dmuwodmfdmuwodmfdmuwodmf-32c1d99150da4966541a51514a15ad99
Accounting 1.2 Version F EBC1013-1014-1015
1. Characteristics of a proprietorship include:
A) multiple owners.
B) limited personal liability for all business debts.
C) a distinct entity, separate from its owner for accounting purposes.
D) both B and C.
2. For accounting purposes, the business entity should be considered separate from its
owners if the business is organized as a:
A) proprietorship.
B) corporation.
C) partnership.
D) any of the above.
3. The economic resources of a business that are expected to produce a benefit in the
future are:
A) liabilities.
B) assets.
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D) expenses.
4. Revenues are:
A) decreases in assets resulting from delivering goods or services to customers.
B) increases in liabilities resulting from delivering goods or services to
customers.
C) increases in retained earnings resulting from delivering goods or services to
customers.
D) decreases in retained earnings resulting from delivering goods or services to
customers.
5. Use the following Balance Sheet and Income Statement to answer the question.
Jane Austin Bookstore
Balance Sheet
December 31, 2012
Liabilities and
Shareholders’
Assets Equity
Cash and equivalents ¼5,000 Accounts payable ¼10,000
Accounts Receivable 12,000 Taxes payable 4,500
Inventory 25,000 Other liabilities 2,500
Prepaid expenses 3,000 Mortgage payable 60,000
Land 54,000 Total liabilities 77,000
Building 63,000
Accumulated depreciation--
Building ???? 51,000 Capital 30,000
Trucks 20,000 Retained earnings ???
Accumulated depreciation--
Trucks 18,000 2,000 Total shareholders' equity ???
Total Assets ¼152,000 Total Liabilities and
Shareholders' Equity ????
1
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Accounting 1.2 Version F EBC1013-1014-1015
Jane Austin Bookstore
Income Statement
For the Year Ended December 31, 2012
Book sales ¼100,000
Cost of goods sold ???
Gross profit ???
Operating expenses:
Selling and administrative expenses 14,000
Depreciation expense 8,000
Total Operating expenses 22,000
Income from operations 13,000
Income tax (35%) expense 4,550
Net income ¼8,450
Based on the provided information, what amount should be reported for Retained
Earnings on the Balance Sheet for 2012?
A) ¼8,450
B) ¼45,000
C) ¼75,000
D) ¼77,000
6. The accounting equation can be stated as:
$ $VVHWV6KDUHKROGHUV¶(TXLW\ /LDELOLWLHV
B) Assets ±/LDELOLWLHV 6KDUHKROGHUV¶(TXLW\
C) Assets = Liabilities - 6KDUHKROGHUV¶(TXLW\
D) Assets ± 6KDUHKROGHUV¶(TXLW\/LDELOLWLHV =HUR
7. Revenues were ¼170,000, expenses were ¼90,000, and cash dividends were ¼30,000.
What was the net income and the change in retained earnings for the period?
A) Net income was ¼50,000; the change in retained earnings was ¼50,000.
B) Net income was ¼80,000; the change in retained earnings was ¼50,000.
C) Net income was ¼80,000; the change in retained earnings was ¼80,000.
D) Net income was ¼250,000; the change in retained earnings was ¼250,000.
8. A business transaction occurs when:
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B) the event can be reliably measured.
C) the accountant determines that the event is important enough to be a
business transaction.
D) both A and B occur.
9. $UHFRUGRIDOOWKHFKDQJHVLQDSDUWLFXODUDVVHWOLDELOLW\RUVKDUHKROGHUV¶HTXLW\
during a period is called a (n):
A) transaction.
B) trial balance.
C) journal
D) account.
10. Prepaid expenses appear on:
A) the Income Statement.
2
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Accounting 1.2 Version F EBC1013-1014-1015
B) the Balance Sheet.
C) the Statement of Changes in Equity and on the Income Statement.
D) both the Income Statement and Balance Sheet.
11. Consider the following transactions within an accounting period:
I. Owners invested ¼8,000 cash to begin the business
II. Provided services for cash, ¼6,000
III. Provided services on account, ¼4,000
IV. Paid cash for expenses, ¼7,500
How much net income did the business have in this accounting period (using accrual
accounting)?
A) ¼ 2,500
B) ¼ 4,500
C) ¼ 6,500
D) ¼10,500
12. The normal balance of an expense account is a __________ because expenses
decrease __________.
A) debit, assets
B) debit, expenses
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' FUHGLWVKDUHKROGHUV¶equity
13. George P. Smythe Co. purchased equipment from Chester Grahame Co for ¼200,000,
paying 10% as a down payment and financing the remainder with a bank loan. The
proper journal entry for this event is:
Account DEBIT Account CREDIT
A) Equipment 200,000
Cash 200,000
B) Equipment 200,000
Bank loan 200,000
C) Equipment 200,000
Cash 20,000
Bank loan 180,000
D) Cash 20,000
Bank loan 180,000
Equipment 200,000
3
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Accounting 1.2 Version F EBC1013-1014-1015
14. If the debit amount of an entry to record the purchase of supplies on account was not
posted:
A) assets would be understated.
