Professional Documents
Culture Documents
INSTRUCTIONS TO CANDIDATES
Read the instructions before you look at the questions
Customers.
C)
2 4
a. Accounts receivable.
b. Cash
c. Note payable.
d. Owner's equity
3 4
4 4
5 4
Sales
A)staff.
Comp
any
B)mana
gers.
Comp
any
C)custo
mers.
Offic
ers
D)and
direct
ors.
Budg
et
E)office
rs.
15. A CPA owns a large home and she has divided the second floor into two separate units:
one used as her personal residence and the other rented out to local college students as an
apartment. On the first floor, she has her own CPA firm where she meets with and provides
accounting services to clients. If she wishes to keep separate records for each of these three
activities, the accounting principle to which she is adhering is?
Going-concern principle.
A)
Monetary unit principle.
B)
Cost principle.
C)
Business entity principle.
D)
Conservatism principle.
E)
16. The basic accounting equation is Assets = Liabilities + Equity. The Equity term of the
equation can be further broken down into several other terms. Assume that the entity is a
sole proprietorship. Which of the following statements is correct?
Additional investments by the business owner will increase
A) equity; and revenues will decrease equity.
Additional investments by the business owner will decrease
B) equity; and revenues will increase equity.
Increases in expenses will decrease equity; and owner
C) withdrawals will decrease equity.
Revenues will increase equity; and owner withdrawals will
D) increase equity.
Revenues will decrease equity; and owner withdrawals will
E) increase equity.
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17. If at the end of the accounting period the company's liabilities total $19,000 and its
equity totals $40,000, then what must be the total of assets?
$14,000
A)
$40,000
B)
$21,000
C)
$59,000
D)
None of the above
E)
18. Company assets total $150,000 and its liabilities total $30,000. What is the equity of
this company?
$120,000
A)
$100,000
B)
$150,000
C)
$180,000
D)
None of the above
E)
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19. If during the current accounting period the company's assets increased by $24,000 and
equity increased by $5,000, then how did liabilities change?
Increased by $29,000
A)
Increased by $24,000
B)
Decreased by $5,000
C)
Decreased by $19,000
D)
Increased by $19,000
E)
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20. Assume that a company's beginning owner's capital was $20,000. During the period,
withdrawals were $24,000, and the owner made additional investments during the period of
$50,000. The ending capital balance was $90,000. What was the net income or net loss for
the period?
Net income, $56,000
A)
Net loss, $44,000
B)
Net income, $44,000
C)
Net income, $30,000
D)
None of the above
E)
9 5
21. Company assets total $150,000 and its liabilities total $30,000. What is
the equity of this company?
$120,000
A)
$100,000
B)
$150,000
C)
$180,000
D)
None of the above
E)
22. If during the current accounting period the company's assets increased by $24,000 and
equity increased by $5,000, then how did liabilities change?
Increased by $29,000
A)
Increased by $24,000
B)
Decreased by $5,000
C)
Decreased by $19,000
D)
Increased by $19,000
E)
8 5
22. Assume that a company's beginning owner's capital was $20,000. During the period,
withdrawals were $24,000, and the owner made additional investments during the period of
$50,000. The ending capital balance was $90,000. What was the net income or net loss for
the period?
Net income, $56,000
A)
Net loss, $44,000
B)
Net income, $44,000
C)
Net income, $30,000
D)
None of the above
E)
23. If during the accounting period
the company's assets decreased by
$15,000, and equity increased by
$4,000, then by how much did
liabilities change?
Increased by $12,000
A)
Increased by $8,000
B)
Decreased by $12,000
C)
Decreased by $19,000
D)
Decreased by $6,000
E)
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11 5
12 5
26. A statement of cash flows will report cash flows from which of the
following activities?
Operating activities
A)
Financing activities
B)
Investing activities
C)
All of the above
D)
Only A and C are correct
E)
13 5
14 5
28. The owner's investment of cash in the company will result in which of the
following?
An increase in cash and a decrease in equity
A)
An increase in cash and an increase in equity
B)
A decrease in cash and a decrease in liabilities
C)
An increase in fees earned and an increase in equity
D)
An increase in cash and an increase in liabilities
E)
29. Purchasing equipment on account (payment to be made in the future) will have what effect on
the components of the accounting equation?
30. A proprietorship employs one full-time accountant. This person is considered an employee. On
the desk in front of her are five different business documents. Which one of the following would not
be considered an original source document from the proprietorship's point of view?
31. At any given point in time, it is possible to describe general ledger accounts as having an
expected or "normal" balance: either a debit balance or a credit balance. This normal balance is on
the side of the account, that is, the debit side or credit side, that represents the "increase" side of the
account. In order, what is the normal balance for the Equipment account, the Owner's Equity
account, and the Sales Revenue account?
