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[Question]
61. An expense has what effect on the
accounting equation?
a. Decrease liabilities.
b. Decrease stockholders’ equity.
c. Increase assets.
d. No effect.
Answer: b
Learning Objective: 02-02
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Effect of Transactions on Accounting
Equation
[Question]
62. Revenues
have what effect on the accounting equation?
a. Increase liabilities.
b. Decrease assets.
c. Increase stockholders’ equity.
d. No effect.
Answer: c
Learning Objective: 02-02
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Effect of Transactions on Accounting
Equation
[Question]
63. Investments by stockholders have what
effect on the accounting equation?
a. Assets increase and liabilities
increase.
b. Expenses increase and liabilities
increase.
c. Assets increase and revenues increase.
d. Assets increase and stockholders' equity
increases.
Answer: d
Learning Objective: 02-02
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Effect of Transactions on Accounting
Equation
[Question]
64. Which of the following is not possible when recording a
transaction?
a. Liabilities increase and assets
decrease.
b. Stockholders’ equity increases and
assets increase.
c. One asset increases and another asset
decreases.
d. Stockholders’ equity decreases and
assets decrease.
Answer: a
Learning Objective: 2
Difficulty: Hard
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Analyze
Topic: Effect of Transactions on Accounting
Equation
[Question]
65. Amounts owed to suppliers for supplies
purchased on account are defined as:
a. Cash.
b. Accounts Receivable.
c. Accounts Payable.
d. Supplies Expense.
Answer: c
Learning Objective: 02-02
Difficulty: Easy
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
Blooms: Remember
Topic: Account Types
[Question]
66. Purchasing office supplies on account
will:
a. Not change assets.
b. Increase assets and decrease
liabilities.
c. Increase assets and increase
liabilities.
d. Increase assets and increase
stockholders’ equity.
Answer: c
Learning Objective: 02-02
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Effect of Transactions on Accounting
Equation
[Question]
67. Providing services and receiving cash
will:
a. Increase assets and increase stockholders’
equity.
b. Increase assets and increase
liabilities.
c. Decrease assets and increase
liabilities.
d. Decrease liabilities and increase
stockholders’ equity.
Answer: a
Learning Objective: 02-02
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Effect of Transactions on Accounting
Equation
[Question]
68. When a company provides services on
account, the accounting equation would be affected as follows:
a. Assets increase.
b. Revenues increase.
c. Assets increase and liabilities
decrease.
d. Assets increase and stockholders’ equity
increases.
Answer: d
Learning Objective: 02-02
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Effect of Transactions on Accounting
Equation
[Question]
69. If a company provides services on
account, which of the following is true?
a. Expenses increase.
b. Liabilities increase.
c. Stockholders’ equity increases.
d. Assets decrease.
Answer: c
Learning Objective: 02-02
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Effect of Transactions on Accounting
Equation
[Question]
70. When a payment is made on an account
payable:
a. Assets and stockholders’ equity
decrease.
b. Assets and liabilities decrease.
c. Liabilities and revenues decrease.
d. Assets and expenses decrease.
Answer: b
Learning Objective: 02-02
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Effect of Transactions on Accounting
Equation
[Question]
71. Purchasing office equipment on account
has what impact on the accounting equation?
a. Stockholders’ equity decreases and
assets increase.
b. Liabilities increase and assets
increase.
c. Assets decrease and liabilities
decrease.
d. Assets increase and stockholders’ equity
increases.
Answer: b
Learning Objective: 02-02
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Effect of Transactions on Accounting
Equation
[Question]
72. Purchasing supplies for cash has what
effect on the accounting equation?
a. Increase assets.
b. Decrease stockholders’ equity.
c. Decrease liabilities.
d. No effect.
Answer: d
Learning Objective: 02-02
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Effect of Transactions on Accounting
Equation
[Question]
73. The Unearned Revenue account is shown
in which statement?
a. Income statement.
b. Statement of cash flows.
c. Balance sheet.
d. Statement of stockholders’ equity.
