250 test bank for fundamental accounting principles 22nd edition

250 Test Bank for Fundamental Accounting Principles
22nd Edition

Multiple Choice Questions - Page 1
A partnership:
1.

A. Is also called a sole proprietorship.

2.

B. Has unlimited liability for its partners.

3.

C. Has to have a written agreement in order to be legal.

4.

D. Is a legal organization separate from its owners.

5.

E. Has owners called shareholders.

The difference between a company's assets and its liabilities, or
net assets is:
1.

A. Net income.

2.

B. Expense.

3.

C. Equity.

4.

D. Revenue.

5.

E. Net loss.

The independent group that is attempting to harmonize
accounting practices of different countries is the:
1.

A. AICPA.

2.

B. IASB.

3.

C. CAP.

4.

D. SEC.

5.

E. FASB.

The accounting principle that requires accounting information
to be based on actual cost and requires assets and
services to be recorded initially at the cash or cashequivalent amount given in exchange, is the:
1.

A. Accounting equation.


2.

B. Cost principle.

3.

C. Going-concern assumption.

4.

D. Realization principle.

5.

E. Business entity assumption.

An example of an investing activity is:
1.

A. Paying wages of employees.

2.

B. Withdrawals by the owner.

3.

C. Purchase of land.

4.

D. Selling inventory.

5.

E. Contribution from owner.

On December 15 of the current year, Conrad Accounting
Services signed a $40,000 contract with a client to provide
bookkeeping services to the client in the following year.
Which accounting principle would require Conrad
Accounting Services to record the bookkeeping revenue
in the following year and not the year the cash was
received?

1.

A. Monetary unit assumption.

2.

B. Going-concern assumption.

3.

C. Cost principle.

4.

D. Business entity assumption.

5.

E. Revenue recognition principle.

Accounting is an information and measurement system that
does all of the following except:
1.

A. Identifies business activities.

2.

B. Records business activities.

3.

C. Communicates business activities.

4.

D. Eliminates the need for interpreting financial data.

5.

E. Helps people make better decisions.


If assets are $300,000 and liabilities are $192,000, then equity
equals:
1.

A. $108,000.

2.

B. $192,000.

3.

C. $300,000.

4.

D. $492,000.

5.

E. $792,000.

In a business decision where there are ethical concerns, the
preferred course of action should be one that:
1.

A. Is agreed upon by the most managers.

2.

B. Maximizes the company's profits.

3.

C. Results in maintaining operations at the current level.

4.

D. Costs the least to implement.

5.

E. Avoids casting doubt on the decision maker and upholds trust.

The private-sector group that currently has the authority to
establish generally accepted accounting principles in the
United States is the:

1.

A. APB.

2.

B. FASB.

3.

C. AAA.

4.

D. AICPA.

5.

E. SEC.

The rule that (1) requires revenue to be recognized at the time it
is earned, (2) allows the inflow of assets associated with
revenue to be in a form other than cash, and (3) measures
the amount of revenue as the cash plus the cash
equivalent value of any noncash assets received from
customers in exchange for goods or services, is called
the:
1.

A. Going-concern assumption.

2.

B. Cost principle.


3.

C. Revenue recognition principle.

4.

D. Objectivity principle.

5.

E. Business entity assumption.

When expenses exceed revenues, the resulting change in
equity is:
1.

A. Net assets.

2.

B. Negative equity.

3.

C. Net loss.

4.

D. Net income.

5.

E. A liability.

Resources a company owns or controls that are expected to
yield future benefits are:
1.

A. Assets.

2.

B. Revenues.

3.

C. Liabilities.

4.

D. Owner's Equity.

5.

E. Expenses.

Another name for equity is:
1.

A. Net income.

2.

B. Expenses.

3.

C. Net assets.

4.

D. Revenue.

5.

E. Net loss.

A corporation is:
1.

A. A business legally separate from its owners.

2.

B. Controlled by the FASB.

3.

C. Not responsible for its own acts and own debts.

4.

D. The same as a limited liability partnership.

5.

