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?

Accepted Answer

A)  Assets increase by $75,000 and liabilities increase by $75,000.
B)  Liabilities increase by $75,000 and expenses decrease by $75,000.
C)  Assets increase by $75,000 and expenses decrease by $75,000.
D)  Assets increase by $75,000 and expenses increase by $75,000.
E)  Assets decrease by $75,000 and expenses decrease by $75,000.F) None of the above
G) C) and D)

Question 2

Explain the accounting equation and define its terms.

Accepted Answer

The accounting equation is stated as: As...

Question 3

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.

Accepted Answer

A)  7.7%.
B)  13.0%.
C)  8.5%.
D)  9.5%.
E)  11.8%.F) B) and D)
G) All of the above

Question 4

A partnership:

Accepted Answer

A)  Is also called a sole proprietorship.
B)  Has to have a written agreement in order to be legal.
C)  Has unlimited liability for its partners.
D)  Is a legal organization separate from its owners.
E)  Has owners called shareholders.F) B) and D)
G) A) and D)

Question 5

Rent expense appears on which of the following statements?

Accepted Answer

A)  Statement of owner's equity.
B)  Balance sheet.
C)  Statement of periodic expenses.
D)  Income statement.
E)  Statement of cash flows only.F) All of the above
G) A) and C)

Question 6

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

Accepted Answer

A)  Balance sheet.
B)  Statement of cash flows.
C)  Statement of financial position.
D)  Statement of changes in owner's equity.
E)  Income statement.F) None of the above
G) B) and C)

Question 7

Investing activities are the acquiring and disposing of resources that an organization uses to acquire and sell its products or services.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following accounting principles prescribes that a company record its expenses incurred to generate the revenue reported?

Accepted Answer

A)  Expense recognition (Matching) principle.
B)  Going-concern assumption.
C)  Measurement (Cost) principle.
D)  Consideration assumption.
E)  Business entity assumption.F) A) and E)
G) A) and D)

Question 9

The accounting concept that requires financial statement information to be supported by independent, unbiased evidence is:

Accepted Answer

A)  Revenue recognition principle.
B)  Time-period assumption.
C)  Objectivity principle.
D)  Going-concern assumption.
E)  Business entity assumption.F) All of the above
G) B) and E)

Question 10

A partnership is a business owned by two or more people.

Accepted Answer

A) True 
 B)False

Question 11

Every business transaction leaves the accounting equation in balance.

Accepted Answer

A) True 
 B)False

Question 12

Distributions of cash or other resources by a business to its owners are called:

Accepted Answer

A)  Expenses.
B)  Withdrawals.
C)  Assets.
D)  Net Income.
E)  Retained earnings.F) D) and E)
G) B) and C)

Question 13

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

Accepted Answer

A)  Cash flows from investing activities.
B)  Cash flows from operating activities.
C)  The net increase or decrease in assets for the period reported.
D)  Cash flows from financing activities.
E)  The net increase or decrease in cash for the period reported.F) A) and B)
G) D) and E)

Question 14

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

Accepted Answer

A)  120%.
B)  83.3%.
C)  16.7%.
D)  8.3%.
E)  12%.F) All of the above
G) B) and D)

Question 15

U.S. Government Treasury bonds provide low return and low risk to investors.

Accepted Answer

A) True 
 B)False

Question 16

The materiality constraint:

Accepted Answer

A)  Prescribes that only information that would influence the decisions of a reasonable person need be disclosed.
B)  Means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.
C)  Provides guidance on when a company must recognize revenue.
D)  Prescribes that accounting information is based on actual cost.
E)  Prescribes that a company record the expenses it incurred to generate the revenue reported.F) C) and D)
G) All of the above

Question 17

The cost-benefit constraint prescribes that only information with benefits of disclosure greater than the costs of providing it need be disclosed.

Accepted Answer

A) True 
 B)False

Question 18

An example of a financing activity is:

Accepted Answer

A)  Buying office supplies.
B)  Buying land.
C)  Obtaining a long-term loan.
D)  Buying office equipment.
E)  Selling inventory.F) D) and E)
G) B) and E)

Question 19

Internal operating activities include research and development, distribution, and human resources.

Accepted Answer

A) True 
 B)False

Question 20

Decreases in equity that represent costs of providing products or services to customers, used to earn revenues are called:

Accepted Answer

A)  Liabilities.
B)  Withdrawals.
C)  Equity.
D)  Owner's Investment.
E)  Expenses.F) A) and B)
G) A) and E)

Exam 1: Accounting in Business

The materiality constraint:

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A partnership:

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

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Decreases in equity that represent costs of providing products or services to customers, used to earn revenues are called:

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Which of the following accounting principles prescribes that a company record its expenses incurred to generate the revenue reported?

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

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Every business transaction leaves the accounting equation in balance.

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Rent expense appears on which of the following statements?

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Internal operating activities include research and development, distribution, and human resources.

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The cost-benefit constraint prescribes that only information with benefits of disclosure greater than the costs of providing it need be disclosed.

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Distributions of cash or other resources by a business to its owners are called:

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A partnership is a business owned by two or more people.

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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?

Correct AnswerverifiedShow Answer

Explain the accounting equation and define its terms.

Correct AnswerverifiedThe accounting equation is stated as: As...View AnswerShow Answer

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

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The accounting concept that requires financial statement information to be supported by independent, unbiased evidence is:

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Investing activities are the acquiring and disposing of resources that an organization uses to acquire and sell its products or services.

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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.

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An example of a financing activity is:

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U.S. Government Treasury bonds provide low return and low risk to investors.

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The accounting equation is stated as: As...
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