1. Hardin Company began operations in 2010. During the year, the following cash transactions  

occurred:

•    Issued stock for $40,000

•    Borrowed $24,000 from bank

•    Provided services to customers for $53,000 cash

•    Paid back $8,000 of the loan from the bank

•    Paid rent expense, $9,000

•    Paid operating expenses, $29,000

Assuming that Hardin engaged in no transactions during the year other than those listed above, what was the amount of net income or loss for the year? (Points : 2)

$19,000 net income

$15,000 net income

$12,000 net income

$11,000 net loss

 Question 2.2. Dale Company purchased land costing $2,400 by paying cash. The company earned $2,000 revenue on account and incurred $1,100 of operating expenses on account. As a result of these transactions: (Points : 2)

Total assets increased by $2,400.

Liabilities increased by $1,100.

Total assets increased by $5,400.

Both A and B.

Question 3.3. Liabilities are: (Points : 2)

claims of creditors.

the owner’s interest in the company.

claims of investors.

both A and B.

Question 4.4. Parrot Company paid a $300 cash dividend. Which of the following choices accurately reflects how this event would affect the company’s financial statements?

     Balance Sheet    Income Statement

Row    Assets    =    Liab.    +    Equity    Rev.    –    Exp.    =    Net Inc.

    Statement of Cash Flows

One    NA    =    300    +    (300)    NA    –    300    =    (300)    NA

Two    (300)    =    NA    +    (300)    NA    –    300    =    (300)    (300) FA

Three    (300)    =    NA    +    (300)    NA    –    NA    =    NA    (300) FA

Four    (300)    =    NA    +    (300)    NA    –    NA    =    NA    (300) OA

(Points : 2)

Row One

Row Two

Row Three

Row Four

Question 5.5. At the end of the accounting period, Sefcik Company made an adjusting entry for supplies consumed. Which of the following choices reflects how this event would affect the company’s financial statements?

Row    Assets    =    Liab.    +    Equity    Rev.    –    Exp.    =    Net Inc.    Cash Flow

One    + –    =    NA    +    NA    NA    –    +    =    –    NA

Two    –    =    NA    +    –    NA    –    +    =    –    NA

Three    –    =    –    +    NA    NA    –    NA    =    NA    NA

Four    + –    =    NA    +    NA    NA    –    NA    =    NA    + IA

(Points : 2)

Row One

Row Two

Row Three

Row Four

Question 6.6. As of December 31, 2009, Bueno Company had $1,000 in liabilities, $8,000 in common stock, and $2,500 in retained earnings. The total amount of assets on that date is: (Points : 2)

$10,000

$12,000

$11,500

 $7,500

 Question 7.7. The Redding Company recorded salaries earned by employees but not yet paid. Which of the following represents the effect of this transaction on the financial statements?

Row    Assets    =    Liab.    +    Equity    Rev.    –    Exp.    =    Net Inc.    Cash Flow

One    +    =    +    +    NA    +    –    NA    =    +    – OA

Two    NA    =    +    +    –    NA    –    +    =    –    – OA

Three    –    =    NA    +    –    NA    –    +    =    –    NA

Four    NA    =    +    +    –    NA    –    +    =    –    NA

Row One

Row Two

Row Three

Row Four

 Question 8.8. The accounting equation may be written: (Points : 2)

Revenues – Expenses = Net Income

Assets = Liabilities

Liabilities = Equity

Assets = Claims on Assets

 Question 9.9. An element that is often present when fraud occurs is: (Points : 2)

the availability of an opportunity

the existence of some form of pressure

the ability to rationalize

all of the above

Question 10.10. Which of the following would be included in the “cash flows from investing activities” section of the statement of cash flows? (Points : 2)

Borrowed $10,000 from a local bank

Paid $1,000 of expenses with cash

Sold land for cash

Issued common stock for cash

Question 11.11. Expenses are shown on the: (Points : 2)

income statement

statement of changes in stockholders’ equity

balance sheet

all of the above

 Question 12.12. The claims of a business’s creditors are called: (Points : 2)

assets

liabilities

equity

revenue

Question 13.13. Which of the following would be included in the “cash flows from financing activities” section of the statement of cash flows? (Points : 2)

Collected cash from accounts receivable

Finance Company loaned cash to another company

Paid cash dividend to stockholders

Purchased business insurance

 Question 14.14. Expenses that are matched with the period in which they are incurred are frequently called: (Points : 2)

period costs

frequency expenses

market expenses

working costs.

Question 15.15. Accounting information is said to be reliable if: (Points : 2)

it is based on recent (not longer than 6 months) information

it was prepared by someone with good credentials in accounting, such as a certified public accountant.

it can be independently verified

it complies with rules and standards of the Internal Revenue Service

Question 16.16. Which of the following groups has primary responsibility for establishing generally accepted accounting principles for businesses in the United States? (Points : 2)

The U.S. Supreme Court

Each state’s Secretary of the Treasury

The Financial Accounting Standards Board

The Internal Revenue Service

 Question 17.17. The purpose of the accrual basis of accounting is to: (Points : 2)

report revenue when cash is received

improve the matching of revenue and expense in the proper period

report expenses when cash disbursements are made

improve the company’s earnings per share

Question 18.18. An asset use transaction: (Points : 2)

increases one asset and decreases another.

decreases an asset and decreases a liability or equity.

increases an asset and decreases a liability or equity.

increases an asset and increases a liability or equity.

 Question 19.19. Which of the following accounts is a permanent account (an account that is not closed)? (Points : 2)

Prepaid Insurance

Service Revenue

Salaries Expense

Rent Expense 

 Question 20.20. Which of the following lists represents the correct sequence of stages in an accounting cycle? (Points : 2)

Record transactions, prepare statements, adjust accounts, and close temporary accounts

Prepare statements, close temporary accounts, record transactions, and adjust accounts

Close temporary accounts, record transactions, prepare statements, and adjust accounts

Record transactions, adjust accounts, prepare statements, and close temporary accounts