Accounting Multiple Choice Chapter 1-5_22_08_2020_19_12 -...

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Unformatted text preview: Accounting MCQ’s Chapter 1-5 Chapter 1: TRUE/FALSE 1. Financial statements are documents that report on a business in monetary amounts. True L.O. 1 Easy Page: 4 2. Nonprofit organizations have no need for accounting information as do profitoriented organizations. False 3. Easy Page: 5 Managers use accounting information to set goals for their organizations. True 4. L.O. 1 L.O. 1 Moderate Page: 5 A Certified Management Accountant is a licensed accountant who serves the general public rather than one particular company. False L.O. 1 Easy Page: 6 5. The cost principle states that acquired assets and services should be recorded at their actual cost. True 6. L.O. 2 Easy Page: 9 The reliability principle is also referred to as the going-concern principle. False L.O. 2 Moderate Page: 9 7. The accounting equation can be stated as assets + liabilities = owner’s equity. False L.O. 3 Easy Page: 11 8. Liabilities are economic resources of a business expected to be of benefit in the future. False 9. L.O. 3 Moderate Page: 10 Owner’s equity is often referred to as capital and represents the residual amount of business assets that can be claimed by the creditors. False L.O. 3 Moderate Page: 11 10. An owner investment would increase the assets and decrease the equity of the firm. False L.O. 4 Easy Page: 12 11. The purchase of supplies on account would have an affect on the liabilities of the firm. True L.O. 4 Moderate Page: 14 12. One way of decreasing the equity of a business is to increase an asset. False L.O. 4 Difficult Page: 14 13. The purchase of supplies on account will decrease equity. False L.O. 4 Moderate Page: 14 14. When revenue is recorded, the asset account cash is always increased along with owner’s equity. False L.O. 4 Moderate Page: 14 15. The income statement lists all the entity's assets, liabilities, and owner's equity as of a specific date. False L.O. 5 Easy Page: 18 16. Increases in owner’s equity result from revenues and owner investments while decreases result from expenses and owner withdrawals. True L.O. 5 Moderate Page: 18 17. An income statement is dated for the last day in the period of time such as "December 31, 20X4." False L.O. 5 Easy Page: 20 18. The income statement must be prepared before the statement of owner’s equity since net income or net loss is added to or subtracted from the beginning balance in the owner’s capital account. True L.O. 5 Moderate Page: 21 19. The income statement presents a summary of an entity's assets and liabilities over a period of time. False L.O. 5 Easy Page: 18 20. The income statement shows how much liabilities either increased or decreased during the period. False L.O. 5 Moderate Page: 18 Multiple choice 1) Accounting guidelines are formulated by: a) the American Institute of Certified Public Accountants b) the Financial Accounting Standards Board c) the American Accounting Association d) the Securities and Exchange Commission b L.O. 1 Easy Page: 6 22. All of the following are forms of business organizations except: a) governmental unit b) partnership c) corporation d) proprietorship a 23. An a) b) c) d) c L.O. 1 Easy Page: 8 entity where ownership is divided into shares of stock is a: proprietorship trade agreement corporation mutual agency L.O. 1 Moderate Page: 8 24. According to the FASB, the primary objective of financial reporting is to provide information: a) regarding the assets and liabilities of a business b) to the Securities and Exchange Commission c) useful for making investing and lending decisions d) regarding the revenues and expenses of a business c L.O. 2 Moderate Page: 9 25. GAAP stands for: a) generally accepted auditing practices b) generally accrued auditing procedures c) generally accrued accounting principles d) generally accepted accounting principles d L.O. 2 Moderate Page: 9 26. The business entity concept means that: a) the business entity is organized according to the rules determined by the IRS b) the business entity is organized according to the rules determined by the FASB c) the owner of the business entity and the business entity are treated the same from a legal and accounting viewpoint d) the business entity is considered a separate entity apart from the owner or owners d L.O. 2 Easy Page: 9 27. Which of the following statements is false? a) Owner opinions are one source of objective evidence. b) Reliable data may be supported by objective evidence. c) Reliable data are verifiable. d) An independent appraisal is usually considered reliable. a L.O. 2 Moderate Page: 9 28. The principle which states that assets acquired by the business should be recorded at their exchange price is the: a) objectivity principle b) matching principle c) revenue recognition principle d) cost principle d L.O. 2 Easy Page: 9 29. The relevant measure of value of the assets of a company that is going out of business is their: a) current market value b) book