Question 1

Alpha Company has assets of $600,000, liabilities of $250,000, and equity of $350,000. It buys office equipment on credit for $75,000. What would be the effects of this transaction on the accounting equation?
A)Assets increase by $75,000 and expenses increase by $75,000.
B)Assets increase by $75,000 and expenses decrease by $75,000.
C)Liabilities increase by $75,000 and expenses decrease by $75,000.
D)Assets decrease by $75,000 and expenses decrease by $75,000.
E)Assets increase by $75,000 and liabilities increase by $75,000.

Accepted Answer

When Alpha Company buys office equipment on credit for $75,000, its assets increase by $75,000 (due to the acquisition of the office equipment), but its liabilities also increase by $75,000 (due to the fact that it now owes $75,000 to the creditor). Equity remains unchanged. Therefore, the accounting equation becomes:

Assets = $600,000 + $75,000 = $675,000
Liabilities = $250,000 + $75,000 = $325,000
Equity = $350,000

Hence, the correct answer is E.

Question 2

The statement of cash flows reports all of the following except:
A)Cash flows from operating activities.
B)Cash flows from investing activities.
C)Cash flows from financing activities.
D)The net increase or decrease in assets for the period reported.
E)The net increase or decrease in cash for the period reported.

Accepted Answer

The statement of cash flows reports cash flows from operating, investing, and financing activities, as well as the net increase or decrease in cash for the period reported. However, it does not report the net increase or decrease in assets for the period.

Question 3

The basic financial statements include all of the following except:
A)Balance Sheet.
B)Income Statement.
C)Statement of Retained Earnings.
D)Statement of Cash Flows.
E)Statement of Changes in Assets.

Accepted Answer

The basic financial statements include the Balance Sheet, Income Statement, Statement of Retained Earnings, and Statement of Cash Flows. The Statement of Changes in Assets is not a basic financial statement.

Question 4

If a company paid $38,000 of its accounts payable in cash, what was the effect on the accounting equation?
A)Assets would decrease $38,000, liabilities would decrease $38,000, and equity would decrease $38,000.
B)Assets would decrease $38,000, liabilities would decrease $38,000, and equity would increase $38,000.
C)Assets would decrease $38,000 and liabilities would decrease $38,000.
D)There would be no effect on the accounts because the accounts are affected by the same amount.
E)Assets would increase $38,000 and liabilities would decrease $38,000.

Accepted Answer

When a company pays its accounts payable in cash, both the asset and liability accounts decrease by the same amount. This means that there is no effect on equity, since equity is calculated as assets minus liabilities. Therefore, the correct answer is C - Assets would decrease $38,000 and liabilities would decrease $38,000.

Question 5

Cage Company had income of $350 million and average invested assets of $2,000 million. Its return on assets (ROA) is:
A)1.8%.
B)35%.
C)17.5%.
D)5.7%.
E)3.5%.

Accepted Answer

Return on assets (ROA) = (Income / Average invested assets) x 100%
ROA = (350 / 2,000) x 100% = 17.5%

Question 6

U.S. government bonds are:
A)High-risk and high-return investments.
B)Low-risk and low-return investments.
C)High-risk and low-return investments.
D)Low-risk and high-return investments.
E)High risk and no-return investments.

Accepted Answer

U.S. government bonds are considered low-risk investments because they are backed by the full faith and credit of the U.S. government. However, they typically have lower returns compared to other types of investments such as stocks or corporate bonds.

Question 7

The financial statement that identifies a company's cash receipts and cash payments over a period of time is the:
A)Statement of financial position.
B)Statement of cash flows.
C)Balance sheet.
D)Income statement.
E)Statement of changes in stockholders' equity.

Accepted Answer

The statement of cash flows is the financial statement that identifies a company's cash receipts and cash payments over a period of time. The statement provides information about the cash flows from operating activities, investing activities, and financing activities. Choices A, C, D, and E are all other types of financial statements, but they do not specifically identify cash receipts and payments.