32. The Baker sole proprietorship started operations on January 1, 2009 and uses a calendar-year
accounting period. On February 7, 2009, the company purchases an automobile with an invoice cost
of $10,000. To settle this transaction, the company immediately pays $3,000 cash to the automobile
dealership and signs a three-month note payable for the $7,000 purchase price balance. A partial
general journal entry is given below. Which item accurately describes the partial entry from Baker's
viewpoint
Cash is debited for $3,000 and Notes Payable is credited for $7,000
A)
The asset account Vehicles is debited for $7,000 and Cash is credited for
B) $3,000.
The asset account Vehicles is credited for $10,000 and Cash is credited for
C) $3,000
Cash is credited for $3,000 and Notes Payable is credited for $7,000
D)
Notes Payable is credited for $7,000 and the asset Vehicles is credited for
E) $3,000
33. A company buys a one-year insurance policy on February 1, 2009, and immediately pays in cash
the $720 insurance premium. The company's bookkeeper records the transaction by crediting the
Cash account for $720 but debits Insurance Expense for $720, instead of debiting Prepaid Insurance,
which would be the correct entry. Based on this information, which statement concerning the trial
balance is correct if the company fails to correct this bookkeeping error?
34. A company buys a new car on February 15, 2009, and immediately pays in cash the $25,000
purchase price. The company's bookkeeper fails to record the transaction at all. Based on this
information, which statement concerning the trial balance is correct if the company fails to correct
this bookkeeping error?
The total debits of the trial balance do not equal the total credits of the trial balance.
B)
The total debits on the trial balance are higher than the total credits.
C)
The total debits on the trial balance are equal to the total credits on the trial balance, but one or
more accounts have incorrect balances.
D)
The total trial balance debits equal the trial balance credits, but only one account balance is
incorrect.
E)
35. Amelia Company received its telephone bill on February 15, 2009 in the amount of $325. This
bill covered the period from January 1, 2009 through January 31, 2009. Amelia paid this bill
immediately. The company uses a calendar year accounting period and prepares its financial
statements only once a year at the end of the year. The general journal entry to record this transaction
includes:
36. On March 1, 2009, a company collects a $500 deposit from a customer for the
installation of a home-theater system. The installation is scheduled for May 5, 2009.
How should the company record this entry on March 1, 2009?
37. A company which sells and services medical insurance policies received one payment of $14,000
cash from a customer for insurance coverage for the next two years. Recording the receipt of this
cash when it is received will require which of the following?
38. Olivia, the proprietor, deposited $40,000 in the company's bank account. She received the money
as the result of a settlement of a class action lawsuit and decided to invest it in her business to help
with expansion. Recording the transaction on the company books will require which of the
following?
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40. The personal residence of Samuel Leonard was landscaped with all new trees, shrubs and
flowers. This improvement was paid for with a check written against Samuel's business checking
account. The landscaping provides no benefit to Samuel's business. What account should be debited
for this transaction?
41. One of your company's business checks clears the bank at its correct amount of $500. The
transaction that underlies this check was the cash purchase of office supplies. The entry was recorded
as a debit to Insurance Expense for $50 and a credit to Cash for $50. The correcting entry should
include which of the following?
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c. Records economic data but does not communicate the data to users.
Relies upon concepts and principles that are independent of
d. specific user needs.
43. Which of the following errors will cause the trial balance totals to be UNEQUAL?
b. Recording the same erroneous amount for both the debit and the credit parts of a transaction.
c. Posting a part of a transaction correctly as a debit or credit but to the wrong account.
Posting the debit amount of the transaction correctly and posting the credit amount of the
d. transaction incorrectly.
44. The ________ is prepared to determine if debits are equal to credits and can ultimately be used to
discover some errors.
a. balance sheet
b. trial balance
c. income statement
46. Decreases in owner's equity from using up assets or consuming services attributable to business
activities are called:
a. drawings.
b. revenues.
c. expenses.
d. liabilities.
47. Every transaction affects at least two accounts. The purchase of land in exchange for cash is
recorded with which of the following entries?
48. Websavvy paid the electric and gas bill for the month in the amount of $325.00. What is the
entry to record this transaction?
c. Debit Accounts Receivable for $325.00, credit Utilities Expense for $325.00.
d. Debit Utilities Expense for $325.00, debit Accounts Receivable for $325.00.
49. If Websavvy (an imaginary web design organization) purchased an insurance policy for the
automobile that is used in the business, and the policy was for 24 months and the cost was $4,800,
the entry to record this purchase is:
a.
b.
c.
d.
50. The rules of debit and credit and the normal balances of the various types of accounts are
summarized correctly in which of these charts?
a.
b.
c.
d.