Answer: c
Learning Objective: 02-02
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Reporting
Blooms: Understand
Topic: Account Types
[Question]
74. On January 1, Brad Inc. sold $30,000 in
products to a customer on account. Then on January 10, Brad collected the cash
on that account. What is the impact on Brad’s accounting equation from the
collection of cash on January 10?
a. No net effect to the accounting
equation.
b. Assets increase and liabilities
decrease.
c. Assets decrease and liabilities decrease.
d. Assets increase and stockholders’ equity
increases.
Answer: a
Learning Objective: 02-02
Difficulty: Hard
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Apply
Topic: Effect of Transactions on Accounting
Equation
[Question]
75. On September 30,
MFP Co. paid employee salaries of $7,000, including $1,000 it owed to its
employees last month. What are the effects of this transaction on the
accounting equation?
|
a.
|
Expenses increased, liabilities increased, and
assets increased.
|
|
b.
|
Assets decreased, liabilities decreased, and
expenses increased.
|
|
c.
|
Assets decreased, expenses decreased, and
liabilities increased.
|
|
d.
|
Expenses decreased, liabilities decreased, and
assets decreased.
|
|
e.
|
Assets increased, expenses increased, and
liabilities decreased.
|
Answer: b
Learning Objective: 02-02
Difficulty: Hard
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Apply
Topic: Effect of Transactions on Accounting
Equation
[Question]
76. Following are transactions of Gotebo
Tanners, Inc., a new company, during the month of January:
1. Issued 10,000 shares of common
stock for $15,000 cash.
2. Purchased land for $12,000,
signing a note payable for the full amount.
3. Purchased office equipment for
$1,200 cash.
4. Received cash of $14,000 for
services provided to customers during the month.
5. Purchased $300 of office supplies
on account.
6. Paid employees $10,000 for their
first month’s salaries.
What was the total amount of Gotebo’s
liabilities following these six transactions?
a. $12,300.
b. $27,300.
c. $22,600.
d. $15,500.
Answer: a
Feedback: Liabilities = ($12,000 + $300) =
$12,300.
Learning Objective: 02-02
Difficulty: Hard
AACSB: Analytic
AICPA: FN Reporting
Blooms: Analyze
Topic: Effect of Transactions on Accounting
Equation
[Question]
77. Consider the following transactions:
Issued
common stock for cash.
Purchased
equipment by signing a note payable.
Paid
rent for the current month.
Collected
cash from customers on account.
How many of these four transactions
increased the given company’s total assets?
a. One.
b. Two.
c. Three.
d. Four.
Answer: b
Feedback: (1) Issued common stock for cash
and (2) purchased equipment by signing a note payable.
Learning Objective: 02-02
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Effect of Transactions on Accounting
Equation
[Question]
78. Assume that Sallisaw Sideboards, Inc.
had a retained earnings balance of $10,000 on April 1, and that the company had
the following transactions during April.
Issued
common stock for cash, $5,000.
Provided
services to customers on account, $2,000.
Provided
services to customers in exchange for cash, $900.
Purchased
equipment and paid cash, $4,300.
Paid
April rent, $800.
Paid
employee salaries for April, $700.
What was Sallisaw’s retained earnings
balance at the end of April?
a. $11,400.
b. $12,100.
c. $16,400.
d. Some other amount.
Answer: a
Feedback: Beginning retained earnings
$10,000 + Net income $1,400 – Dividends $0 = Ending retained earnings $11,400.
Net Income = Revenue ($2,000 + $900) –
Expenses ($800 + $700) = $1,400.
Learning Objective: 02-02
Difficulty: Hard
AACSB: Analytic
AICPA: FN Measurement
Blooms: Analyze
Topic: Effect of Transactions on Accounting
Equation
[Question]
79. Consider the following transactions:
Issued
common stock for cash.
Purchased
equipment by signing a note payable.
Provided
services to customers on account.
Collected
cash from customers on account.
How many of these four transactions
increased the given company’s total liabilities?
a. One.
b. Two.
c. Three.
d. Four.
Answer: a
Feedback: Purchased equipment by signing a
note payable.