E. Not subject to double taxation.


Revenues are:
1.

A. The same as net income.

2.

B. The excess of expenses over assets.

3.

C. Resources owned or controlled by a company.

4.

D. The increase in equity from a company's sales of products and services.

5.

E. The costs of assets or services used.

Revenue is properly recognized:
1.

A. When the customer makes an order.

2.

B. Only if the transaction creates an account receivable.

3.

C. At the end of the accounting period.

4.

D. Upon completion of the sale or when services have been performed and the
business obtains the right to collect the sales price.

5.

E. When cash from a sale is received.

A limited partnership:
1.

A. Includes a general partner with unlimited liability.

2.

B. Is subject to double taxation.

3.

C. Has owners called stockholders.

4.

D. Is the same as a corporation.

5.

E. May only have two partners.

If equity is $300,000 and liabilities are $192,000, then assets
equal:
1.

A. $108,000.

2.

B. $192,000.

3.

C. $300,000.

4.

D. $492,000.

5.

E. $792,000.


The description of the relation between a company's assets,
liabilities, and equity, which is expressed as Assets =
Liabilities + Equity, is known as the:
1.

A. Income statement equation.

2.

B. Accounting equation.

3.

C. Business equation.

4.

D. Return on equity ratio.

5.

E. Net income.

If assets are $99,000 and liabilities are $32,000, then equity
equals:
1.

A. $32,000.

2.

B. $67,000.

3.

C. $99,000.

4.

D. $131,000.

5.

E. $198,000.

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

1.

A. Going-concern assumption.

2.

B. Matching principle.

3.

C. Cost principle.

4.

D. Business entity assumption.

5.

E. Consideration assumption.

The rule that requires financial statements to reflect the
assumption that the business will continue operating
instead of being closed or sold, unless evidence shows
that it will not continue, is the:
1.

A. Going-concern assumption.

2.

B. Business entity assumption.

3.

C. Objectivity principle.


4.

D. Cost Principle.

5.

E. Monetary unit assumption.

If a company purchases equipment costing $4,500 on credit, the
effect on the accounting equation would be:
1.

A. Assets increase $4,500 and liabilities decrease $4,500.

2.

B. Equity decreases $4,500 and liabilities increase $4,500.

3.

C. Liabilities decrease $4,500 and assets increase $4,500.

4.

D. Assets increase $4,500 and liabilities increase $4,500.

5.

E. Equity increases $4,500 and liabilities decrease $4,500.

All of the following regarding a Certified Public Accountant are
true except:
1.

A. Must meet education and experience requirements.

2.

B. Must pass an examination.

3.

C. Must exhibit ethical character.

4.

D. May also be a Certified Management Accountant.

5.

E. Cannot hold any certificate other than a CPA.

The Superior Company acquired a building for $500,000. The

building was appraised at a value of $575,000. The seller
had paid $300,000 for the building 6 years ago. Which
accounting principle would require Superior to record the
building on its records at $500,000?
1.

A. Monetary unit assumption.

2.

B. Going-concern assumption.

3.

C. Cost principle.

4.

D. Business entity assumption.

5.

E. Revenue recognition principle.

The accounting concept that requires every business to be
accounted for separately from other business entities,
including its owner or owners is known as the:
1.

A. Time-period assumption.

2.

B. Business entity assumption.

3.

C. Going-concern assumption.

4.

D. Revenue recognition principle.

5.

E. Cost principle.

If a company uses $1,300 of its cash to purchase supplies, the
effect on the accounting equation would be:
1.

A. Assets increase $1,300 and liabilities decrease $1,300.

2.

B. One asset increases $1,300 and another asset decreases $1,300, causing no effect.

3.

C. Assets decrease $1,300 and equity decreases $1,300.

4.

D. Assets decrease $1,300 and equity increases $1,300.

5.

E. Assets increase $1,300 and liabilities increase $1,300.

Technology:
1.

A. Has replaced accounting.

2.

B. Has not improved the clerical accuracy of accounting.

3.

C. Reduces the time, effort and cost of recordkeeping.

4.

