Exam 1

Question 1

1 Financial accounting provides economic and financial information for all of the following except:

a. creditors.
b. investors.
c. employees.
d. other external users.

Answer 1

c. employees.

Question 2

2. An asset account is:

a. usually credited.
b. a periodic account.
c. usually debited.
d. balanced to the income summary.

Answer 2

d. balanced to the income summary.

Question 3

3. Owner’s equity is best depicted by the following:

a. Assets = Liabilities.
b. Liabilities + Assets.
c. Residual equity + Assets.
d. Assets – Liabilities.

Answer 3

d. Assets – Liabilities.

Question 4

4. If services are rendered for credit, then…

a. assets will decrease.
b. liabilities will increase.
c. owner’s equity will increase.
d. liabilities will decrease.

Answer 4

c. owner’s equity will increase.

Question 5

5. If supplies that have been purchased are used in the course of business, then…

a. a liability will increase.
b. an asset will increase.
c. owner’s equity will decrease.
d. owner’s equity will increase.

Answer 5

c. owner’s equity will decrease.

Question 6

6. An income statement:

a. summarizes the changes in owner’s equity for a specific period of time.
b. reports the changes in assets, liabilities, and owner’s equity over a period of time.
c. reports the assets, liabilities, and owner’s equity at a specific date.
d. presents the revenues and expenses for a specific period of time.

Answer 6

d. presents the revenues and expenses for a specific period of time.

Question 7

7. The balance sheet is frequently referred to as…

a. an operating statement.
b. the statement of financial position.
c. the statement of cash flows.
d. the statement of owner’s equity.

Answer 7

b. the statement of financial position.

Question 8

8. Which of the following is not part of the accounting process?

a. Recording
b. Identifying
c. Financial decision making
d. Communicating

Answer 8

c. Financial decision making

Question 9

9. Juggernaut Company buys a $29,000 van on credit. The transaction will affect the…

a. income statement only.
b. balance sheet only.
c. income statement and owner’s equity statement only.
d. income statement, owner’s equity statement, and balance sheet.

Answer 9

b. balance sheet only.

Question 10

10. Mellon Company purchases $1,500 of equipment from Office Equipment Inc. for cash. The effect on the components of the basic accounting equation of Mellon Company is…

a. an increase in assets and liabilities.
b. a decrease in assets and liabilities.
c. no change in total assets.
d. an increase in assets and a decrease in liabilities.

Answer 10

c. no change in total assets.

Question 11

Identify whether the following items would be reported on the income statement (IS) or balance sheet (BS).

1. Cash
2. Service Revenue
3. Notes Payable
4. Interest Expense
5. Accounts Receivable

Answer 11

1. Cash BS
2. Notes Payable BS
3. Accounts Receivable BS
4. Service Revenue IS
5. Interest Expense IS