T/F - Accounting is a system of maintaining records of a company's operations and communicating that information to decision makers - ANSWER-True
XYZ
... [Show More] Airlines, Inc. flies throughout North America
employing a strategy of short flights using smaller
aircraft to increase efficiencies and utilization. The
Company's policy is to provide a cash refund to
customers for unused aircraft tickets. When should
XYZ recognize revenue for ticket sales?
A. When the passenger pays for the ticket.
B. When the airline sells the ticket.
C. When the plane arrives at its destination.
D. When boarding passes are taken at the plane
door - ANSWER-C. When the plane arrives at its destination.
T/F - The primary functions of financial accounting are to measure business activities of a company and to communicate those measurements to internal parties for decision‐making purposes. - ANSWER-False (Primarily External)
Which statement below best describes the accounting
equation?
A. The change in retained earnings equals net
income less dividends.
B. Equality of revenue and expense transactions
over time.
C. Resources of the company equal creditors' and
owners' claims to those resources.
D. Financing activities equal investing and
operating activities. - ANSWER-C. Resources of the company equal creditors' and
owners' claims to those resources.
T/F - If total assets of a company equal $12,000 and total stockholders' equity equals $4,000, then total liabilities equal $8,000. - ANSWER-True
An alternative form of the accounting equation is:
A. Net Income = Revenues ‐ Expenses.
B. Stockholders' Equity = Assets + Liabilities.
C. Assets = Liabilities ‐ Stockholders' Equity.
D. Assets ‐ Liabilities = Stockholders' Equity - ANSWER-D. Assets ‐ Liabilities = Stockholders' Equity
T/F - If total liabilities of a company equal $16,000 and total stockholders' equity equals $9,000, then total assets equal $7,000. - ANSWER-False
Liabilities can be best described as:
A. The amount of expenses over the past year.
B. The amount expected to be distributed to stockholders.
C. The amount owed to creditors.
D. The amount of services provided to customers during the year. - ANSWER-C. The amount owed to creditors.
If a company has stockholders' equity of $60,000 at the end of the year, which of the following statements must be true?
A. The company's assets exceed liabilities by $60,000.
B. The company has issued $60,000 of common stock.
C. Net income for the year equals $60,000.
D. Total revenues during the year equal $60,000 - ANSWER-A. The company's assets exceed liabilities by $60,000.
The amounts recorded when the company sells products or provides services to customers are referred to as:
A. Liabilities
B. Revenues
C. Assets
D. Expenses - ANSWER-B. Revenues
T/F - The difference between revenues and expenses is referred to as net income or net loss. - ANSWER-True
The costs associated with producing revenues are referred to as:
A. Dividends.
B. Assets.
C. Liabilities.
D. Expenses. - ANSWER-D. Expenses
Use the following appropriate amounts to calculate net income: Revenues, $12,000; Liabilities, $5,000; Expenses, $4,000; Assets, $19,000; Dividends, $4,000
A. $6,000.
B. $8,000.
C. $4,000.
D. $14,000 - ANSWER-B. $8,000
Which of the following best describes revenue?
A. Resources of a company.
B. Sales of goods and services to a customer.
C. Cash received from a customer.
D. Dividends paid to stockholders. - ANSWER-B. Sales of goods and services to a customer.
T/F - Dividends represent a return of the company's profits to its owners, the stockholders. - ANSWER-True
Most business enterprises in the United States are
A. government units.
B. partnerships
C. sole proprietorship.
D. corporations. - ANSWER-C. sole proprietorship
T/F - Limited liability means the stockholders are not held personally responsible for the financial obligations of the corporation. - ANSWER-True
Transfer of ownership will not affect the
continuity of a
A. corporation of partnership
B. corporation
C. partnership
D. sole proprietorship - ANSWER-B. corporation
T/F - A corporation is an entity that is legally separate from its owners. - ANSWER-True
Which of the following is an operating activity?
A. Issuing common stock.
B. Paying dividends.
C. Borrowing cash from a bank to acquire a factory.
D. Paying electricity bills for the month. - ANSWER-D. Paying electricity bills for the month.
How many of the following transactions are operating
activities?