D. In accounting has replaced the need for decision makers.

5.

E. In accounting is only available to large corporations.

Decreases in equity that represent costs of providing products
or services to customers, used to earn revenues are
called:
1.

A. Liabilities.

2.

B. Equity.

3.

C. Withdrawals.

4.

D. Expenses.

5.

E. Owner's Investment.


The conceptual framework that the Financial Accounting
Standards Board (FASB) and the International Accounting
Standards Board (IASB) are attempting to converge and
enhance includes the following broad areas to guide
standard setting except:

1.

A. Objectives

2.

B. Qualitative characteristics

3.

C. Uniformity

4.

D. Elements

5.

E. Recognition and measurement

If a company receives $12,000 from the owner to establish a
proprietorship, the effect on the accounting equation
would be:
1.

A. Assets decrease $12,000 and equity decreases $12,000.

2.

B. Assets increase $12,000 and liabilities decrease $12,000.

3.

C. Assets increase $12,000 and liabilities increase $12,000.

4.

D. Liabilities increase $12,000 and equity decreases $12,000.

5.

E. Assets increase $12,000 and equity increases $12,000.

An example of a financing activity is:
1.

A. Buying office supplies.

2.

B. Obtaining a long-term loan.

3.

C. Buying office equipment.

4.

D. Selling inventory.

5.

E. Buying land.

Which of the following purposes would financial statements
serve for external users?
1.

A. To find information about projected costs and revenues of proposed products.

2.

B. To assess employee performance and compensation.

3.

C. To assist in monitoring consumer needs and price concerns.

4.

D. To fulfill regulatory requirements for companies whose stock is sold to the public.


5.

E. To determine purchasing needs.

The question of when revenue should be recognized on the
income statement according to GAAP is addressed by
the:

1.

A. Revenue recognition principle.

2.

B. Going-concern assumption.

3.

C. Objectivity principle.

4.

D. Business entity assumption.

5.

E. Cost principle.

Which of the following accounting principles require that all
goods and services purchased be recorded at actual
cost?
1.

A. Going-concern assumption.

2.

B. Matching principle.

3.

C. Cost principle.

4.

D. Business entity assumption.

5.

E. Consideration assumption.

To include the personal assets and transactions of a business's
owner in the records and reports of the business would
be in conflict with the:
1.

A. Objectivity principle.

2.

B. Monetary unit assumption.

3.

C. Business entity assumption.

4.

D. Going-concern assumption.

5.

E. Revenue recognition principle.

Increases in equity from a company's sales of products or
services are:
1.

A. Assets.

2.

B. Revenues.

3.

C. Liabilities.


4.

D. Owner's Equity.

5.

E. Expenses.

Net Income:

1.

A. Decreases equity.

2.

B. Represents the amount of assets owners put into a business.

3.

C. Equals assets minus liabilities.

4.

D. Is the excess of revenues over expenses.

5.

E. Represents owners' claims against assets.

Marsha Bogswell is the owner of Bogswell Legal Services.
Which accounting principle requires Marsha to keep her
personal financial information separate from the financial
information of Bogswell Legal Services?
1.

A. Monetary unit assumption.

2.

B. Going-concern assumption.

3.

C. Cost principle.

4.

D. Business entity assumption.

5.

E. Matching principle.

The area of accounting aimed at serving the decision making
needs of internal users is:
1.

A. Financial accounting.

2.

B. Managerial accounting.

3.

C. External auditing.

4.

D. SEC reporting.

5.

E. Bookkeeping.

An example of an operating activity is:
1.

A. Paying wages.

2.

B. Purchasing office equipment.

3.

C. Borrowing money from a bank.

4.

D. Selling stock.

5.

E. Paying off a loan.


All of the following are true regarding ethics except:
1.

A. Ethics are beliefs that separate right from wrong.

2.

B. Ethics rules are often set for CPAs.

3.

C. Ethics do not affect the operations or outcome of a company.

4.

D. Are critical in accounting.

5.

