Sample MC for Midterm

THE ACCOUNTING EQUATION

A company's total liabilities decreased by $$105,000$ and its stockholders' equity decreased

$$35,000$ during a period of time. By what amount and in what direction must the company's

total assets have changed during that same period?

a$.$ $$140,000$ increase

b$.$ $$70,000$ decrease

c$.$ $$140,000$ decrease

d$.$ $$70,000$ decrease

Jimmy's Repair Shop started the year with total assets of $$300,000$ and total liabilities of

$$240,000.$ During the year, the business recorded $$630,000$ in revenues, $$330,000$ in

expenses, and dividends of $$60,000.$ The net income reported by Jimmy's Repair

Shop for the year was

a$.$ $$240,000.$

b$.$ $$300,000.$

c$.$ $$180,000.$

d$.$ $$570,000.$

FINANCIAL STATEMENTS

An income statement

a$.$ summarizes the changes in retained earnings for a specific period of time.

b$.$ reports the changes in assets, liabilities, and stockholders' equity over a period of time.

c$.$ reports the assets, liabilities, and stockholders' equity at a specific date.

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

Which of the following financial statements is divided into major categories of operating,

investing, and financing activities?

a$.$ The income statement

b$.$ The balance sheet

c$.$ The retained earnings statement

d$.$ The statement of cash flows