101. If an individual asset is increased, then a. there must be an equal decrease in a specific liability. b. there must be an equal decrease in owner's equity. c. there must be an equal decrease in another asset. d. none of these is possible.
102. 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.
103. If expenses are paid in cash, then a. assets will increase. b. liabilities will decrease. c. owner's equity will increase. d. assets will decrease.
104. If an owner makes a withdrawal of cash from a proprietorship, then a. there has been a violation of accounting principles. b. owner's equity will increase. c. owner's equity will decrease. d. there will be a new liability showing the owner owes money to the business.
105. 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.
106. Net income results when a. Assets > Liabilities. b. Revenues = Expenses. c. Revenues > Expenses. d. Revenues < Expenses.
107. Owner's capital at the end of the period is equal to a. owner's capital at the beginning of the period plus net income minus liabilities. b. owner's capital at the beginning of the period plus net income minus drawings. c. net income. d. assets plus liabilities.
108. A balance sheet shows a. revenues, liabilities, and owner's equity. b. expenses, drawings, and owner's equity. c. revenues, expenses, and drawings. d. assets, liabilities, and owner's equity.
109. 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.
110. If the owner's equity account increases from the beginning of the year to the end of the year, then a. net income is less than owner drawings. b. a net loss is less than owner drawings. c. additional owner investments are less than net losses. d. net income is greater than owner drawings.
Use the following information for questions 111–113.
Jerry's Car Repair Shop started the year with total assets of $90,000 and total liabilities of $60,000. During the year the business recorded $150,000 in car repair revenues, $95,000 in expenses, and Jerry withdrew $15,000.
111. Jerry's Capital balance at the end of the year was a. $70,000. b. $40,000. c. $85,000. d. $55,000.
112. The net income reported by Jerry's Car Repair Shop for the year was a. $40,000. b. $55,000. c. $30,000. d. $135,000.
113. Jerry's Capital balance changed by what amount from the beginning of the year to the end of the year? a. $15,000. b. $55,000. c. $30,000. d. $40,000.
114. 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.
The following questions are from the Study Guide.
115. The primary purpose of the statement of cash flows is to report a. a company's investing transactions. b. a company's financing transactions. c. information about cash receipts and cash payments of a company. d. the net increase or decrease in cash.
s116. Which of the following is not part of the accounting process? a. Recording b. Identifying c. Financial decision making d. Communicating
s117. Auditing is a. the examination of financial statements by a CPA in order to express an opinion on their fairness. b. a part of accounting that involves only recording of economic events. c. an area of accounting that involves such activities as cost accounting, budgeting, and accounting information systems. d. conducted by the Securities and Exchange Commission to ensure that registered financial statements are presented fairly.
s118. The organization(s) primarily responsible for establishing generally accepted accounting principles is(are) the FASB SEC a. no no b. yes no c. no yes d. yes yes
s119. A proprietorship is a business a. owned by one person. b. owned by two or more persons. c. organized as a separate legal entity under state corporation law. d. owned by a governmental agency.
s120. A net loss will result during a time period when a. assets exceed liabilities. b. assets exceed owner's equity. c. expenses exceed revenues. d. revenues exceed expenses.
s121. The Relias Uptown Grill receives a bill of $400 from the Erml Advertising Agency. The owner, John Relias, is postponing payment of the bill until a later date. The effect on specific items in the basic accounting equation is a. a decrease in Cash and an increase in Accounts Payable. b. a decrease in Cash and an increase in R. Relias, Capital. c. an increase in Accounts Payable and a decrease in R. Relias, Capital. d. a decrease in Accounts Payable and an increase in R. Relias, Capital.
s122. Jeanie Company purchases $600 of equipment from Mundelein Inc. for cash. The effect on the components of the basic accounting equation of Jeanie 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.
s123. Morreale Beaver Company buys a $12,000 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.
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