B) assets would be overstated.
C) liabilities would be understated.
D) liabilities would be overstated.
15. The payment of salaries to employees would:
A) increase assets and increase liabilities.
B) decrease net income and decrease assets.
C) increase liabilities and increase net income.
D) decrease assets and increase liabilities.
16. Under accrual accounting, revenue is recorded:
A) when the cash is collected, regardless of when the services are performed.
B) when the services are performed, regardless of when the cash is received.
C) either when the cash is received or the sale is made.
D) only if the cash is received at the same time the services are performed.
17. When using the cash basis of accounting, a sale on account is not recorded. Such a
transaction should be recorded under accrual accounting. The problem, using the cash
basis of accounting, is the failure to record an entry to which account(s)?
A) Cash
B) Accounts Receivable
C) Revenue
D) Both Accounts Receivable and Revenue
18. The term deferral refers to an event where the:
A) recognition of an expense or revenue is recorded after the cash is paid or
received.
B) liability for an expense is recorded before the expense is actually incurred.
C) liability for an expense is recorded after the expense is actually incurred.
D) recognition of an expense or revenue is recorded before the cash is paid or
received.
19. Adjusting entries are:
A) not needed under the accrual basis of accounting.
B) prepared at the beginning of the accounting period to update all accounts.
C) prepared at the end of the accounting period to update certain accounts.
D) both B and C are correct.
20. Ben George, Inc. has an opening balance in AccXPXODWHG'HSUHFLDWLRQņ7UXFNRI
¼9,000 as of January 1, 2012. This relates to a Truck purchased for ¼15,000 with an
expected useful life of 5 years that is depreciated using the straight line method. After
recording the depreciation expense for 2012, the balance in the Accumulated
'HSUHFLDWLRQņ7UXFNDFFRXQWDVRI'HFHPEHU2 is:
A) ¼15,000.
B) ¼12,000.
C) ¼3,000.
D) ¼6,000.
4
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Accounting 1.2 Version F EBC1013-1014-1015
1. Characteristics of a proprietorship include:
A) multiple owners.
B) limited personal liability for all business debts.
C) a distinct entity, separate from its owner for accounting purposes.
D) both B and C.
2. For accounting purposes, the business entity should be considered separate from its
owners if the business is organized as a:
A) proprietorship.
B) corporation.
C) partnership.
D) any of the above.
3. The economic resources of a business that are expected to produce a benefit in the
future are:
A) liabilities.
B) assets.
& RZQHUV¶HTXLW\
D) expenses.
4. Revenues are:
A) decreases in assets resulting from delivering goods or services to customers.
B) increases in liabilities resulting from delivering goods or services to
customers.
C) increases in retained earnings resulting from delivering goods or services to
customers.
D) decreases in retained earnings resulting from delivering goods or services to
customers.
5. Use the following Balance Sheet and Income Statement to answer the question.
Jane Austin Bookstore
Balance Sheet
December 31, 2012
Liabilities and
Shareholders’
Assets Equity
Cash and equivalents ¼5,000 Accounts payable ¼10,000
Accounts Receivable 12,000 Taxes payable 4,500
Inventory 25,000 Other liabilities 2,500
Prepaid expenses 3,000 Mortgage payable 60,000
Land 54,000 Total liabilities 77,000
Building 63,000
Accumulated depreciation--
Building ???? 51,000 Capital 30,000
Trucks 20,000 Retained earnings ???
Accumulated depreciation--
Trucks 18,000 2,000 Total shareholders' equity ???
Total Assets ¼152,000 Total Liabilities and
Shareholders' Equity ????
1
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,dmuwodmfdmuwodmfdmuwodmf-32c1d99150da4966541a51514a15ad99
Accounting 1.2 Version F EBC1013-1014-1015
Jane Austin Bookstore
Income Statement
For the Year Ended December 31, 2012
Book sales ¼100,000
Cost of goods sold ???
Gross profit ???
Operating expenses:
Selling and administrative expenses 14,000
Depreciation expense 8,000
Total Operating expenses 22,000
Income from operations 13,000
Income tax (35%) expense 4,550
Net income ¼8,450
Based on the provided information, what amount should be reported for Retained
Earnings on the Balance Sheet for 2012?