E. Ethics can be difficult to apply.

Ethical behavior requires that:
1.

A. Auditors' pay not depend on the success of the client's business.

2.

B. Auditors invest in businesses they audit.

3.

C. Analysts report information favorable to their companies.

4.

D. Managers use accounting information to benefit themselves.

5.

E. Auditors' pay depends on the success of the client's business.

If a company is considering the purchase of a parcel of land
that was acquired by the seller for $85,000, is offered for
sale at $150,000, is assessed for tax purposes at $95,000,
is recognized by the purchaser as easily being worth
$140,000, and is purchased for $137,000, the land should
be recorded in the purchaser's books at:
1.

A. $95,000.

2.

B. $137,000.

3.

C. $138,500.

4.

D. $140,000.

5.

E. $150,000.

Operating activities:
1.

A. Are the means organizations use to pay for resources like land, buildings and
equipment.

2.

B. Involve using resources to research, develop, purchase, produce, distribute and
market products and services.

3.

C. Involve acquiring and disposing of resources that a business uses to acquire and
sell its products or services.


4.

D. Are also called asset management.

5.

E. Are also called strategic management.

The International Accounting Standards Board (IASB):
1.

A. Hopes to create harmony among accounting practices of different countries to
improve comparability.

2.

B. Is the government group that establishes reporting requirements for companies that
issue stock to the investing public.

3.

C. Has the authority to impose its standards on companies around the world.

4.

D. Is the only source of generally accepted accounting principles (GAAP).

5.

E. Only applies to companies that are members of the European Union.

The primary objective of financial accounting is to:
1.

A. Serve the decision-making needs of internal users.

2.

B. Provide accounting information that serves external users.

3.

C. Monitor and control company activities.

4.

D. Provide information on both the costs and benefits of looking after products and
services.

5.

E. Know what, when, and how much product to produce.

A resource that the owner takes from the company is called
a(n):
1.

A. Liability.

2.

B. Withdrawal.

3.

C. Expense.

4.

D. Contribution.

5.

E. Investment.

Creditors' claims on the assets of a company are called:
1.

A. Net losses.

2.

B. Expenses.

3.

C. Revenues.

4.

D. Equity.


5.

E. Liabilities.

The accounting concept that requires financial statement
information to be supported by independent, unbiased
evidence is:
1.

A. Business entity assumption.

2.

B. Revenue recognition principle.

3.

C. Going-concern assumption.

4.

D. Time-period assumption.

5.

E. Objectivity principle.

External users of accounting information include all of the
following except:
1.

A. Shareholders.

2.

B. Customers.

3.

C. Purchasing managers.

4.

D. Government regulators.

5.

E. Creditors.

114 Free Online Test Bank for Fundamental Accounting
Principles 22nd Edition by Wild Multiple Choice
Questions - Page 2
Dawson Electronic Services had revenues of $80,000 and
expenses of $50,000 for the year. Its assets at the
beginning of the year were $400,000. At the end of the
year assets were worth $450,000. Calculate its return on
assets.
1.

A. 7.1%

2.

B. 7.5%

3.

C. 6.7%

4.

D. 20.0%

5.

E. 18.8%


If the liabilities of a business increased $75,000 during a period
of time and the owner's equity in the business decreased
$30,000 during the same period, the assets of the
business must have:
1.

A. Decreased $105,000.

2.

B. Decreased $45,000.

3.

C. Increased $30,000.

4.

D. Increased $45,000.

5.

E. Increased $105,000.

If the liabilities of a company increased $74,000 during a period
of time and equity in the company decreased $19,000
during the same period, what was the effect on the
assets?
1.

A. Assets would have increased $55,000.

2.

B. Assets would have decreased $55,000.

3.

C. Assets would have increased $19,000.

4.

D. Assets would have decreased $19,000.

5.

E. None of these.

Determine the net income of a company for which the following
information is available for the month of September.
Service revenue $300,000; Rent expense 48,000; Utilities
expense. 3,200; Salaries expense 81,000
1.

A. $263,800.

2.

B. $432,200.

3.