value c) historical cost d) higher of historical cost or current market value a L.O. 2 Moderate Page: 9 30. Which of the following statements is true? a) The value of a dollar remains stable over time. b) The value of a dollar changes over time. c) The stable-monetary-unit concept requires adjustments to the accounting records for the effects of inflation. d) High inflation rates indicate a dollar’s purchasing power is stable. b L.O. 2 Moderate Page: 10 31. The accounting equation can be stated as: a) Expenses = Liabilities - Owner’s Equity b) Assets - Liabilities = Owner’s Equity c) Liabilities = Revenue + Owner’s Equity d) Owner’s Equity = Assets + Liabilities b L.O. 3 Easy Page: 11 32. Liabilities are: a) Expenses incurred by the business b) Increases in owner's equity earned by delivering goods or services c) Economic resources of a business d) Outsider claims to the business's assets d L.O. 3 Easy Page: 11 33. All of the following are assets except: a) Accounts Payable b) Cash c) Accounts Receivable d) Equipment a L.O. 3 Easy Page: 11 34. All of the following describe a liability except: a) investments by owners b) economic obligations to creditors c) debts to creditors d) outsider claims a L.O. 3 Easy Page: 11 35. A written promise for future collections of cash is a: a) revenue b) account receivable c) note receivable d) owner withdrawal c L.O. 3 Easy Page: 11 36. If owner's equity is $150,000 and total liabilities are $90,000, then total assets would be: a) $60,000 b) $225,000 c) $240,000 d) $135,000 c L.O. 3 Moderate Page: 11 37. Owner’s equity and total assets were $32,000 and $79,000 at the beginning of the period. Assets increased 50% and liabilities decreased 60% during the period. What is owner’s equity at the end of the period? a) $47,000 b) $43,300 c) $99,700 d) $105,700 c L.O. 3 Difficult Page: 11 38. A business paid $15,500 to a creditor. The effect of this transaction is to: a) Decrease assets and decrease liabilities b) Increase assets and decrease owner's equity c) Decrease liabilities and owner's equity d) Increase assets and decrease liabilities a L.O. 3 Difficult Page: 11 39. If total liabilities decrease by $30,000 and owner's equity increases by $8,000 during the period, then assets must have: a) increased $38,000 b) increased $22,000 c) decreased $22,000 d) decreased $38,000 c L.O. 3 Difficult Page: 11 40. If total liabilities are $98,000 and owner's equity is $150,000, total assets would be: a) $52,000 b) $248,000 c) $98,000 d) $300,000 b L.O. 3 Moderate Page: 11 41. If total liabilities are $200,000 and total assets are $325,000, owner's equity would be: a) $125,000 b) $525,000 c) $200,000 d) impossible to determine from the given data a L.O. 3 Moderate 42. Earning revenue on account: a) increases assets b) increases liabilities c) decreases owner's equity d) increases liabilities Page: 11 a L.O. 4 Moderate Page: 15 43. The amount owed by an entity when it makes a purchase on account is termed a(n): a) expense b) accounts payable c) note receivable d) accounts receivable b L.O. 4 Moderate Page: 14 44. On December 31, the assets of a business include: Cash, $4,500, Accounts Receivable, $14,000, and Supplies, $1,050. The liabilities on December 31 total $7,600. The owner's equity on December 31 is: a) $18,550 b) $25,100 c) $10,950 d) $11,950 d L.O. 4 Moderate Page: 15 45. Purchasing office supplies for cash would: a) decrease owner’s equity b) increase total assets c) have no effect on owner's equity d) decrease liabilities c L.O. 4 Difficult Page: 14 46. Purchasing a tract of land for $100,000 by paying $20,000 in cash and signing a promissory note for the remainder would: a) decrease assets by $120,000 b) increase owner's equity by $20,000 c) decrease liabilities by $120,000 d) increase total assets by $80,000 d L.O. 4 Difficult Page: 14 47. Collection of an account receivable would: a) have no effect on total assets b) have no effect on owner's equity c) decrease owner’s equity d) both a and b d L.O. 4 Difficult Page: 15 48. The payment of an account payable would: a) have no effect on total assets b) decrease assets and increase owner's equity c) decrease assets and decrease liabilities d) decrease assets and increase liabilities c L.O. 4 Difficult Page: 16 49. Transactions affecting owner's equity include: a) owner withdrawals and owner investments b) purchases of assets for cash c) purchases of assets on account d) only owner investments a L.O. 4 Moderate Page: 17 50. Borrowing money from a bank would: a) increase expenses b) decrease assets c) decrease liabilities d) increase liabilities d L.O. 4 Moderate Page: 17 51. Earning a revenue and immediately collecting the related cash would: a) decrease total assets and increase owner's equity b) have no effect on owner's equity c) have no effect on total liabilities d) decrease liabilities and increase owner’s equity c L.O. 4 Moderate Page: 17 52. Earning a revenue on account would: a) have no effect on owner’s equity b) increase owner's equity c) decrease owner's equity d) decrease