MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 1] Which of the following groups has the primary responsibility for establishing generally accepted accounting principles for business entities in the United States? A] Securities and Exchange Commission B] U.S. Congress C] International Accounting Standards Board D] Financial Accounting Standards Board 2] Which type of accounting information is intended to satisfy the needs of external users of accounting information? A] Cost accounting B] Managerial accounting C] Tax accounting D] Financial accounting 3] Financial accounting standards are known collectively as GAAP. What does that acronym stand for? A] Generally Accepted Accounting Principles 8] Generally Applied Accounting Procedures C] Governmentally Approved Accounting Practices D] Generally Authorized Auditing Principles 4] Which of the following is an accurate definition of the term "asset?\" A) An obligation to creditors B] A resource that will be used to produce revenue C] A transfer of wealth from the business to its stockholders D] A sacrifice incurred from operating the business 5] If total assets decrease, then which of the following statements is true? A] Liabilities must increase and retained eamings must decrease. B] Common stock must decrease and retained earnings must increase. C] Liabilities, common stock, or retained eamings must decrease. D] Liabilities, common stock, or retained earnings must increase. Version 1 1 6] Which of the following statements about liabilities is true? A) They represent obligations to repay debts. B] They may increase when assets increase. C] They are found on the claims side of the accounting equation. 0] All of the answers are characteristics of liabilities. 7] Which of the following is an accurate depiction of the accounting equation? A) Assets = Liabilities + Common Stock + Retained Earnings B] Assets = Liabilities + Common Stock - Expenses C] Assets = Liabilities + Retained Earnings - Dividends D] Assets = Liabilities + Common Stock + Dividends 8] Which term describes a distribution of the business's assets back to the owners of the business? A] Liability B] Dividend C] Retained earnings D] Common stock 9] Finn Company reported assets of $1,000 and stockholders' equity of $600. What amount will Finn report for liabilities? A] $400 B] $600 C] $1,600 D) Cannot be determined 10) The balance sheet of the Algonquin Company reported assets of $50,000, liabilities of $22,000 and common stock of $15,000. Based on this information only, what is the amount of retained earnings? A] $7.000. B] $517,000. C] $13,000. D] $81000. 11) Li Company paid cash to purchase land. As a result of this accounting event, which of the following statements is true? A) Total assets decreased. 3] Total assets were unaffected. C] Total stockholders' equity decreased. D] Both assets and total stockholders' equity decreased. 12] How will accounts receivable appear on the following nancial statements? A] Asset on the balance sheet B] Expense on the income statement C] Liability on the balance sheet D] Revenue on the income statement 13] How will accounts payable appear on the following nancial statements? A] Expense on the income statement B] Revenue on the income statement C] Liability on the balance sheet D] Asset on the balance sheet 14] Greg Company recognized revenue on account. Which of the following nancial statements are affected by this accounting event? A] Balance sheet B] Income statement C] Statement of cash ows 0] Income statement and the balance sheet 15) How would purchasing prepaid rent be classied? A) Asset source transaction B] Asset use transaction C] Asset exchange transaction D] Claims exchange transaction 16) The following pre-closing accounts and balances were drawn from the records of Carolina Company on December 31, Year 1: Cash 5 4, 000 Accounts receivable $ Dividends 2, 000 Cannon stock Land 3, 200 Revenue Accounts payable 1, 800 Expense What is net income that will be shown on Carolina's Year 1 income statement? A) $2,200 B] $3 ,200 (:1 $1,000 D} $200 1?] Which of the following would be considered as primarily a merchandising business? A] West Consulting B] Martin's Supermarket C] Sandridge and Associates Law Ofces D} KPM Accounting and Tax Service 3, 400 3,900 3,200 2, 200 18) Which of the following would not be considered as primarily a merchandising business? A) Abercrombie and Fitch B] Sam's Clubs C] Amazon D} Regal Cinemas 19) The Cost of Goods Sold account is classied as: A] a liability. B] an asset. C] a contra asset. D} an expense. 20) Which of the following statements is true about period costs? A) Most period costs are expensed in the period the costs are incurred. B] Period costs are expensed when the products associated with these costs are sold. (2] Period costs are usually recorded as assets. D} Period costs do not adhere to the matching principle. 21) Abbott Company purchased $6,500 of merchandise inventory on account. Abbott uses the perpetual inventory method. How does this transaction affect the nancial statements? A) Decrease accounts payable and decrease purchases B] Increase inventory and increase accounts payable C] Increase cost of goods sold and increase accounts payable D} Decrease accounts payable and decrease inventory 22] Streif Company uses the perpetual inventory method. The company purchased an item of inventory for $80 and sold the item to a customer for $120. What effect will the sale have on the company's inventory account? A) The inventory account will decrease by $120 B] The inventory account will decrease by $80 C] The inventory account will increase by $40 D) There will be no effect on the inventory account 23) Use the following account numbers and corresponding account titles to answer the following question. Account Number Account Title {1} Cash {2} Merchandise inventory (3} Cost of goods sold (4} Transportationout (5} Dividends (6} Common stock (7} Selling expense (8} Loss on the sale of land (9} Sales revenue Which accounts would affect the amount of net income shown on the income statement? A) Account numbers 3, 4, 7, 8, and 9 B] Account numbers 3, 4, 5, 7. and 9 C] Account numbers 2, 3, 7. 8. and 9 D) Account numbers 3, S, 7, and 8 24) Use the following account numbers and corresponding account titles to answer the following question. Bonus Points worth 5 points (This question is optional) Account Number Account Title (1} Cash (2} Merchandise inventory {3} Cost. of goods sold (4} Transportationout {5} Dividends (6} Common stock (7} Selling expense (8} Loss on the sale of land (9} Sales revenue Which accounts would be reported on the balance sheet? A] Account numbers 1, 2,4, and 5 B] Account numbers 1, 3,1, and 8 C] Account numbers 1, 2, and 6 D) Account numbers 3,4, 8, and 9 25) How does the purchase of inventory on account under the perpetual inventory method affect the nancial statements? A] Total assets increase. 8] Total liabilities increase. C] Total assets are unaffected. D) Total assets and total liabilities both increase. 26) What do the credit terms, 2115, N30, mean? A) A 15% discount can be deducted if the invoice is paid within 2 days following the date of sale. 81 A 2% discount can be deducted for a period up to 30 days following the date of sale. C] A 2% discount can be deducted if the invoice is paid before the 15th day following the date of the sale. D) A 2% discount can be deducted if the invoice is paid after the 15th day following the sale, but before the 30th day