C. $171,000.

4.

D. $167,800.

5.

E. $252,000.

Doc's Ribhouse had beginning equity of $52,000; net income of
$35,000, and withdrawals by the owner of $12,000.
Calculate the ending equity.
1.

A. $(5,000).


2.

B. $29,000.

3.

C. $5,000.

4.

D. $99,000.

5.

E. $75,000.

Assets created by selling goods and services on credit are:
1.

A. Accounts payable.

2.

B. Accounts receivable.

3.

C. Liabilities.

4.

D. Expenses.

5.

E. Equity.

Rico's Taqueria had cash inflows from operating activities of
$27,000; cash outflows from investing activities of
$22,000, and cash outflows from financing activities of
$12,000. Calculate the net increase or decrease in cash.
1.

A. $61,000 increase.

2.

B. $37,000 increase.

3.

C. $7,000 decrease.

4.

D. $7,000 increase.

5.

E. $34,000 decrease.

Contessa Company collected $42,000 cash on its accounts
receivable. The effects of this transaction as reflected in
the accounting equation are:
1.

A. Total assets decrease and equity increases.

2.

B. Both total assets and total liabilities decrease.

3.

C. Neither assets, total liabilities, nor equity are changed.

4.

D. Both total assets and equity are unchanged and liabilities increase.

5.

E. Total assets increase and equity decreases.


The financial statement that reports whether the business

earned a profit and also lists the revenues and expenses
is called the:
1.

A. Balance sheet.

2.

B. Statement of owner's equity.

3.

C. Statement of cash flows.

4.

D. Income statement.

5.

E. Statement of financial position.

Cage Company had income of $350 million and average
invested assets of $2,000 million. Its return on assets
(ROA) is:
1.

A. 1.8%.

2.

B. 35%.

3.

C. 17.5%.

4.

D. 5.7%.

5.

E. 3.5%.

The financial statement that identifies a company's cash
receipts and cash payments over a period of time is the:
1.

A. Statement of financial position.

2.

B. Statement of cash flows.

3.

C. Balance sheet.

4.

D. Income statement.

5.

E. Statement of changes in owner's equity.

All of the following are classified as liabilities except:
1.

A. Accounts Receivable.

2.

B. Notes Payable.

3.

C. Wages Payable.

4.

D. Accounts Payable.

5.

E. Taxes Payable.


Accounts payable appear on which of the following

statements?
1.

A. Balance sheet.

2.

B. Income statement.

3.

C. Statement of owner's equity.

4.

D. Statement of cash flows.

5.

E. Transaction statement.

A company's balance sheet shows: cash $22,000, accounts
receivable $16,000, office equipment $50,000, and
accounts payable $17,000. What is the amount of owner's
equity?
1.

A. $17,000.

2.

B. $29,000.

3.

C. $71,000.

4.

D. $88,000.

5.

E. $105,000.

If a company paid $38,000 of its accounts payable in cash, what
was the effect on the accounting equation?
1.

A. Assets would decrease $38,000, liabilities would decrease $38,000, and equity
would decrease $38,000.

2.

B. Assets would decrease $38,000, liabilities would decrease $38,000, and equity
would increase $38,000.

3.

C. Assets would decrease $38,000 and liabilities would decrease $38,000.

4.

D. There would be no effect on the accounts because the accounts are affected by the
same amount.

5.

E. Assets would increase $38,000 and liabilities would decrease $38,000.

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.
1.

A. 7.7%.


2.

B. 8.5%.

3.

C. 9.5%.

4.

D. 11.8%.

5.

E. 13.0%.

Use the following information as of December 31 to determine
equity. Cash 57,000; Buildings 175,000; Equipment
206,000; Liabilities $141,000
1.

A. $57,000.

2.

B. $141,000.

3.

C. $297,000.

4.

D. $438,000.

5.

E. $579,000.

If assets are $365,000 and equity is $120,000, then liabilities are:
1.

A. $120,000.

2.

B. $245,000.

3.

C. $365,000.

4.

D. $485,000.

5.