total assets b L.O. 4 Moderate Page: 17 53. The payment of utilities each month would: a) increase total assets b) increase owner's equity c) decrease liabilities d) increase expenses d L.O. 4 Moderate Page: 15 54. A cash investment into the business by the owner would: a) increase assets and increase owner's equity b) increase assets and decrease owner’s equity c) decrease assets and increase liabilities d) increase assets and decrease liabilities a L.O. 4 Moderate Page: 13 55. An owner investment of office equipment into the business would: a) decrease owner's equity and decrease liabilities b) increase total assets and increase owner's equity c) decrease owner's equity and increase total assets d) decrease owner’s equity and increase liabilities b L.O. 4 Moderate Page: 14 56. Purchasing office equipment for cash would: a) increase total assets and increase liabilities b) increase total assets and decrease owner’s equity c) have no effect on total assets or liabilities d) increase liabilities and decrease owner’s equity c L.O. 4 Moderate Page: 14 57. Purchasing supplies on account would: a) decrease total assets and decrease owner's equity b) increase total assets and increase liabilities c) decrease liabilities and decrease total assets d) have no effect on the accounting equation b L.O. 4 Moderate Page: 14 58. Purchasing a building for $120,000 by paying cash of $30,000 and obtaining a mortgage for $90,000 would: a) increase assets and increase liabilities by $90,000 b) increase owner's equity by $90,000 c) increase liabilities by $30,000 d) decrease assets and decrease liabilities by $30,000 a L.O. 4 Difficult Page: 14 59. Receiving cash from a customer in payment of an account receivable would: a) increase total assets and increase owner’s equity b) increase owner's equity and increase liabilities c) increase total assets and decrease liabilities d) have no effect on total assets or liabilities d L.O. 4 Moderate Page: 15 60. A cash payment of an account payable would: a) have no effect on owner's equity b) increase total assets and decrease liabilities c) have no effect on total assets d) decrease liabilities and increase owner's equity a L.O. 4 Moderate Page: 15 61. A withdrawal of cash for personal use by an owner would: a) decrease total assets and decrease owner's equity b) increase owner’s equity and increase liabilities c) decrease total assets and increase owner’s equity d) increase total assets and decrease owner’s equity a L.O. 4 Moderate Page: 17 62. Borrowing money and signing a note payable would: a) decrease total assets and increase liabilities b) decrease liabilities and increase total assets c) increase total assets and increase liabilities d) increase total assets and increase owner’s equity c 63. L.O. 4 Moderate Page: 11 Receiving cash for services performed would: a) increase owner’s equity and decrease total assets b) decrease total assets and decrease liabilities c) increase liabilities and increase total assets d) increase owner’s equity and have no effect on liabilities d L.O. 4 Moderate Page: 17 64. A business receives its bill for utilities for the current month that it plans to pay next month. This transaction causes: a) an increase in liabilities and a decrease in owner’s equity b) a decrease in both owner’s equity and liabilities c) an increase in both assets and liabilities d) an increase in both assets and owner's equity a L.O. 4 Difficult Page: 14 65. Performing a service on account would: a) increase liabilities and decrease total assets b) decrease liabilities and increase total assets c) increase total assets and increase owner's equity d) increase owner’s equity and decrease liabilities c L.O. 4 Moderate Page: 14 66. Paying for supplies purchased In the previous period on account causes: a) assets to increase and owner’s equity to decrease b) both assets and liabilities to decrease c) assets to increase and owner’s equity to increase d) no change in total assets b L.O. 4 Difficult Page: 15 67. A business acquires a parcel of land by issuing a note payable for $60,000. This transaction causes: a) total assets to decrease b) owner’s equity to decrease c) assets to increase and equity to increase d) total assets to increase and liabilities to increase d L.O. 4 Moderate Page: 14 68. Which of the following transactions would increase an asset and increase owner’s equity: a) payment of a debt b) receipt of cash in payment of an account receivable c) owner investment of land into the business d) payment of the telephone bill c L.O. 4 Moderate Page: 14 69. Which of the following transactions would both increase and decrease an asset: a) purchasing land by issuing a note payable b) borrowing money from a bank c) performing a service and receiving the cash immediately d) purchasing office supplies for cash d L.O. 4 Moderate Page: 14 70. Which of the following transactions would increase an asset and increase a liability: a) payment of an account payable b) borrowing money from a bank c) an owner investment of cash into