Question 8

Risk is:
A)Net income divided by average total assets.
B)The reward for investment.
C)The uncertainty about the return expected to be earned.
D)Unrelated to return expected.
E)Derived from the idea of getting something back from an investment.

Accepted Answer

Risk refers to the uncertainty or possibility of loss that an investor may face while investing in a particular asset or security. It is the chance that an investment's actual return may differ from the expected return. Therefore, option C is the correct choice as it defines the concept of risk accurately.

Question 9

A financial statement providing information that helps users understand a company's financial status, and which lists the types and amounts of assets, liabilities, and equity as of a specific date, is called a(n):
A)Balance sheet.
B)Income statement.
C)Statement of cash flows.
D)Statement of retained earnings.
E)Financial Status Statement.

Accepted Answer

A balance sheet provides information about a company's financial status by listing its assets, liabilities, and equity as of a specific date. It helps users understand the company's financial position and liquidity. Income statement, statement of cash flows, and statement of retained earnings provide information about a company's financial performance, but not its financial status. "Financial Status Statement" is not a commonly used term in accounting and finance.

Question 10

The financial statement that reports whether the business earned a profit and also lists the revenues and expenses is called the:
A)Balance sheet.
B)Statement of retained earnings.
C)Statement of cash flows.
D)Income statement.
E)Statement of financial position.

Accepted Answer

The income statement reports the business's profitability by listing its revenues and expenses and the resulting net income or loss. The balance sheet reports the business's assets, liabilities, and equity at a specific point in time. The statement of retained earnings shows how the company's net income has been used to pay dividends or retained within the business. The statement of cash flows reports the sources and uses of cash during a specific period. The statement of financial position is another name for the balance sheet.

Question 11

Speedy has net income of $18,955, and assets at the beginning of the year of $200,000. Assets at the end of the year total $246,000. Compute its return on assets.
A)7.7%.
B)8.5%.
C)9.5%.
D)11.8%.
E)13.0%.

Accepted Answer

The answer of Speedy has net income of $18,955, and...

Question 12

If the liabilities of a business increased $75,000 during a period of time and the stockholders' equity in the business decreased $30,000 during the same period, the assets of the business must have:
A)Decreased $105,000.
B)Decreased $45,000.
C)Increased $30,000.
D)Increased $45,000.
E)Increased $105,000.

Accepted Answer

The answer of If the liabilities of a business increased...

Question 13

A balance sheet lists:
A)The types and amounts of the revenues and expenses of a business.
B)Only the information about what happened to equity during a time period.
C)The types and amounts of assets, liabilities, and equity of a business as of a specific date.
D)The inflows and outflows of cash during the period.
E)The assets and liabilities of a company but not the retained earnings.

Accepted Answer

A balance sheet is a financial statement that reports a company's assets, liabilities, and equity as of a specific date. It provides a snapshot of the company's financial health at a given point in time. Option A is describing an income statement, option B is incorrect as a balance sheet includes information about equity, option D is describing a cash flow statement and option E is incorrect as the balance sheet includes information about both assets and liabilities, as well as equity.

Question 14

The statement of retained earnings:
A)Reports how retained earnings changes at a point in time.
B)Reports how retained earnings changes over a period of time.
C)Reports on cash flows for operating, financing, and investing activities over a period of time.
D)Reports on cash flows for operating, financing, and investing activities at a point in time.
E)Reports on amounts for assets, liabilities, and equity at a point in time.

Accepted Answer

The statement of retained earnings reports how retained earnings changes over a period of time. It shows the beginning balance of retained earnings, any net income or losses, dividends paid, and the ending balance of retained earnings for a specific period of time.

Question 15

Contessa Company collected $42,000 cash on its accounts receivable. The effects of this transaction as reflected in the accounting equation are:
A)Total assets decrease and equity increases.
B)Both total assets and total liabilities decrease.
C)Neither assets, total liabilities, nor equity are changed.
D)Both total assets and equity are unchanged and liabilities increase.
E)Total assets increase and equity decreases.

Accepted Answer

The answer of Contessa Company collected $42,000 cash on its...

