Test bank for survey of accounting 2nd edition

increases an asset and decreases a liability or equity.. increases an asset and decreases a liability or equity1. Which financial statement matches asset increases from operating a busi

Test Bank for Survey of Accounting 2nd Edition

Multiple Choice Questions

Rowena Company spent cash to purchase equipment As a

result of this event,

1 A total liabilities increased.

2 B total assets increased.

3 C net income increased.

4 D total assets were unchanged.

The accounting equation may be written,

1 A Revenues - Expenses = Net Income

2 B Assets = Liabilities

3 C Liabilities = Equity

4 D Assets = Claims

The amount of land owned by a business appears on which

financial statement?

1 A income statement

2 B statement of changes in stockholders' equity

3 C statement of cash flows

4 D balance sheet

An asset decrease resulting from consumption of resources to

earn revenue is

1 A a net loss.

2 B a liability.

3 C an expense.

4 D an asset source transaction.

Dividends paid by a company are shown on the

1 A income statement.

2 B balance sheet.

3 C statement of changes in stockholders' equity.

4 D all of these.

The claims of a business's creditors are called

1 A assets.

2 B liabilities.

3 C equity.

4 D revenue.

A creditor

1 A provides financial resources to a business in exchange for an ownership interest.

2 B provides labor resources to a business.

3 C lends financial resources to a business.

4 D is a resource user.

An asset use transaction

1 A increases one asset and decreases another.

2 B decreases an asset and decreases a liability or equity.

3 C increases an asset and decreases a liability or equity.

4 D increases an asset and increases a liability or equity.

Which of the following items would appear on a balance sheet?

1 A Notes Payable

2 B Dividends

3 C Expenses

4 D Revenues

Most assets must be reported on the balance sheet at

1 A their current replacement cost.

2 B fair market value.

3 C an amount estimated by the company's management.

4 D historical cost.

Which of the following transactions is an asset source

transaction?

1 A acquired office supplies by signing a short-term note payable

2 B paid cash to purchase land

3 C paid cash for operating expenses

4 D paid cash dividends to owners

Accounting information is said to be reliable if

1 A it is based on recent information.

2 B it was prepared by someone with good credentials in accounting, such as a certified public accountant.

3 C it can be independently verified.

4 D it complies with rules and standards of the Internal Revenue Service.

Liabilities are shown on the

1 A income statement.

2 B statement of changes in stockholders' equity.

3 C statement of cash flows.

4 D balance sheet.

In event of liquidation of a business,

1 A creditors have priority claim on the business's assets.

2 B investors have priority claim on the business's assets.

3 C resource users have priority claim on the business's assets.

4 D stakeholders are assured of receiving the resources they had provided to the

business.

In 1998, Parker Corporation purchased land for $130,000 In

2010, Parker Company had the land appraised, and its value was estimated to be $190,000 Also during 2010, another company offered Parker $145,000 for the parcel of land When the balance sheet is prepared at the end of

2010, at what dollar amount should the land be reported?

1 A $190,000

2 B $145,000

3 C $130,000

4 D None of these

The term "articulation"

1 A requires that asset decreases (expenses) be matched with asset increases

(revenues).

2 B refers to the requirement that separate financial statements be prepared for separate entities.

3 C means that a business's financial statements are prepared for specified periods of time.

4 D indicates that there are interrelationships among a business's financial statements.

Assuming that Hardin engaged in no transactions during the

year other than those listed above, what was the amount

of net income or loss for the year?

1 A $19,000 net income

2 B $15,000 net income

3 C $12,000 net income

4 D $11,000 net loss

Which of the following items would be an example of revenue?

1 A cash investments made by owners

2 B cash received from a bank loan

3 C cash received from customers for services provided

4 D all of these

An asset source transaction

1 A increases one asset and decreases another.

2 B increases an asset and increases a liability or equity.

3 C increases an asset and decreases a liability or equity.

4 D decreases an asset and increases a liability.

As of December 31, 2009, Bueno Company had $1,000 in

liabilities, $8,000 in common stock, and $2,500 in retained earnings The total amount of assets on that date is

1 A $10,000.

2 B $12,500.

3 C $11,500.

4 D $7,500.

Generally accepted accounting principles (GAAP) are

measurement rules for

1 A managerial accounting.

2 B financial accounting

3 C tax accounting.

4 D determining the market rate of return on a company's stock.

The balance sheet for Raymond Company shows total assets of

$4,000, liabilities of $1,500, and retained earnings of

$1,200 Based on this information, the amount of common stock must be

1 A $1,300.

2 B $5,500.

3 C $4,200.

4 D $1,700.

Which financial statement matches asset increases from

operating a business with asset decreases from operating the business?

1 A statement of changes in equity

2 B balance sheet

3 C income statement

4 D statement of cash flows

A company's retained earnings at the beginning and ending of

the accounting period were $48,000 and $55,000,

respectively If the company had revenues of $61,000 and expenses of $50,000, the amount of cash dividends paid must have been

1 A $2,000.

2 B $9,000.

3 C $3,000.

4 D $4,000.

The claims side of the accounting equation

1 A lists the resources that a business owns or controls.

2 B lists the sources of the business's assets.

3 C must balance out to zero.

4 D indicates the amount of profit that a business has earned.

Pardee Company earned $25,000 of cash revenue What kind of

transaction is this?

1 A asset use transaction

2 B asset exchange transaction

3 C asset source transaction

4 D claims source transaction

Which of the following is NOT an asset use transaction?

1 A paying cash dividends

2 B paying cash to purchase land

3 C paying off the principal on a loan

4 D paying salaries to employees

Retained Earnings is

1 A a part of a company's assets.

2 B a category or type of liability.

3 C a part of stockholders' equity.

4 D a result of asset use transactions.

Accounting information focused on the needs of external users

is

1 A financial accounting.

2 B managerial accounting.

3 C claims accounting.

4 D not-for-profit accounting.

Expenses are shown on the

1 A income statement.

2 B statement of changes in stockholders' equity.

3 C balance sheet.

4 D all of these.

Bridges Company earned $4,000 in cash revenues, paid cash

expenses of $3,450, and paid a cash dividend of $300 to its owners It engaged in no other transactions during the period Which of the following statements is true?

1 A The cash flow from financing activities was $0.

2 B The net cash flow from operating activities was an inflow or increase of $550.

3 C The net cash flow from operating activities was an inflow or increase of $250.

4 D The cash flow from investing activities was an increase of $250.

What amount of cash did Hardin have at the end of 2010?

1 A $48,000

2 B $56,000

3 C $52,000

4 D $67,000

Which financial statement reports the results of a business's

operations?

1 A income statement

2 B statement of changes in equity

3 C balance sheet

4 D statement of cash flows

What was the cash flow from financing activities?

1 A an inflow of $60,000

2 B an inflow of $52,000

3 C an inflow of $36,000

4 D an inflow of $48,000

During 2010, Cruz Company earned $5,000 in cash revenue,

incurred $3,200 in cash expenses, and paid $500 in cash dividends to its owners Based on this information,

1 A retained earnings increased by $1,300 during the year.

2 B net income was $1,300 for 2010.

3 C the net cash flow from operating activities was $1,300 for the year.

4 D total assets increased by $1,800 during 2010.

Which of the following groups has primary responsibility for

establishing generally accepted accounting principles for businesses in the United States?

1 A the US Congress

2 B the Securities and Exchange Commission

3 C the Financial Accounting Standards Board

4 D the Internal Revenue Service

An investor provides resources to a business in exchange for

1 A physical resources.

2 B priority of claims in event of liquidation.

3 C an ownership interest in the business.

4 D a promise that the resources will be repaid at a given date.

Which of the following transactions is an asset use

transaction?

1 A payment of cash dividends to owners

2 B paying cash to acquire furniture

3 C acquiring cash by issuing stock to owners

4 D providing services to customers for cash

Wayne Company purchased equipment for $45,000 cash As a

result of this event, Wayne had a

1 A $45,000 cash outflow from financing activities.

2 B $45,000 cash inflow from financing activities.

3 C $45,000 cash outflow from investing activities.

4 D $45,000 cash outflow from operating activities.

Hanks Corporation acquired $150,000 cash by issuing common

stock to investors As a result of this event,

1 A retained earnings increased.

2 B assets increased.

3 C liabilities increased.

4 D both B and C.

Liabilities are

1 A claims of creditors.

2 B the owner's interest in the company.

3 C claims of investors.

4 D both A and B.

Which of the following items would appear in the financing

activities section of a statement of cash flows?

1 A received cash revenue from customers

2 B paid cash for dividends

3 C purchased equipment for cash

4 D paid cash for utility bill

Ohio Company provided services to a customer for $1,700 cash

As a result of this event,

1 A total assets decreased.

2 B total liabilities increased.

3 C retained earnings increased.

4 D cash flows from financing activities increased.

Chen Company paid $3,000 cash for utility expenses What kind

of transaction is this?

1 A asset source transaction

2 B asset use transaction

3 C asset exchange transaction

4 D claims source transaction

What was the cash flow from investing activities?

1 A an outflow of $15,000

2 B an outflow of $19,000

3 C an inflow of $65,000

4 D an outflow of $23,000

A business's equity comes from

1 A its creditors.

2 B investments by owners.

3 C amounts earned by the business.

4 D both B and C

Resources that a business uses to operate the business are

called

1 A assets.

2 B equity.

3 C revenues.

4 D liabilities.

The broad categories of information reported on a business's

financial statements are referred to as

1 A accounts.

2 B elements of the financial statements.

3 C components.

4 D assets.

A stockholder in a corporation would use _ to learn about the

company

1 A financial accounting information

2 B managerial accounting information

3 C not-for-profit accounting information

4 D both A and C

If a company receives cash for providing services to customers,

that transaction is

1 A an asset source transaction.

2 B an asset use transaction.

3 C an asset exchange transaction.

4 D either A or C

Hardin Company began operations in 2010 During the year, the

following cash transactions occurred: issued stock for

$40,000; borrowed $24,000 from bank; provided services

to customers for $53,000 cash; paid back $8,000 of the loan from the bank5 paid rent expense, $9,000;

purchased equipment costing $19,000; paid operating expenses, $29,000; paid $4,000 dividend to stockholders What was the cash flow from operating activities?

1 A an inflow of $4,000

2 B an inflow of $19,000

3 C an inflow of $11,000

4 D an inflow of $15,000

If a company's expenses are greater than its revenues for the

year,

1 A its assets increased during the period.

2 B the company incurred a net loss during the period.

3 C the company's liabilities must have increased.

4 D the company's stockholders' equity must have decreased during the period.

True - False Questions

The historical cost concept requires that most assets be

reported at the amount paid for them

1 True

2 False

The sources of a business's assets are liabilities and

distributions to owners

1 True

2 False

Issuance of common stock is an asset use transaction

1 True

2 False

The accounting equation may be written, "Assets = Claims" or

"Assets = Liabilities + Equity."

1 True

2 False

A business and a person who owns the business are separate

reporting entities

1 True

2 False

A business can obtain resources through its earnings activities

1 True

2 False

The balance sheet reports a business's assets and the claims to

those assets

1 True

2 False

The income statement matches expenses and revenues

1 True

2 False

A business's equity is the future obligations of the entity

1 True

2 False

Dividends that a company pays to its stockholders are treated

as an expense of the business

1 True

2 False

The accounting term "reliability" means that information is

consistent from one accounting period to the next

1 True

2 False

The four financial statements prepared by a business are not

interrelated

1 True

2 False

The account, "Land," is a subclassification of the "Liabilities"

element of the financial statements

1 True

2 False

Both liabilities and equity are sources of a business's assets

1 True

2 False

An asset exchange transaction does not affect the total amount

of liabilities and equity of a business

1 True

2 False

Net income is an increase in assets as a result of operating a

business

1 True

2 False

Accounting is an information system that reports on the

activities of an organization

1 True

2 False

The Financial Accounting Standards Board is the primary

authority for establishing accounting standards for

businesses in the United States

1 True

2 False

The difference between asset increases and asset decreases

from operating a business is called income or earnings

1 True

2 False

An asset exchange transaction does not affect the total amount

of assets of an entity

1 True

2 False

Investors in a business expect to receive a share of the income

earned by the business

1 True

2 False

Accounts are subclassifications of the various elements of the

financial statements.

1 True

2 False

An asset source transaction increases a business's assets and

the claims to assets.

1 True

2 False

Investors and creditors use accounting information to identify

the businesses they wish to provide resources to

1 True

2 False

A business's creditors have a priority claim to its assets in the

event of liquidation

1 True

2 False