A) ¼8,450
B) ¼45,000
C) ¼75,000
D) ¼77,000
6. The accounting equation can be stated as:
$ $VVHWV6KDUHKROGHUV¶(TXLW\ /LDELOLWLHV
B) Assets ±/LDELOLWLHV 6KDUHKROGHUV¶(TXLW\
C) Assets = Liabilities - 6KDUHKROGHUV¶(TXLW\
D) Assets ± 6KDUHKROGHUV¶(TXLW\/LDELOLWLHV =HUR
7. Revenues were ¼170,000, expenses were ¼90,000, and cash dividends were ¼30,000.
What was the net income and the change in retained earnings for the period?
A) Net income was ¼50,000; the change in retained earnings was ¼50,000.
B) Net income was ¼80,000; the change in retained earnings was ¼50,000.
C) Net income was ¼80,000; the change in retained earnings was ¼80,000.
D) Net income was ¼250,000; the change in retained earnings was ¼250,000.
8. A business transaction occurs when:
$ DQHYHQWDIIHFWVWKHHQWLW\¶VILQDQFLDOSRVLWLRQ
B) the event can be reliably measured.
C) the accountant determines that the event is important enough to be a
business transaction.
D) both A and B occur.
9. $UHFRUGRIDOOWKHFKDQJHVLQDSDUWLFXODUDVVHWOLDELOLW\RUVKDUHKROGHUV¶HTXLW\
during a period is called a (n):
A) transaction.
B) trial balance.
C) journal
D) account.
10. Prepaid expenses appear on:
A) the Income Statement.
2
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Accounting 1.2 Version F EBC1013-1014-1015
B) the Balance Sheet.
C) the Statement of Changes in Equity and on the Income Statement.
D) both the Income Statement and Balance Sheet.
11. Consider the following transactions within an accounting period:
I. Owners invested ¼8,000 cash to begin the business
II. Provided services for cash, ¼6,000
III. Provided services on account, ¼4,000
IV. Paid cash for expenses, ¼7,500
How much net income did the business have in this accounting period (using accrual
accounting)?
A) ¼ 2,500
B) ¼ 4,500
C) ¼ 6,500
D) ¼10,500
12. The normal balance of an expense account is a __________ because expenses
decrease __________.
A) debit, assets
B) debit, expenses
& GHELWVKDUHKROGHUV¶HTXLW\
' FUHGLWVKDUHKROGHUV¶equity
13. George P. Smythe Co. purchased equipment from Chester Grahame Co for ¼200,000,
paying 10% as a down payment and financing the remainder with a bank loan. The
proper journal entry for this event is:
Account DEBIT Account CREDIT
A) Equipment 200,000
Cash 200,000
B) Equipment 200,000
Bank loan 200,000
C) Equipment 200,000
Cash 20,000
Bank loan 180,000
D) Cash 20,000
Bank loan 180,000
Equipment 200,000
3
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Accounting 1.2 Version F EBC1013-1014-1015
14. If the debit amount of an entry to record the purchase of supplies on account was not
posted:
A) assets would be understated.
B) assets would be overstated.
C) liabilities would be understated.
D) liabilities would be overstated.
15. The payment of salaries to employees would:
A) increase assets and increase liabilities.
B) decrease net income and decrease assets.
C) increase liabilities and increase net income.
D) decrease assets and increase liabilities.
16. Under accrual accounting, revenue is recorded:
A) when the cash is collected, regardless of when the services are performed.
B) when the services are performed, regardless of when the cash is received.
C) either when the cash is received or the sale is made.
D) only if the cash is received at the same time the services are performed.
17. When using the cash basis of accounting, a sale on account is not recorded. Such a
transaction should be recorded under accrual accounting. The problem, using the cash
basis of accounting, is the failure to record an entry to which account(s)?
A) Cash
B) Accounts Receivable
C) Revenue
D) Both Accounts Receivable and Revenue
18. The term deferral refers to an event where the:
A) recognition of an expense or revenue is recorded after the cash is paid or
received.
B) liability for an expense is recorded before the expense is actually incurred.
C) liability for an expense is recorded after the expense is actually incurred.
D) recognition of an expense or revenue is recorded before the cash is paid or
received.
19. Adjusting entries are:
A) not needed under the accrual basis of accounting.
B) prepared at the beginning of the accounting period to update all accounts.
C) prepared at the end of the accounting period to update certain accounts.
D) both B and C are correct.
20. Ben George, Inc. has an opening balance in AccXPXODWHG'HSUHFLDWLRQņ7UXFNRI
¼9,000 as of January 1, 2012. This relates to a Truck purchased for ¼15,000 with an
expected useful life of 5 years that is depreciated using the straight line method. After
recording the depreciation expense for 2012, the balance in the Accumulated
'HSUHFLDWLRQņ7UXFNDFFRXQWDVRI'HFHPEHU2 is:
A) ¼15,000.
B) ¼12,000.
C) ¼3,000.
D) ¼6,000.
4
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