Learning Objective: 02-02
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Effect of Transactions on Accounting
Equation
[Question]
80. Following are transactions of Gotebo
Tanners, Inc., a new company, during the month of January:
1. Issued 10,000 shares of common
stock for $15,000 cash.
2. Purchased land for $12,000,
signing a note payable for the full amount.
3. Purchased office equipment for
$1,200 cash.
4. Received cash of $14,000 for
services provided to customers during the month.
5. Purchased $300 of office supplies
on account.
6.
Paid employees $10,000 for their first month’s salaries.
How many of these transactions decreased
Gotebo’s total assets?
a. One.
b. Two.
c. Three.
d. Four.
Answer: a
Feedback: Transaction #6.
Learning Objective: 02-02
Difficulty: Hard
AACSB: Reflective Thinking
AICPA: FN Reporting
Blooms: Apply
Topic: Effect of Transactions on Accounting
Equation
[Question]
81. Following are transactions of Gotebo
Tanners, Inc., a new company, during the month of January:
1. Issued 10,000 shares of common
stock for $15,000 cash.
2. Purchased land for $12,000,
signing a note payable for the full amount.
3. Purchased office equipment for
$1,200 cash.
4. Received cash of $14,000 for
services provided to customers during the month.
5. Purchased $300 of office supplies
on account.
6.
Paid employees $10,000 for their first month’s salaries.
How many of these transactions increased
Gotebo’s liabilities?
a. Four.
b. Three.
c. Two.
d. One.
Answer: c
Feedback: Transactions #2 and #5.
Learning Objective: 02-02
Difficulty: Hard
AACSB: Reflective Thinking
AICPA: FN Reporting
Blooms: Apply
Topic: Effect of Transactions on Accounting
Equation
[Question]
82. Which of the following transactions
causes a decrease in stockholders’ equity?
a. Pay dividends to stockholders.
b. Obtain cash by borrowing from a local
bank.
c. Provide services to customers on
account.
d. Purchase office equipment for cash.
Answer: a
Learning Objective: 02-02
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Effect of Transactions on Accounting
Equation
[Question]
83. How many of the
following events would require an expense to be recorded?
Ordering
office supplies
Hiring
a receptionist
Paying
employee salaries for the current month
Receiving
but not paying a current utility bill
Paying for insurance in advance
a. One.
b. Two.
c. Three.
d. Four.
Answer: b
Feedback: (1) Paying employee salaries for
the current month and (2) Receiving but not paying a current utility bill.
Learning Objective: 02-02
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Effect of Transactions on Accounting
Equation
[Question]
84. Which of the
following is NOT possible for a business transaction?
a. Increase assets and decrease revenue.
b. Decrease assets and increase expense.
c. Increase liabilities and increase expense.
d. Decrease liabilities and increase revenue.
Answer: a
Learning Objective: 02-02
Difficulty: Hard
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Apply
Topic: Effect of Transactions on Accounting
Equation
[Question]
85. Which of the following
transactions would cause a decrease in both assets and stockholders’ equity?
a. Paying insurance premium for the next two
years.
b. Purchasing office equipment on account.
c. Paying advertising for the current month.
d. Providing installation services to customers.
Answer: c
Learning Objective: 02-02
Difficulty: Hard
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Apply
Topic: Effect of Transactions on Accounting
Equation
[Question]
86. When a company
issues common stock for cash, what is the effect on the accounting equation for
the company?
a. Assets increase and liabilities increase.
b. Assets increase and stockholders’ equity
increases.
c. Assets decrease and liabilities decrease.
d. Liabilities decrease and stockholders’ equity
increases.
Answer: b
Learning Objective: 02-02
Difficulty: Hard
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Apply
Topic: Effect of Transactions on Accounting
Equation
[Question]
87. If the
liabilities of a company increased by $55,000 during a month and the
stockholders’ equity decreased by $21,000 during that same month, did assets
increase or decrease and by how much?
a. $34,000 increase.
b. $55,000 increase.
c. $34,000 decrease.
d. $76,000 increase.
Answer: a
Learning Objective: 02-02
Feedback: Increase in Liabilities ($55,000)
– Decrease in Stockholders’ Equity ($21,000) = Increase in Assets ($34,000).
Difficulty: Hard
AACSB: Analytic
AICPA: FN Reporting
Blooms: Apply
Topic: Effect of Transactions on Accounting
Equation
[Question]
88. Providing
services to customers on account would affect the balances reported in which
financial statement(s)?
a. Income statement
b. Statement of stockholders’ equity
c. Balance sheet
d. All of the financial statements
would be affected
Answer: d
Learning Objective: 02-02
Difficulty: Hard
AACSB: Reflective Thinking
AICPA: FN Reporting
Blooms: Apply
Topic: Effect of
Transactions on Accounting Equation
[Question]
89. Which of the following transactions
would cause an increase in both the assets and liabilities of a company?
a. Paying for the current month’s rent.
b. Pay for inventory purchased 90 days ago.
c. Purchase of a building by issuing a note
payable.
e. Services received on account.
Answer: c
Feedback: One asset (building) and one
liability (note payable) increases.
Learning Objective: 02-02
Difficulty: Hard
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Apply
Topic: Effect of Transactions on Accounting
Equation
[Question]
90. When a company pays
cash for equipment, what is the effect on the accounting equation for that
company?
a. Increase assets and
increase liabilities.
b. Decrease assets and
decrease liabilities.
c. No change.
d. Increase assets and
increase stockholders’ equity.
Answer: c
Feedback: One asset (equipment) increases
while another asset (cash) decreases.
Learning Objective: 02-02
Difficulty: Hard
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Apply
Topic: Effect of Transactions of Accounting
Equation
[Question]
91. “Record revenue in the period in which
it’s earned” is the definition of which principle in accounting?
a. Trial balance.
b. Debits and credits.
c. Revenue recognition.
d. Accounting equation.
Learning Objective: 02-02
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
Blooms: Understand
Topic: Revenue Recognition Principle
[Question]
92. Which of the accounts are decreased on
the debit side and increased on the credit side?
a. Liabilities, stockholders’ equity, and
revenues.
b. Dividends, liabilities, and assets.
c. Expenses, dividends, and stockholders’
equity.
d. Assets, dividends, and expenses.
Answer: a
Learning Objective: 02-03
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Debits and Credits
[Question]
93. Which of the following is true about a
“debit”?
I. It is part of the double-entry procedure
that keeps the accounting equation in balance.
II. It represents an increase to assets.
III. It represents a decrease to
liabilities.
IV. It is on the right side of a T-account.
a. I and II.
b. IV only.
c. I, II, and III.
d. I, II, III, and IV.
Answer: c
Learning Objective: 02-03
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Debits and Credits
[Question]
94. Which of the following is true about a
“credit”?
I. It is part of the double-entry procedure
that keeps the accounting equation in balance.
II. It represents a decrease to assets.
III. It represents an increase to
liabilities.
IV. It is on the right side of a T-account.
a. I and II.
b. IV only.
c. I, II, and III.
d. I, II, III, and IV.
Answer: d
Learning Objective: 02-03
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Debits and Credits
[Question]
95. Dividends normally carry a _______
balance and are shown in the ______________.
a. Debit; Statement of stockholders’
equity.
b. Debit; Income statement.
c. Credit; Balance sheet.
d. Debit; Balance Sheet.
Answer: a
Learning Objective: 02-03
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
AICPA: FN Reporting
Blooms: Understand
Topic: Debits and Credits
Topic: Statement of Stockholders’ Equity
[Question]
96. Expenses normally carry a _______
balance and are shown in the ______________.
a. Debit; Statement of stockholders’
equity.
b. Debit; Income statement.
c. Credit; Balance sheet.
d. Debit; Balance Sheet.
Answer: b
Learning Objective: 02-03
Difficulty: Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
AICPA: FN Reporting
Blooms: Understand
Topic: Debits and Credits
Topic: Income Statement
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