Practice Exam Questions – Ch 1 - B
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Practice Exam Questions – Ch 1 - B
1. Assume you are examining a financial statement that indicates it is at “December 31, 2018.” The heading tells you the statement is the:
a. Statement of Retained Earnings.
b. Income Statement.
c. Balance Sheet.
d. The financial statement could be the Balance Sheet, Income Statement, Statement of Retained Earnings, or the Statement of Cash Flows.
2. During the year, Blue Company had revenues of $240,000, expenses of $75,000, and stock issuances of $80,000. Dividends during the year were $8,000. If retained earnings at the beginning ofthe year was $90,000, what was retained earnings at the end of the year?
a. $327,000
b. $247,000
c. $162,000
d. $170,000
3. At the beginning of the year, ABC Company’s assets are $250,000 and its equity is $200,000. During the year, assets increased by $40,000 and liabilities increased by $25,000. What is equity at the end of the year?
a. $215,000
b. $185,000
c. $150,000
d. $165,000
4. Which of the following statements is true?
a. Accounts payable represents cash the company expects to receive in the future from customers for purchases the customer made on credit (on account).
b. Dividends are expenses on the income statement.
c. Equity is the owner's claim on assets.
d. Revenues occur when expenses exceed assets.
5. When a company receives a payment on credit (on account) from a customer:
a. Accounts Payable is increased.
b. Accounts Payable is decreased.
c. Accounts Receivable is decreased.
d. Accounts Receivable is increased.
6. Miller Company paid $40,000 on credit (on account). What would be the effects ofthis transaction on the accounting equation?
a.
b.
c.
d.
Assets
Decrease
Decrease
Increase
Decrease
Liabilities
Increase
No Effect
No Effect
Decrease
Equity
No Effect
Decrease
Increase
No Effect
7. According to the revenue recognition principle, revenue is properly recognized:
a. when cash from a sale is received.
b. when the customer's order is received.
c. only ifthe transaction creates an account receivable.
d. when services have been performed or the product delivered.
8. Which of the following transactions would affect the Income Statement for XYZ Company?
a. XYZ purchased equipment on credit (on account).
b. XYZ purchased a building for cash.
c. XYZ paid dividends to the company's own stockholders.
d. XYZ paid salaries to employees for work performed for the company this month.
9. The accounting records of ABC Company show the following balances at December 31:
Common Stock Accounts Receivable Accounts Payable Rent Expense
Cash
Dividends
Equipment
Supplies Expense Retained Earnings Salaries Expense Service Fees Earned Supplies
$2,800
800
1,600
1,200
2,400
800
4,000
800
2,400
2,400
6,000
400
Total assets as ofDecember 31 are:
a. $8,400.
b. $7,600.
c. $5,200.
d. $7,200.
10. The owner of Bentley Company contributed $90,000 ofcash to the company in exchange for common stock. How would this transaction affect the accounting equation ofthe company?
a.
b.
c.
d.
Assets
Increase
Increase
Decrease
Decrease
Liabilities
Decrease
No Effect
No Effect
Decrease
Equity
Increase
Increase
Decrease
No Effect
11. Clancy Company is a janitorial services company. The company purchased new equipment on credit (on account) for $22,000. What would be the effects ofthis transaction on the accounting equation?
a.
b.
c.
d.
Assets
Increase
Increase
Increase
No Effect
Liabilities
Increase
No Effect
Decrease
Decrease
Equity
No Effect
Increase
No Effect
Increase
12. Bixby Company provided $9,000 of landscaping work for a customer on credit (on account). What effect does this transaction have on the accounts of Bixby Company?
a. $9,000 decrease in accounts receivable, $9,000 decrease in cash
b. $9,000 increase in accounts receivable, $9,000 increase in revenue
c. $9,000 decrease in accounts receivable, $9,000 decrease in accounts payable
d. $9,000 increase in accounts receivable, $9,000 increase in accounts payable
13. On January 1, Alpha Corporation has liabilities and equity in the amounts of $30,000 and $120,000, respectively. During January, the company purchased $100,000 of equipment by paying $10,000 cash and paying $90,000 on account. What is the total amount of Alpha Corporation's assets after this transaction has been recorded?
a. $100,000
b. $90,000
c. $240,000
d. $250,000
14. Dividends are listed on which of the following statements?
a. Balance Sheet
b. Income Statement
c. Statement of Retained Earnings
d. Both the Income Statement and the Statement of Retained Earnings
15. Denver Company Inc. paid $200 cash for running an ad in the local newspaper for the month advertising the company. How would this transaction affect the accounting equation of the company?
a.
b.
c.
d.
Assets
Decrease
No Effect
Decrease
Increase
Equity
Decrease
Decrease
No Effect
Increase
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2022-02-24