MULTIPLE CHOICE QUESTIONS

1 Copyright © McGraw-Hill Education.All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Chapter 02 Analyzing Business Transactions

MULTIPLE CHOICE QUESTIONS

1)The entire process of analyzing, recording, and reporting business transactions is based on the fundamental accounting equation.A)True B)False 2)When using the fundamental accounting equation, an accountant must make sure that total assets are always equal to total liabilities minus owner's equity.A)True B)False 3)Assets always equal debts of the business plus the financial interest of the owner.A)True B)False 4)When cash is paid to a creditor, the firm's liabilities decrease.A)True B)False 5)Al Dunn Bakery bought a new oven for $1,380. Al paid $300 as a cash down payment and will pay the balance in 30 days. Total assets increased by $1,080.A)True B)False 6)If the owner takes cash out of the business for personal use, the withdrawal should be recorded as an expense of the business.A)True B)False 7)When cash is collected from accounts receivable, the total amount of assets increases.A)True B)False 8)A company has assets of $56,320 and liabilities of $29,500. The owner's equity is $85,820.A)True B)False College Accounting A Contemporary Approach 4th Edition Haddock Test Bank Visit TestBankDeal.com to get complete for all chapters

2 Copyright © McGraw-Hill Education.All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.9)The expenses for a period are reported on the balance sheet.A)True B)False 10)A double line drawn under the figures in a money column shows that the computation is complete.A)True B)False 11)A business transaction is a financial event that affects the resources of a business.A)True B)False 12)If there is an excess of expenses over revenues, the excess represents a profit.A)True B)False 13)A withdrawal of funds by the owner for personal use is considered a business expense.A)True B)False 14)The statement of owner's equity is prepared before the balance sheet so that the ending capital balance is available.A)True B)False 15)If assets are $8,000 and liabilities are $2,000, owner's equity is $10,000.A)True B)False 16)The amount of net income or net loss is needed to complete the statement of owner's equity.A)True B)False 17)Withdrawals by the owner are reported on the income statement.A)True B)False 18)The income statement is also known as the profit and loss statement.A)True B)False

3 Copyright © McGraw-Hill Education.All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.19)The net income or net loss for the period is shown on both the income statement and the balance sheet.A)True B)False 20)Which of the following equations is the Fundamental Accounting Equation?A)Assets – Owner's Equity = Liabilities B) Assets + Liabilities = Owner's Equity

• Assets = Liabilities + Owner's Equity D) Assets – Liabilities = Owner's Equity

21)The balance sheet shows:

A)all revenues and expenses.B)the financial position of a business at a given time.C)the results of business operations.D)the amount of net income or loss.

22)The Income Statement shows:

A)the financial position of a business at a given time.B)the change in owner's equity for a period of time.C)the amount of net income or net loss.D)assets, liabilities and expenses.

23)Amounts that a business must pay in the future are known as:

A)capital. B) liabilities. C) expenses. D) assets.

24)Examples of assets are:

A)cash and accounts receivable. B) investments by the owner and revenue.

• accounts receivable and rent expense. D) equipment and revenue.

25)Ginger Yale Ice Company receives money from a customer on account. Recording this transaction

will:

A)decrease Accounts Payable. B) increase Cash.

• increase Accounts Receivable. D) decrease G. Yale, Capital.

26)If a business issues a check for $100 to purchase office supplies, What is the effect on the accounting equation?A)Owner's Equity will decrease B) Assets will decrease

• Owner's Equity will increase D) Total Assets will remain the same

4 Copyright © McGraw-Hill Education.All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.27)If a business issued a check for $1,000 to pay for two months rent in advance, what is the effect on the firms' assets, liabilities and owner's equity.A)Owner's Capital will increase B) Accounts Payable will increase

• Prepaid Rent will decrease D) Cash will decrease

28)The owner's investment or equity in a business is called:

A)accounts payable. B) drawing.

• cash. D) capital.

29)At the end of the first month of operations for SloMo Delivery Service, the business had the following accounts: Accounts Receivable, $11,350; Prepaid Insurance, $400; Equipment, $26,200 and Cash, $21,650. On the same date, SloMo owed the following creditors: Simpson Supply Company, $17,000; Allen Office Equipment, $14,500.

The total assets for the SloMo Delivery Service are:

A) $59,600. B) $21,650. C) $33,400. D) $33,000.

30)At the end of the first month of operations for SloMo Delivery Service, the business had the following accounts: Accounts Receivable, $11,350; Prepaid Insurance, $400; Equipment, $26,200 and Cash, $21,650. On the same date, SloMo owed the following creditors: Simpson Supply Company, $17,000; Allen Office Equipment, $14,500.

The total amount of Liabilities is:

A) $17,000. B) $14,500. C) $28,100. D) $31,500.

31)Total assets of Douglas Fuhr Furniture Co. are $84,000 and the total liabilities are $37,000. What is the amount of the owner's equity?

A) $47,000 B) $121,000 C) $84,000 D) $6,000

32)If during the year total assets increase by $75,000 and total liabilities decrease by $16,000, by how much did owner's equity increase/decrease?A)$59,000 decrease B) $75,000 increase

• $91,000 increase D) $91,000 decrease

33)Which financial statement is reported as of a specific date?A)Statement of Changes in Financial Position B)Income Statement C)Statement of Owner's Equity D)Balance Sheet