E. $610,000.

The basic financial statements include all of the following
except:
1.

A. Balance Sheet.

2.

B. Income Statement.

3.

C. Statement of Owner's Equity.

4.

D. Statement of Cash Flows.

5.

E. Statement of Changes in Assets.

A balance sheet lists:
1.

A. The types and amounts of the revenues and expenses of a business.

2.

B. Only the information about what happened to equity during a time period.

3.

C. The types and amounts of assets, liabilities, and equity of a business as of a specific
date.


4.

D. The inflows and outflows of cash during the period.

5.

E. The assets and liabilities of a company but not the owner's equity.

If the assets of a company increase by $55,000 during the year
and its liabilities increase by $25,000 during the same
year, then the change in equity of the company during the
year must have been:
1.

A. An increase of $80,000.

2.

B. A decrease of $80,000.

3.

C. An increase of $30,000.

4.

D. A decrease of $30,000.

5.

E. An increase of $25,000.

The financial statement that shows the beginning balance of
owner's equity; the changes in equity that resulted from
new investments by the owner, net income (or net loss);

withdrawals; and the ending balance, is the:
1.

A. Statement of financial position.

2.

B. Statement of cash flows.

3.

C. Balance sheet.

4.

D. Income statement.

5.

E. Statement of owner's equity.

All of the following are classified as assets except:
1.

A. Accounts Receivable.

2.

B. Supplies.

3.

C. Equipment.

4.

D. Accounts Payable.

5.

E. Land.

The statement of owner's equity:
1.

A. Reports how equity changes at a point in time.

2.

B. Reports how equity changes over a period of time.


3.

C. Reports on cash flows for operating, financing, and investing activities over a period
of time.

4.

D. Reports on cash flows for operating, financing, and investing activities at a point in

time.

5.

E. Reports on amounts for assets, liabilities, and equity at a point in time.

Rent expense appears on which of the following statements?
1.

A. Balance sheet.

2.

B. Income statement.

3.

C. Statement of owner's equity.

4.

D. Statement of periodic expenses.

5.

E. Statement of cash flows only.

The statement of cash flows reports all of the following except:
1.

A. Cash flows from operating activities.

2.

B. Cash flows from investing activities.

3.

C. Cash flows from financing activities.

4.

D. The net increase or decrease in assets for the period reported.

5.

E. The net increase or decrease in cash for the period reported.

A financial statement providing information that helps users
understand a company's financial status, and which lists
the types and amounts of assets, liabilities, and equity as
of a specific date, is called a(n):
1.

A. Balance sheet.

2.

B. Income statement.

3.

C. Statement of cash flows.

4.

D. Statement of owner's equity.

5.

E. Financial Status Statement.

Use the following information for Meeker Corp. to determine the
amount of equity to report. Cash 70,000; Buildings
125,000; Land 205,000; Liabilities $130,000
1.

A. $390,000.


2.

B. $140,000.

3.

C. $20,000.

4.

D. $530,000.

5.

E. $270,000.

Determine the net income of a company for which the following
information is available for the month of July. Employee
salaries expense $180,000; Interest expense 10,000; Rent
expense 20,000; Consulting revenue 400,000
1.

A. $190,000.

2.

B. $210,000.

3.

C. $230,000.

4.

D. $400,000.

5.

E. $610,000.

On August 31 of the current year, the assets and liabilities of
Gladstone, Inc. are as follows: Cash $30,000; Supplies,
$600; Equipment, $10,000; Accounts Payable, $8,500.
What is the amount of owner's equity as of August 31 of
the current year?
1.

A. $49,100

2.

B. $32,100

3.

C. $12,100

4.

D. $10,900

5.

E. $30,900

Atkins Company collected $1,750 as payment for the amount
owed by a customer from services provided the prior
month on credit. How does this transaction affect the
accounting equation for Atkins?
1.

A. Assets would decrease $1,750 and liabilities would decrease $1,750.

2.

B. One asset would increase $1,750 and a different asset would decrease $1,750,
causing no effect.

3.

