

The balance sheet consists of three components - owners' equity, assets, and liabilities. Owners' equity represents the amount of the company that is owned by the shareholders, assets are the resources owned by the company, and liabilities are the debts and obligations owed by the company to others. Expenses, revenue, and net income are components of the income statement, while revenue, expenses, and owners' equity together make up the statement of retained earnings. Assets, liabilities, and revenues are not the correct components of the balance sheet.

Question 14

If your liabilities total $448,000 and owner's equity totals $1,542,000, what do your assets total?

Accepted Answer

The accounting equation is Assets = Liabilities + Owner's Equity. Therefore, Assets = Liabilities + Owner's Equity.
Substituting the given values, we get,
Assets = $448,000 + $1,542,000
Assets = $1,990,000
Hence, the assets total $1,990,000, which is closest to option C, $1,094,000.

Question 15

An automobile manufacturer purchases a piece of new equipment for the factory using cash. The equipment is considered which of the following on the balance sheet?

Accepted Answer

When a company purchases new equipment for the factory using cash, it is considered a long-term asset on the balance sheet. This is because the equipment is expected to provide economic benefits to the company for several years.

Question 16

The resources owned by David's Spa and Salon total $148,000. The total amount of debt that it owes to others is $87,000. Which of the following describes David's Spa and Salon?

Accepted Answer

The resources owned by David's Spa and Salon include both owners' equity and liabilities. Thus, to find the owners' equity, we need to subtract the liabilities from the total resources owned:
Total resources owned - liabilities = owners' equity
$148,000 - $87,000 = $61,000
Therefore, choice A is the correct answer.

Question 17

According to the accountant for Virunder's Floral Supply, the firm's assets are $124,000 and its liabilities are $31,000. Which of the following statements is correct?

Accepted Answer

The accounting equation is Assets = Liabilities + Owners' equity. Therefore, Owners' equity = Assets - Liabilities. From the information given, Owners' equity = $124,000 - $31,000 = $93,000. Therefore, option A is correct. Option B and C cannot be determined with the given information. Option D is not correct as the accounting equation balances.

Question 18

All of the following are acceptable ways of stating the accounting equation EXCEPT which one?

Accepted Answer

The accounting equation can only be properly stated in the format of assets = liabilities + owners' equity. All other variations are incorrect.

Question 19

If the assets for your small business are $22,349 and your liabilities are $6,825, what is the owner's equity?

Accepted Answer

Owner's equity is calculated by subtracting liabilities from assets, so $22,349 - $6,825 = $15,524. Therefore, the best choice is B.

Question 20

The Cheese Shoppe's liabilities total $59,000 and its owners' equity is $124,000. Which of the following statements is correct?

Accepted Answer

The total assets of the Cheese Shoppe can be calculated by adding its liabilities and owners' equity:

Total assets = Liabilities + Owners' equity 
Total assets = $59,000 + $124,000 
Total assets = $183,000

Therefore, option C is the correct choice.

Quiz 17: Using Accounting and Financial Information

Chase starts a new auto detailing business. He obtains a loan for $10,000 and uses the funds to build a small workshop in his backyard and to buy tools and supplies. At this point, his assets are ___, liabilities are _, and owners' equity is ___.