Question 16

If the assets of a business increased $89,000 during a period of time and its liabilities increased $67,000 during the same period, equity in the business must have:
A)Increased $22,000.
B)Decreased $22,000.
C)Increased $89,000.
D)Decreased $156,000.
E)Increased $156,000.

Accepted Answer

Equity in the business is calculated as assets minus liabilities. Therefore, if assets increased by $89,000 and liabilities increased by $67,000, we can calculate the change in equity as follows:

Equity = Assets - Liabilities
Equity = ($89,000 + Old Equity) - ($67,000 + Old Equity)
Equity = $22,000 + Old Equity - Old Equity
Equity = $22,000

Therefore, equity in the business must have increased by $22,000.

Question 17

Rushing had income of $150 million and average invested assets of $1,800 million. Its return on assets is:
A)8.3%.
B)83.3%.
C)12%.
D)120%.
E)16.7%.

Accepted Answer

The answer of Rushing had income of $150 million and...

Question 18

If the liabilities of a company increased $74,000 during a period of time and equity in the company decreased $19,000 during the same period, what was the effect on the assets?
A)Assets would have increased $55,000.
B)Assets would have decreased $55,000.
C)Assets would have increased $19,000.
D)Assets would have decreased $19,000.
E)None of thesE.Assets = Liabilities + Stockholders' Equity

Accepted Answer

According to the accounting equation (Assets = Liabilities + Equity), if liabilities increase by $74,000 and equity decreases by $19,000, assets must increase by $55,000 to keep the equation balanced.

Question 19

Chou Co. has a net income of $43,000, assets at the beginning of the year are $250,000 and assets at the end of the year are $300,000. Compute its return on assets.
A)8.4%
B)17.2%
C)14.3%
D)15.6%
E)1.5%

Accepted Answer

The answer of Chou Co. has a net income of...

Question 20

If assets are $365,000 and equity is $120,000, then liabilities are:
A)$120,000.
B)$245,000.
C)$365,000.
D)$485,000.
E)$610,000.

Accepted Answer

According to the accounting equation, Assets = Liabilities + Equity. Therefore, Liabilities = Assets - Equity. Substituting the given values, Liabilities = $365,000 - $120,000 = $245,000.

Quiz 1: Introducing Financial Accounting

Alpha Company has assets of $600,000, liabilities of $250,000, and equity of $350,000. It buys office equipment on credit for $75,000. What would be the effects of this transaction on the accounting equation?

The statement of cash flows reports all of the following except:

The basic financial statements include all of the following except:

If a company paid $38,000 of its accounts payable in cash, what was the effect on the accounting equation?

Cage Company had income of $350 million and average invested assets of $2,000 million. Its return on assets (ROA) is:

U.S. government bonds are:

The financial statement that identifies a company's cash receipts and cash payments over a period of time is the:

Risk is:

A financial statement providing information that helps users understand a company's financial status, and which lists the types and amounts of assets, liabilities, and equity as of a specific date, is called a(n) :

The financial statement that reports whether the business earned a profit and also lists the revenues and expenses is called the:

Speedy has net income of $18,955, and assets at the beginning of the year of $200,000. Assets at the end of the year total $246,000. Compute its return on assets.

If the liabilities of a business increased $75,000 during a period of time and the stockholders' equity in the business decreased $30,000 during the same period, the assets of the business must have:

A balance sheet lists:

The statement of retained earnings:

Contessa Company collected $42,000 cash on its accounts receivable. The effects of this transaction as reflected in the accounting equation are:

If the assets of a business increased $89,000 during a period of time and its liabilities increased $67,000 during the same period, equity in the business must have:

Rushing had income of $150 million and average invested assets of $1,800 million. Its return on assets is:

If the liabilities of a company increased $74,000 during a period of time and equity in the company decreased $19,000 during the same period, what was the effect on the assets?

Chou Co. has a net income of $43,000, assets at the beginning of the year are $250,000 and assets at the end of the year are $300,000. Compute its return on assets.

If assets are $365,000 and equity is $120,000, then liabilities are: