52 test bank for survey of accounting 2nd

52 Test Bank for Survey of Accounting 2nd
Edition by Edmonds
Multiple Choice Questions
The claims of a business's creditors are called
1.

A. assets.

2.

B. liabilities.

3.

C. equity.

4.

D. revenue.

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

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

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.

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.

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

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

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.

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 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

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

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.

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

Accounting information is said to be reliable if
1.
2.

A. it is based on recent information.
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.

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

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

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 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

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.

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

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.

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.

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

The accounting equation may be written,
1.

A. Revenues - Expenses = Net Income

2.

B. Assets = Liabilities

3.

C. Liabilities = Equity

4.

D. Assets = Claims

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

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.

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.

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.


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

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.

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.

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.

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.

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.

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

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

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.

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.

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.

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.

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

Resources that a business uses to operate the business are
called
1.

A. assets.

2.

B. equity.

3.

C. revenues.

4.

D. liabilities.

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

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.

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 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.

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 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

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.

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.

Which of the following items would appear on a balance sheet?
1.

A. Notes Payable

2.

B. Dividends

3.

C. Expenses

4.

D. Revenues

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.