Question 1
If total liabilities are $1,000 and total assets are $8,000, owner's equity must be
A. $7,000.
B. $3,000.
C. $10,000.
D. $13,000.
Question 2
If total assets are $30,000 and total liabilities are $18,000, capital must equal
A. $12,000.
B. $28,000.
C. $8,000.
D. $20,000.
Question 3
Which of the following is an advantage of a sole proprietorship form of business?
A. There's limited personal risk.
B. The business can continue indefinitely.
C. The owner makes all the decisions.
D. All of the above
Question 4
The claims of creditors against the assets are
A. expenses.
B. revenues.
C. liabilities.
D. owner's equity.
Question 5
How does the purchase of office equipment on account affect the accounting equation?
A. Assets increase, and liabilities decrease.
B. Assets increase, and owner's equity increases.
C. Assets increase, and liabilities increase.
D. Liabilities increase, and owner's equity decreases.
Question 6
The purpose of the accounting process is to provide financial information about
A. sole proprietorships.
B. small businesses.
C. large corporations.
D. All of the above
Question 7
Logan's Motor Sports buys $30,000 of equipment on credit. Which of the following is a true statement?
A. Total assets increase.
B. Total assets are unchanged.
C. Total liabilities decrease.
D. Total liabilities are unchanged.
Question 8
If total liabilities increased by $6,000 and the assets increased by $8,000 during the accounting period, what is the change in the owner's equity amount?
A. Increase of $2,000
B. Decrease of $2,000
C. Increase of $10,000
D. Decrease of $10,000
Question 9
A legal firm would be considered a
A. merchandise company.
B. manufacturer.
C. service company.
D. None of the above
Question 10
Which of the following is a characteristic of a sole proprietorship?
A. The business is owned by more than one person.
B. It's easy to form.
C. Each stockholder acts as an owner of the company.
D. It can continue indefinitely.
Question 11
The type of business organization that can continue indefinitely is known as a
A. sole proprietorship.
B. partnership.
C. corporation.
D. None of the above
Question 12
Bonnie's Baskets purchases $4,000 worth of office equipment on account. This causes
A. Cash and Capital to decrease.
B. Office Equipment and Accounts Payable to increase.
C. Office Equipment to decrease and Accounts Payable to increase.
D. Accounts Payable to increase and Capital to decrease.
Question 13
The Sarbanes-Oxley Act was passed to
A. prevent fraud at public companies.
B. replace all of the old accounting procedures with new ones.
C. improve the accuracy of the company's financial reporting.
D. Both A and C
Question 14
Strum Hardware has total assets of $50,000. What are the total assets if new equipment is purchased for $10,000 cash?
A. $45,000
B. $50,000
C. $55,000
D. $60,000
Question 15
A partnership is a business that
A. is easy to form.
B. ends with the death of a partner.
C. is owned by more than one person.
D. All of the above
Question 16
Assets are equal to
A. liabilities + owner's equity.
B. liabilities - owner's equity.
C. liabilities - revenues.
D. revenues - expenses.
Question 17
The purchase of supplies for cash would affect which account category?
A. Assets
B. Liabilities
C. Capital
D. Expense
Question 18
The balance sheet contains
A. liabilities, expenses, and capital.
B. assets, liabilities, and revenues.
C. expenses, assets, and cash.
D. assets, liabilities, and owner's equity.
Question 19
Which of the following would result if a business purchased equipment with a 40% down payment in cash?
A. Equipment would increase, and Cash would decrease.
B. Accounts Payable would increase.
C. Since the equipment hasn't been paid in full, there's nothing to record.
D. Both A and B
Question 20
A corporation
A. can continue indefinitely.
B. is owned by stockholders.
C. has limited risk to stockholders.
D. All of the above