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For each of the following questions, indicate the single best answer by circling the appropriate letter.
6. Which of the following organizations has had the least influence on the development of generally accepted accounting principles?
a. The American Institute of CPAs b. The Securities and Exchange Commission c. The Internal Revenue Service d. The Financial Accounting Standards Board
9. The financial statement that presents the assets and equities of a business at a particular moment in time is the:
a. statement of changes in financial position. b. statement of retained earnings. c. balance sheet. d. income statement.
12. Company K has assets of $30,000 and liabilities of $5,000. The company buys delivery equipment on credit for $4,000. What immediate effect would this transaction have on the balance sheet?
a. Assets increase $4,000 and expenses increase $4,000. b. Assets increase $4,000 and liabilities increase $4,000. c. Expenses increase $4,000 and liabilities increase $4,000. d. Expenses increase $4,000 and stockholders' equity increases $4,000.
14. Little Corporation collected $500 of its $2,000 of accounts receivable. How is the balance sheet affected?
a. Assets increase by $500 and stockholders' equity increases by $500. b. Accounts receivable is decreased by $500 and liabilities are increased by $500. c. Total assets are increased, but liabilities and stockholders' equity remain the same. d. There is no change in total assets, liabilities, or stockholders' equity.
18. Which of the following is an appropriate format for the balance sheet equation?
a. Assets + Liabilities = Stockholders' Equity b. Assets + Liabilities = Revenues - Expenses c. Assets + Liabilities = Liabilities + Expenses d. Assets - Liabilities = Stockholders' Equity
20. A payment to the owners of a business as a return on the investment they provided is called a(n):
a. expense. b. revenue. c. account receivable. d. dividend.
21. If total assets of Q Corporation are $100,000, total liabilities are $34,000, and capital stock is $40,000, how much are the retained earnings of Q Corporation?
a. $26,000 b. $94,000 c. $106,000 d. Cannot be determined from the above information
22. The _________________ assumption means that a business is deemed to have an existence separate and distinct from its owners.
a. equity b. going concern c. cost d. entity
26. Palmer Company has assets of $50,000, liabilities of $24,000, and capital stock of $8,000 at the end of a month. During the month, Palmer had $30,000 of revenues, $10,000 of expenses, and paid dividends of $6,000. Net income for the month was:
a. $14,000 b. $18,000 c. $20,000
Copyright 1998, Steven L. Jager, CPA
d. $26,000
27. Using the above information for Palmer Company, retained earnings at the end of the month would be:
a. $12,000 b. $18,000 c. $26,000 d. $32,000
28. Connie Corporation showed the following information at the beginning of June 1993: Assets............................ $16,000 Liabilities............................ 2,000 Capital Stock...................... 3,000 During the month of June, Connie Corporation generated $10,000 of revenues, incurred $4,000 of expenses, and paid dividends of $1,000. Retained earnings at the end of June would be:
a. $5,000. b. $6,000. c. $16,000. d. $17,000.