question

The basic elements of a financial accounting system include a framework for preparing financial statements.

answer

TRUE

question

The accounting equation is expressed as follows: Assets = Liabilities + Stockholders' Equity.

answer

TRUE

question

Any given transaction must affect at least two different parts of the accounting equation.

answer

FALSE

question

Dividends are an example of an expense.

answer

FALSE

question

Retained earnings will be increased by the amount in the dividend account.

answer

FALSE

question

By keeping a running total of the effects of transactions, the accounting equation provides a framework for summarizing the effects of a series of transactions.

answer

TRUE

question

A business receives $10,000 cash for a sale of merchandise and records this receipt of cash as an increase in accounts receivable by mistake. The accounting equation is still in balance.

answer

TRUE

question

The effect of every transaction is an increase or a decrease in one or more of the accounting equation elements.

answer

TRUE

question

The accounting equation can be expressed: Assets - Liabilities = Revenues.

answer

FALSE

question

When an accounts payable account is paid in cash, the stockholders' equity in the business increases.

answer

FALSE

question

A transaction can affect at most two elements of the accounting equation.

answer

FALSE

question

When an account receivable is collected in cash, the total assets of the business increase.

answer

FALSE

question

Equality of the accounting equation means that no errors have occurred.

answer

FALSE

question

It is possible for a transaction to change the makeup of assets, but to NOT affect assets in total.

answer

TRUE

question

When capital stock is issued by a corporation for cash, both the income statement and the balance sheet are affected.

answer

FALSE

question

Fees earned and received in cash will increase operating activity cash flows as well as retained earnings.

answer

TRUE

question

Miscellaneous expenses are expenses that have an undetermined amount to be paid.

answer

FALSE

question

The payment of utilities expense in cash would affect the operating activities in the statement of cash flows and the income statement but NOT the balance sheet.

answer

FALSE

question

Revenues decrease stockholders' equity.

answer

FALSE

question

The two sides of the accounting equation do NOT have to be equal.

answer

FALSE

question

The basic financial statements do NOT include the a. income statement. b. tax return c. balance sheet. d. statement of cash flows.

answer

B. TAX RETURN

question

Which of the following is NOT an element of the financial accounting system? a. A set of rules for determining the recording of economic events b. A framework for preparing financial statements c. A set of rules for the stock exchange d. Controls to determine whether errors occur during recording

answer

C. A SET OF RULES FOR THE STOCK EXCHANGE

question

If a $15,000 purchase of equipment for cash is incorrectly recorded as an increase to equipment and as an increase to cash, at the end of the period assets will a. exceed liabilities and stockholders' equity by $15,000. b. equal liabilities and stockholders' equity. c. exceed liabilities and stockholders' equity by $30,000 d. exceed liabilities and stockholders' equity by $40,000.

answer

C. EXCEED LIABILITIES AND STOCKHOLDERS' EQUITY BY $30,000

question

Which of the following is NOT considered to be a liability? a. Note payable b. Accounts Receivable c. Unearned revenues d. Accounts payable

answer

B. ACCOUNTS RECEIVABLE

question

Which of the following statements is NOT true about liabilities? a. Liabilities are debts owed to outsiders. b. Account titles of liabilities often include the term "payable." c. Cash received before services are performed is considered to be a liability. d. Liabilities do not include wages owed to employees of the company

answer

D. LIABILITIES DO NOT INCLUDE WAGES OWED TO EMPLOYEES OF THE COMPANY

question

Which of the following accounts is a stockholders' equity account? a. Cash b. Capital Stock c. Prepaid Insurance d. Accounts Payable

answer

B. CAPITAL STOCK

question

Which of the following group of accounts are all assets? a. Cash, Accounts Payable, Buildings b. Accounts Receivable, Revenue, Cash c. Prepaid Expenses, Buildings, Patents d. Unearned Revenues, Prepaid Expenses, Cash

answer

C. PREPAID EXPENSES, BUILDINGS, PATENTS

question

Which of the following situations increase stockholders' equity? a. Supplies are purchased on account. b. Services are provided on account c. Cash is received from customers. d. Utility bill will be paid next month.

answer

B. SERVICES ARE PROVIDED ON ACCOUNT

question

Stockholders' Equity will be reduced by all of the following accounts a. Revenues b. Expenses c. Dividends d. All of the above reduce Stockholders' Equity.

answer

A. REVENUES

question

Expenses can be defined as a. assets consumed. b. services used in the process of generating revenues. c. costs that have been incurred during the normal course of business. d. all of these.

answer

D. ALL OF THESE

question

The gross increases in stockholders' equity attributable to business activities are called a. assets. b. liabilities. c. revenues. d. net income.

answer

C. REVENUES

question

The payment of $15,000 for expenses was recorded by Spears Co. as an increase in cash of $15,000 and a decrease in retained earnings of $15,000. What is the effect of this error on the accounting equation? a. Total assets will exceed total liabilities and stockholders' equity by $15,000. b. Total assets will exceed total liabilities and stockholders' equity by $30,000. c. Total assets will be less than total liabilities and stockholders' equity by $30,000. d. The error will not affect the accounting equation.

answer

B. TOTAL ASSETS WILL EXCEED TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY BY $30,000

question

Which of the following will increase stockholders' equity? a. Expenses > revenues b. Owner investment c. Accounts payable d. Dividends

answer

B. OWNER INVESTMENT

question

A __________ is an economic event that under generally accepted accounting principles affects an element of the financial statements and must be recorded. a. framework b. control c. set of rules d. transaction

answer

D. TRANSACTION

question

The statement of cash flows is integrated with the balance sheet because a. the cash at the beginning of the period plus or minus the cash flows from operating, investing, and financing activities equals the end of period cash reported on the balance sheet. b. the cash at the beginning of the period plus or minus the net income equals the end of period cash reported on the balance sheet. c. the cash at the beginning of the period plus or minus assets and liabilities equals the end of period cash reported on the balance sheet. d. the cash at the beginning of the period plus or minus the cash flows from operating activities equals the end of period cash reported on the balance sheet.

answer

A. the cash at the beginning of the period plus or minus the cash flows from operating, investing, and financing activities equals the end of period cash reported on the balance sheet.

question

Hodges, Inc. had the following assets and liabilities as of September 30, 2011: Assets $56,327 Liabilities $28,416 What is the stockholders' equity of Hodges as of September 30, 2011? a. $0 b. $27,911 c. $84,743 d. Cannot be determined with this information

answer

B. $27,911

question

Hodges, Inc. had the following assets and liabilities as of September 30, 2011: Assets $56,327 Liabilities $28,416 If assets increased by $3,914 and equity increased by $2,290, what is the increase or decrease in liabilities of Hodges as of October 31, 2011? a. ($1,624) b. $1,624 c. $6,204 d. ($6,204)

answer

B. $1,624

question

Rush Corporation borrowed $25,000 from the bank. Which of the following accurately shows the effects of the transaction? a. Increase cash $25,000 and decrease notes payable $25,000 b. Increase cash $25,000 and increase notes payable $25,000 c. Decrease cash $25,000 and decrease notes payable $25,000 d. Decrease cash $25,000 and increase notes payable $25,000

answer

B. Increase cash $25,000 and increase notes payable $25,000

question

Flow, Inc. received cash from fees earned. How does this transaction affect the Statement of Cash Flows? a. Increase cash from Operating Activities b. Increase cash from Investing Activities c. Increase cash from Financing Activities d. No effect on the Statement of Cash Flows

answer

A. Increase cash from Operating Activities

question

Philip Corporation purchased equipment on account. What is the effect of this transaction? a. Cash will decrease and equipment will increase. b. Total assets will remain unchanged. c. Cash flow from Investing Activities will decrease. d. Total assets and total liabilities will both increase.

answer

D. Total assets and total liabilities will both increase.

question

Johnson, Inc. paid rent expense of $3,500 for the month of October. How are the accounts affected due to this transaction? a. Increase in cash $3,500 and increase in retained earnings $3,500 b. Increase in cash $3,500 and decrease in retained earnings $3,500 c. Decrease in cash $3,500 and decrease in retained earnings $3,500 d. Decrease in cash $3,500 and increase in retained earnings $3,500

answer

C. Decrease in cash $3,500 and decrease in retained earnings $3,500

question

Johnson, Inc. purchased land for cash. What effect does this transaction have on the following accounts: a. Increase in Cash and decrease in Land b. Decrease in Cash and decrease in Land c. Increase in Cash and increase in Land d. Decrease in Cash and increase in Land

answer

D. Decrease in Cash and increase in Land

question

Johnson, Inc. issued $15,000 in capital stock in exchange for cash. What is the effect of this transaction? a. Total assets remain unchanged. b. Cash flow from Financing Activities will increase. c. Net Income will increase. d. Total Retained Earnings will increase.

answer

B. Cash flow from Financing Activities will increase.

question

Johnson, Inc. receives $5,000 cash for fees earned. What is the effect of this transaction? a. Total assets remain unchanged. b. Cash flow from Financing Activities will increase. c. Net income will increase. d. Retained earnings will remain unchanged.

answer

C. Net income will increase.

question

Stockholders' Equity will be increased by all of the following accounts EXCEPT: a. Dividends b. Revenues c. Owner investments d. All of the above increase Stockholders' Equity.

answer

A. Dividends

question

ABC Company deposited $20,000 in a bank account in return for issuing shares in the corporation. This transaction would affect which two financial statement elements? a. Assets and stockholders' equity b. Assets and liabilities c. Liabilities and stockholders' equity d. None of these

answer

A. Assets and stockholders' equity

question

BNC Company earns revenues and as a result collects cash. Which of the following financial statement elements are increased? a. Cash only b. Stockholders' equity only c. Liabilities d. Cash and stockholders' equity

answer

D. Cash and stockholders' equity

question

DAF Company paid a utility bill of $300 and paid rent of $700 in December. By how much would these events reduce stockholders' equity? a. $300 b. $1,000 c. $400 d. $700

answer

B. $1,000

question

Declaring and paying cash dividends affects which balance sheet accounts? a. Cash only b. Stockholders' equity only c. Cash and stockholders' equity d. Cash and capital stock

answer

C. Cash and stockholders' equity

question

Which of the following transactions changes the mix of assets only? a. Paid for supplies with cash b. Borrowed money from Second National Bank c. Received money for fees earned d. Received a utility bill

answer

A. Paid for supplies with cash

question

If Assets have a balance of $40,000 and Stockholders' Equity has a balance of $30,000, then Liabilities must have a balance of a. $70,000. b. $30,000. c. $40,000. d. $10,000.

answer

D. $10,000

question

If Liabilities have a balance of $10,000 and Stockholders' Equity has a balance of $60,000, then Assets must have a balance of a. $50,000. b. $60,000. c. $70,000. d. $10,000.

answer

C. $70,000

question

Gibbs Company has $16,000 in Retained Earnings, $27,000 in Assets, and $5,000 in Liabilities. How much is in Common Stock? a. $22,000 b. $16,000 c. $11,000 d. $6,000

answer

D. $6,000

question

A to Z Corporation engaged in the following transaction "Paid a $10,000 cash dividend." On the Statement of Cash Flows, the transaction would be classified as a. Cash Flows from Operating Activities. b. Cash Flows from Investing Activities. c. Cash Flows from Financing Activities. d. Noncash transaction.

answer

C. Cash Flows from Financing Activities.

question

A to Z Corporation engaged in the following transaction "Purchased a building for $80,000 cash." On the Statement of Cash Flows, the transaction would be classified as a. Cash Flows from Operating Activities. b. Cash Flows from Investing Activities. c. Cash Flows from Financing Activities. d. Noncash transaction.

answer

B. Cash Flows from Investing Activities.

question

A to Z Corporation engaged in the following transaction "Issued a $30,000 note payable to borrow cash from the bank." On the Statement of Cash Flows, the transaction would be classified as a. Cash Flows from Operating Activities. b. Cash Flows from Investing Activities. c. Cash Flows from Financing Activities. d. Noncash transaction.

answer

C. Cash Flows from Financing Activities.

question

An increase in Stockholders' Equity from revenues earned will also result in an increase in a. liabilities. b. assets. c. expenses. d. cash flow from financing activities.

answer

B. assets.

question

For EFG Co., the transaction "Payment to creditors" would a. increase total assets. b. decrease total assets. c. have no effect on total assets. d. decrease stockholders' equity.

answer

B. decrease total assets.

question

For EFG Co., the transaction "Cash sales to customers" would a. increase total assets. b. decrease total assets. c. have no effect on total assets. d. decrease stockholders' equity.

answer

A. increase total assets.

question

For EFG Co., the transaction "Payment of interest expense" would a. increase total assets. b. decrease total assets. c. have no effect on total assets. d. increase stockholders' equity.

answer

B. decrease total assets.

question

For EFG Co., the transaction "Purchase of store equipment with cash" would a. increase total assets. b. decrease total assets. c. have no effect on total assets. d. decrease stockholders' equity.

answer

C. have no effect on total assets.

question

For EFG Co., the transaction "Payment of dividends" would a. increase total assets. b. decrease total assets. c. have no effect on total assets. d. increase stockholders' equity.

answer

B. decrease total assets.

question

For EFG Co., the transaction "Purchase of store equipment with a note payable" would a. increase total assets. b. decrease total assets. c. have no effect on total assets. d. decrease total liabilities.

answer

A. increase total assets.

question

For EFG Co., the transaction "Payment of quarterly taxes" would a. increase total assets. b. decrease total assets. c. have no effect on total assets. d. increase stockholders' equity.

answer

B. decrease total assets.

question

For EFG Co., the transaction "Receipt of interest income" would a. increase total assets. b. decrease total assets. c. have no effect on total assets. d. decrease total liabilities.

answer

A. increase total assets.

question

For EFG Co., the transaction "Receipt of a utility bill" would a. increase total assets. b. decrease total assets. c. have no effect on total assets. d. decrease total liabilities.

answer

C. have no effect on total assets.

question

For EFG Co., the transaction "Billed a customer for fees earned" would a. increase total assets. b. decrease total assets. c. have no effect on total assets. d. increase total liabilities.

answer

A. increase total assets.

question

The income statement for August indicates net income of $50,000. The corporation also paid $10,000 in dividends during the same period. If there was no beginning balance in stockholders' equity, what is the ending balance in stockholders' equity? a. $40,000 b. $50,000 c. $10,000 d. $60,000

answer

A. $40,000

question

Anthony, Inc. buys land for $50,000 cash. The net affect on assets is a. $50,000 increase. b. $0. c. $50,000 decrease. d. $25,000 increase.

answer

B. $0.

question

Declaring and paying cash dividends affects which accounts? a. Cash only b. Capital stock only c. Cash and retained earnings d. Cash and capital stock

answer

C. Cash and retained earnings

question

Buying equipment for cash affects which accounts? a. Cash only b. Retained earnings only c. Equipment and retained earnings d. Cash and equipment

answer

D. Cash and equipment

question

Receiving cash for fees earned affects which financial statement elements? a. Assets only b. Stockholders' equity only c. Assets and stockholders' equity d. Assets and liabilities

answer

C. Assets and stockholders' equity

question

Paying expenses affects which financial statement elements? a. Assets only b. Stockholders' equity only c. Assets and stockholders' equity d. Assets and liabilities

answer

C. Assets and stockholders' equity

question

The payment of a liability a. decreases assets and stockholders' equity. b. increases assets and decreases liabilities. c. decreases assets and increases liabilities. d. decreases assets and decreases liabilities.

answer

D. decreases assets and decreases liabilities.

question

The first month of operation showed the net cash from operating activities to be $3,760, the net cash from investing activities to be ($5,415), and the ending cash balance to be $3,425. The net cash from financing activities must be a. $1,770. b. $5,080. c. $5,750. d. $12,600.

answer

B. $5,080.

ACCT 2110 Chapter 2 – Flashcards

Unlock all answers in this set

Haven't found what you were looking for?

Search for samples, answers to your questions and flashcards