Question 1

Understanding generally accepted accounting principles is not necessary to effectively use and interpret financial statements.

Accepted Answer

A) True 
 B)False

Question 2

The revenue recognition principle:

Accepted Answer

A)  Provides guidance on when a company must recognize revenue.
B)  Prescribes that a company record the expenses it incurred to generate the revenue reported.
C)  Prescribes that a company report the details behind financial statements that would impact users' decisions.
D)  Prescribes that accounting information is based on actual cost.
E)  Means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.F) A) and D)
G) A) and B)

Question 3

Zippy had cash inflows from operations $60,500; cash outflows from investing activities of $47,000; and cash inflows from financing of $25,000. The net change in cash was:

Accepted Answer

A)  $132,000 increase.
B)  $132,500 decrease.
C)  $38,500 decrease.
D)  $11,500 decrease.
E)  $38,500 increase.F) B) and E)
G) A) and B)

Question 4

The financial statement that reports whether the business earned a profit and also lists the revenues and expenses is called the:

Accepted Answer

A)  Statement of cash flows.
B)  Statement of financial position.
C)  Balance sheet.
D)  Income statement.
E)  Statement of owner's equity.F) A) and C)
G) A) and B)

Question 5

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.

Accepted Answer

A)  $37,000 increase.
B)  $34,000 decrease.
C)  $61,000 increase.
D)  $7,000 increase.
E)  $7,000 decrease.F) C) and D)
G) A) and D)

Question 6

The business entity principle means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.

Accepted Answer

A) True 
 B)False

Question 7

Owner financing refers to resources contributed by creditors or lenders.

Accepted Answer

A) True 
 B)False

Question 8

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?

Accepted Answer

A)  Business entity assumption.
B)  Revenue recognition principle.
C)  Monetary unit assumption.
D)  Measurement (Cost) principle.
E)  Going-concern assumption.F) C) and D)
G) A) and B)

Question 9

The first section of the income statement reports cash flows from operating activities.

Accepted Answer

A) True 
 B)False

Question 10

On May 31 of the current year, the assets and liabilities of Riser, Inc. are as follows: Cash $20,500; Accounts Receivable, $7,250; Supplies, $650; Equipment, $12,000; Accounts Payable, $9,300. What is the amount of owner's equity as of May 31 of the current year?

Accepted Answer

A)  $13,050.
B)  $49,700.
C)  $40,400.
D)  $31,100.
E)  $20,500.F) A) and D)
G) A) and C)

Question 11

The accounting equation for Long Company shows an increase in its assets and an increase in its liabilities. Which of the following transactions could have caused that effect?

Accepted Answer

A)  Supplies were purchased for cash.
B)  Cash was received from providing services to a customer.
C)  Cash was received as an owner investment.
D)  Equipment was purchased on credit.
E)  Advertising expense for the month was paid in cash.F) D) and E)
G) C) and D)

Question 12

Ending capital reported on the statement of owner's equity is calculated by adding owner investments and net losses and subtracting net income and withdrawals.

Accepted Answer

A) True 
 B)False

Question 13

Owner's equity is increased when cash is received from customers in payment of previously recorded accounts receivable.

Accepted Answer

A) True 
 B)False

Question 14

In the partnership form of business, the owners are called stockholders.

Accepted Answer

A) True 
 B)False

Question 15

If a company has excess space in its building that it rents to another company for $700, what is the effect on the accounting equation during the first month?

Accepted Answer

A)  Liabilities would decrease $700 and equity would increase $700.
B)  Assets would increase $700 and equity would increase $700.
C)  Assets would decrease $700 and equity would increase $700.
D)  Assets would increase $700 and equity would decrease $700.
E)  Assets would decrease $700 and liabilities would decrease $700.F) A) and B)
G) A) and C)

Question 16

Objectivity means that financial information is supported by independent, unbiased evidence; it demands more than a person's opinion.

Accepted Answer

A) True 
 B)False

Question 17

All of the following are classified as assets except:

Accepted Answer

A)  Accounts Payable.
B)  Land.
C)  Equipment.
D)  Accounts Receivable.
E)  Supplies.F) All of the above
G) D) and E)

Question 18

The income statement describes revenues earned and expenses incurred along with the resulting net income or loss over a specified period of time, due to earnings activities.

Accepted Answer

A) True 
 B)False

Question 19

The primary objective of managerial accounting is to provide general purpose financial statements to help external users analyze and interpret an organization's activities.

Accepted Answer

A) True 
 B)False

Question 20

Owners of a corporation are called shareholders or stockholders.

Accepted Answer

A) True 
 B)False

Exam 1: Accounting in Business

The financial statement that reports whether the business earned a profit and also lists the revenues and expenses is called the:

Correct AnswerverifiedShow Answer

In the partnership form of business, the owners are called stockholders.

Correct AnswerverifiedShow Answer

The primary objective of managerial accounting is to provide general purpose financial statements to help external users analyze and interpret an organization's activities.

Correct AnswerverifiedShow Answer

If a company has excess space in its building that it rents to another company for $700, what is the effect on the accounting equation during the first month?

Correct AnswerverifiedShow Answer

The revenue recognition principle:

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Owner's equity is increased when cash is received from customers in payment of previously recorded accounts receivable.

Correct AnswerverifiedShow Answer

The business entity principle means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Understanding generally accepted accounting principles is not necessary to effectively use and interpret financial statements.

Correct AnswerverifiedShow Answer

The income statement describes revenues earned and expenses incurred along with the resulting net income or loss over a specified period of time, due to earnings activities.

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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.

Correct AnswerverifiedShow Answer

Objectivity means that financial information is supported by independent, unbiased evidence; it demands more than a person's opinion.

Correct AnswerverifiedShow Answer

Zippy had cash inflows from operations $60,500; cash outflows from investing activities of $47,000; and cash inflows from financing of $25,000. The net change in cash was:

Correct AnswerverifiedShow Answer

On May 31 of the current year, the assets and liabilities of Riser, Inc. are as follows: Cash $20,500; Accounts Receivable, $7,250; Supplies, $650; Equipment, $12,000; Accounts Payable, $9,300. What is the amount of owner's equity as of May 31 of the current year?

Correct AnswerverifiedShow Answer

The first section of the income statement reports cash flows from operating activities.

Correct AnswerverifiedShow Answer

Owner financing refers to resources contributed by creditors or lenders.

Correct AnswerverifiedShow Answer

The accounting equation for Long Company shows an increase in its assets and an increase in its liabilities. Which of the following transactions could have caused that effect?

Correct AnswerverifiedShow Answer

Ending capital reported on the statement of owner's equity is calculated by adding owner investments and net losses and subtracting net income and withdrawals.

Correct AnswerverifiedShow Answer

Owners of a corporation are called shareholders or stockholders.

Correct AnswerverifiedShow Answer

All of the following are classified as assets except:

Correct AnswerverifiedShow Answer

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