the business e) purchasing office equipment for cash b L.O. 4 Moderate Page: 11 71. Which of the following transactions would increase one asset, decrease another asset, and increase a liability: a) purchasing land with a cash down payment and a note payable b) paying liabilities incurred last period c) owner investment of cash and equipment into the business d) purchasing supplies and equipment on account a L.O. 4 Difficult Page: 14 72. Which of the following transactions would have no effect on total assets, total liabilities, or owner’s equity: a) payment of a liability b) payment of an expense c) purchasing supplies on account d) purchasing supplies for cash d L.O. 4 Difficult Page: 14 73. The financial statement that presents a summary of the assets, liabilities, and owner's equity as of a specific date is the: a) statement of assets b) balance sheet c) statement of owner’s equity d) statement of cash flows b L.O. 5 Easy Page: 18 74. The statement which presents a summary of the revenues and expenses of an entity is called the: a) statement of cash flows b) statement of financial position c) balance sheet d) income statement d L.O. 5 Easy Page: 18 75. The income statement presents a summary of the: a) revenues and expenses of an entity b) cash inflows and outflows of an entity c) assets and liabilities of an entity d) changes that occurred in the owner’s equity of an entity a L.O. 5 Easy Page: 18 76. Which of the following financial statements reports owner's equity as of the end of the accounting period? a) statement of owner's equity and the balance sheet b) statement of cash flows and the balance sheet c) income statement and the balance sheet d) statement of cash flows and the income statement a L.O. 5 Easy Page: 18 77. Net income appears on which of the following statements? a) statement of cash flows and balance sheet b) statement of owner's equity and balance sheet c) income statement and statement of owner's equity d) none of the above c L.O. 5 Difficult Page: 18 78. Liabilities are reported on the: a) income statement b) income statement and balance sheet c) statement of owner’s equity d) balance sheet d L.O. 5 Easy Page: 18 79. Assets are reported on the: a) statement of owner’s equity and balance sheet b) income statement and balance sheet c) statement of owner's equity d) balance sheet d L.O. 5 Easy Page: 18 80. Determine net income for the period if beginning owner’s equity is $20,000, cash withdrawals by the owner amount to $7,000, and ending owner’s equity is $37,000. a) $10,000 b) $27,000 c) $24,000 d) $13,000 c L.O. 5 Difficult Page: 18 81. If beginning capital was $25,000, ending capital is $37,000, and the owner's withdrawals were $23,000, the amount of net income or net loss for the period was: a) net loss of $35,000 b) net income of $16,000 c) net income of $35,000 d) net loss of $14,000 c L.O. 5 Difficult Page: 18 82. Determine cash withdrawals for the period if net income is $34,000, beginning owner’s equity is $29,000, and ending owner’s equity is $55,000. a) $8,000 b) $5,000 c) $60,000 d) $18,000 a L.O. 5 Difficult Page: 18 83. Total assets at the end of the period were $325,000 and liabilities were 40% of owner’s equity. Determine owner’s equity at the end of the period. a) $232,143 b) $130,000 c) $455,000 d) $195,000 a L.O. 5 Difficult Page: 18 84. Cash investments by the owner are reported on the: a) statement of cash flows b) income statement c) balance sheet d) statement of owner's equity and the income statement a L.O. 5 Difficult Page: 18 Table 1 Following is a random list showing the account balances of various assets, liabilities, revenues and expenses for Michael's Landscaping at December 31, 20X5, the end of its first year of operations. Accounts receivable $25,000 Accounts payable 3,500 Salary expense 4,500 Repairs expense 800 Truck 8,500 Equipment 6,300 Notes payable 8,200 Cash 6,800 Supplies expense 1,600 Service revenue Gasoline expense Salary payable 22,800 800 2,200 The owner, Michael Mower, invested $22,600 at the beginning of the year and withdrew $5,000 during the year for personal use. 85. Refer to Table 1. The net income or loss for the year was: a) $12,800 b) $15,100 c) $5,900 d) $7,700 b L.O. 5 Moderate Page: 18 86. Refer to Table 1. Total assets at December 31, 20X5, were: a) $31,600 b) $32,700 c) $36,200 d) $46,600 d L.O. 5 Moderate Page: 18 87. Refer to Table 1. Owner's equity at December 31, 20X5, was: a) $32,700 b) $23,900 c) $22,600 d) $18,700 a L.O. 5 Moderate Page: 18 88. Refer to Table 1. The statement of owner’s equity would show an ending capital balance of: a) $36,600 b) $3,900 c) $32,600 d) $32,700 d L.O. 5 Moderate Page: 18 89. Refer to Table 1. Total liabilities at December 31, 20X5, were: a) $12,800 b) $13,900 c) $20,600 d) $22,600 b L.O. 5 Moderate Page: 18 90. Refer to Table 1. The net change in owner’s equity for the year ended December 31, 20X5, was: a) an increase of $32,700 b) a decrease of $14,800 c) an increase of $36,500 d)...
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