C. Assets would increase $1,750 and equity would increase $1,750.


4.

D. Assets would increase $1,750 and liabilities would increase $1,750.

5.

E. Liabilities would decrease $1,750 and equity would increase $1,750.

The assets of a company total $700,000; the liabilities, $200,000.
What are the net assets?
1.

A. $900,000.

2.

B. $700,000.

3.

C. $500,000.

4.

D. $200,000.

5.

E. It is impossible to determine unless the amount of this owners' investment is known.

Savvy Sightseeing had beginning equity of $72,000; revenues of
$90,000, expenses of $65,000, and withdrawals by owners
of $9,000. Calculate the ending equity.
1.

A. $88,000.

2.

B. $25,000.

3.

C. $97,000.

4.

D. $38,000.

5.

E. $47,000.

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?
1.

A. Assets increase by $75,000 and expenses increase by $75,000.

2.

B. Assets increase by $75,000 and expenses decrease by $75,000.

3.

C. Liabilities increase by $75,000 and expenses decrease by $75,000.

4.

D. Assets decrease by $75,000 and expenses decrease by $75,000.

5.

E. Assets increase by $75,000 and liabilities increase by $75,000.

Charlie's Chocolates' owner made investments of $50,000 and
withdrawals of $20,000. The company has revenues of
$83,000 and expenses of $64,000. Calculate its net
income.
1.

A. $30,000.


2.

B. $83,000.

3.

C. $64,000.

4.

D. $19,000.

5.

E. $49,000.

A company borrows $125,000 from the Northern Bank and
receives the loan proceeds in cash. This represents a(n):
1.

A. Revenue activity.

2.

B. Operating activity.

3.

C. Expense activity.

4.

D. Investing activity.

5.

E. Financing activity.

A company's balance sheet shows: cash $24,000, accounts
receivable $30,000, equipment $50,000, and equity
$72,000. What is the amount of liabilities?
1.

A. $104,000.

2.

B. $76,000.

3.

C. $32,000.

4.

D. $68,000.

5.

E. $176,000.

If the assets of a business increased $89,000 during a period of
time and its liabilities increased $67,000 during the same
period, equity in the business must have:
1.

A. Increased $22,000.

2.

B. Decreased $22,000.

3.

C. Increased $89,000.

4.

D. Decreased $156,000.

5.

E. Increased $156,000.


Grandmark Printing pays $2,000 rent to the landlord of the
building where its facilities are located. How does this
transaction affect the accounting equation for
Grandmark?
1.

A. Assets would decrease $2,000 and liabilities would decrease $2,000.

2.

B. Assets would decrease $2,000 and equity would decrease $2,000.

3.

C. Assets would increase $2,000 and equity would increase $2,000.

4.

D. Assets would increase $2,000 and liabilities would increase $2,000.

5.

E. Liabilities would decrease $2,000 and equity would increase $2,000.

Risk is:
1.

A. Net income divided by average total assets.

2.

B. The reward for investment.

3.

C. The uncertainty about the return expected to be earned.

4.

D. Unrelated to return expected.

5.

E. Derived from the idea of getting something back from an investment.

Billington Corp. borrows $80,000 cash from Second National
Bank. How does this transaction affect the accounting
equation for Billington?
1.

A. Assets would decrease $80,000 and liabilities would decrease $80,000.

2.

B. Assets would decrease $80,000 and equity would increase $80,000.

3.

C. Assets would increase $80,000 and equity would decrease $80,000.

4.

D. Assets would increase $80,000 and liabilities would increase $80,000.

5.

E. Liabilities would decrease $80,000 and equity would increase $80,000.

Saddleback Company paid off $30,000 of its accounts payable
in cash. What would be the effects of this transaction on
the accounting equation?
1.

A. Assets, $30,000 increase; equity, $30,000 increase.

2.

B. Assets, $30,000 decrease; liabilities, $30,000 decrease.

3.

C. Assets, $30,000 decrease; liabilities, $30,000 increase.

4.

D. Liabilities, $30,000 decrease; equity, $30,000 increase.