• Borrowed $50,000 from the bank
• Purchased $12,000 in supplies
• Provide services to customers for $27,000
• Paid the utility bill of $750
• Purchased a delivery truck for $12,000
• Received $25,000 from issuing common stock
A. One.
B. Two
C. Three
D. Four - ANSWER-C. Three
Financing activities include:
A. The purchase of a building.
B. Issuing common stock to stockholders.
C. Transactions with company employees.
D. Selling goods or services to customers. - ANSWER-B. Issuing common stock to stockholders.
Which of the following items would not appear in an income statement?
A. Salaries expense
B. Advertising expense
C. Service revenue
D. Cash - ANSWER-D. Cash
LePage's has an ending Retained Earnings balance of $51,100. If during the year LePage's paid dividends of $4,300 and had net income of $22,500, then what was the beginning Retained Earnings balance?
A. $24,300
B. $32,900
C. $300
D. $69,300 - ANSWER-B. $32,900 (Beginning Balance = Ending Balance - Net Income + Dividends)
T/F - Dividends are considered an expense in running the business and reported in the income statement. - ANSWER-False
T/F - The balance sheet is a financial statement that reports the company's revenues and expenses over an interval of time. - ANSWER-False
Investing cash flows in the statement of cash flows would include which of the following?
A. Paying salaries for the month.
B. Purchase of land.
C. Paying dividends to stockholders.
D. Selling goods or services to customers. - ANSWER-B. Purchase of Land
Which of the following accounts represents a resource of the company?
A. Common stock.
B. Service revenue.
C. Accounts receivable.
D. Salaries expense. - ANSWER-C. Accounts receivable
Cash received from bank borrowing would be reported in the statement of cash flows as what type of activity?
A. Investing
B. Organizing
C. Operating
D. Financing - ANSWER-D. Financing
T/F - Any transaction that affects the income statement ultimately affects the balance sheet through the balance of retained earnings. - ANSWER-True
Net income (loss) appears in which two financial statements?
A. Balance sheet and income statement.
B. Income statement and statement of stockholders' equity.
C. Statement of stockholders' equity and balance sheet.
D. Net income appears in only one financial
statement. - ANSWER-B. Income statement and statement of stockholders' equity.
The financial statement(s) that record activity over an interval of time include the
A. Income statement
B. Balance sheet
C. Balance sheet and income statement
D. Income statement and statement of cash flows. - ANSWER-D. Income statement and statement of cash flows.
Which of the following best represents value created for stockholders during the current period?
A. Retained earnings
B. Total assets.
C. Net income.
D. Stockholders' equity. - ANSWER-C. Net Income
In what order are the following financial statements prepared: (1) balance sheet, (2) income statement, and (3) statement of stockholders' equity?
A. 1, 2, 3.
B. 3, 2, 1
C. 1, 3, 2
D. 2, 3, 1 - ANSWER-D. 2, 3, 1
Which financial statement best reveals to investors and creditors information about a company's debt?
A. Income statement
B. Balance sheet
C. Statement of cash flows
D. Statement of stockholders' equity - ANSWER-B. Balance sheet
The independent, private‐sector group that is primarily responsible for setting financial reporting standards in the United States is the:
A. FASB.
B. IASB.
C. SEC.
D. IRS. - ANSWER-A. FASB.
The major underlying assumptions of accounting include all of the following except:
A. Economic entity.
B. Monetary unit.
C. Legal liability.
D. Going concern. - ANSWER-C. Legal liability
Of the following, the most important objective for financial accounting is to provide
information useful for:
A. Predicting cash flows.
B. Determining taxable income.
C. Providing accountability.
D. Increasing future profi - ANSWER-A. Predicting Cash Flows
The assumption that a business will continue to operate into the future is the:
A. Monetary unit assumption.
B. Periodicity assumption.
C. Economic entity assumption.
D. Going concern assumption. - ANSWER-D. Going concern assumption
Fundamental qualitative characteristics of accounting information are:
A. Relevance and comparability.
B. Comparability and consistency
C. Faithful representation and relevance.
D. Faithful representation and consistency - ANSWER-C. Faithful representation and relevance
The assumption that the life of the business can be divided into time intervals for reporting purposes is the:
A. Monetary unit assumption.
B. Periodicity assumption.
C. Economic entity assumption.
D. Going concern assumption. - ANSWER-B. Periodicity assumption
External events include all of the following except:
A. Paying rent.
B. Purchasing equipment.
C. Using office supplies.
D. Collecting an account receivable - ANSWER-C. Using office supplies
The full set of procedures used to accomplish the measurement/communication process of financial accounting is referred to as the:
A. Trial balance
B. Accounting cycle
C. Chart of accounts
D. General ledger - ANSWER-B. Accounting Cycle
Those who lend money or deliver goods and services before being paid are called
A. investors
B. debtors
C. underwriters
D. creditors - ANSWER-D. creditors
What is the best definition of an accounts receivable?
A. an amount owed by the company to others.
B. owners' investment in the business.
C. amounts owed by customers to a company
D. none of the above - ANSWER-C. amounts owed by customers to a company
The accounting equation is in balance if there is a (an)
A. increase in liabilities and an increase in equity
B. decrease in assets and an increase in liabilities
C. increase in assets and an increase in equity
D. decrease in equity and an increase in assets - ANSWER-C. increase in assets and an increase in equity
Which of the following is not possible when recording a transaction?
A. Liabilities increase and assets decrease.
B. Stockholders' equity increases and assets increase.
C. One asset increases and another asset decreases.
D. Stockholders' equity decreases and assets decrease. - ANSWER-A. Liabilities increase and assets decrease.
T/F - The accounting equation will not be in balance when a business transaction increases and decreases assets in the same amount? - ANSWER-False
The accounting equation is in balance if there is a (an)
A. increase in liabilities and an increase in equity
B. decrease in assets and an decrease in liabilities
C. decrease in assets and an increase in equity
D. decrease in equity and an increase in assets - ANSWER-B. decrease in assets and an decrease in liabilities
Which of the following would increase assets and increase liabilities?
A. Provide services to customers on account.
B. Purchase office supplies on account.
C. Pay dividends to stockholders
D. Receive a utility bill but do not pay it immediately - ANSWER-B. Purchase office supplies on account.
Knomark, Inc. sold $500 of shoe polish to a customer on account on January 1. On January 11 Knomark collected the cash from that customer. What is the impact on Knomark's accounting equation from the collection of cash?
A. No net effect to the accounting equation.
B. Decrease assets and increase liabilities.
C. Increase assets and increase liabilities.
D. Decrease assets and decrease liabilities. - ANSWER-A. No net effect to the accounting equation
Investments by stockholders have what effect on the accounting equation?
A. Assets increase and liabilities increase.
B. Expenses increase and liabilities increase.
C. Assets increase and revenues increase.
D. Assets increase and stockholders' equity increases. - ANSWER-D. Assets increase and stockholders equity increases
When a payment is made on an account payable
A. Assets and stockholders' equity decrease.
B. Assets and liabilities decrease.
C. Liabilities and revenues decrease.
D. Assets and expenses decrease. - ANSWER-B. Assets and Liabilities decrease.
1. Issued 10,000 shares of common stock for $15,000 cash.
2. Purchased land for $12,000, signing a note payable for the full amount.
3. Purchased office equipment for $1,200 cash.
4. Received cash of $14,000 for services provided to customers during the month.
5. Purchased $300 of office supplies on account.
6. Paid employees $10,000 for their first month's salaries.
What was the total amount of ATI's liabilities following
these six transactions?
A. $12,300.
B. $27,300.
C. $22,600.
D. $15,500. - ANSWER-A. $12,300
2. Purchased land for $12,000, signing a note payable for
the full amount
5. Purchased $300 of office supplies on account
Accounting Equation - ANSWER-Assets = Liabilities + Stockholders Equity
Stockholders Equity = Common Stock + Retained Earnings
Retained Earnings = Revenues - Expenses - Dividends
A business provides a service to [Show Less]