Problem 1. If during the current accounting period the company's assets increased by $24,000 and equity increased by $5,000, then how did liabilities change?
A. Increased by $29,000
B. Increased by $24,000
C. Decreased by $5,000
E. Decreased by $19,000
F.Increased by $19,000
Problem 2. Purchasing equipment on account (payment to be made in the future) will have what effect on the components of the accounting equation?
A. Increase in equipment (assets) and a decrease in equity
B Increase in equipment (assets) and an increase in equity
C Increase in equipment (assets) and an increase in liabilities
D Increase in equipment (assets) and a decrease in liabilities
E. None of the above
Problem 3. Which of the following financial statements refers to a specific date (point in time)?
A. Income statement
B. Statement of owner's equity
C. Statement of cash flows
D. Balance Sheet
E. Answers A, B & C are all correct
Problem 4. The basic accounting equation is Assets = Liabilities + Equity. The Equity term of the equation can be further broken down into several other terms. Assume that the entity is a sole proprietorship. Which of the following statements is correct?
A. Additional investments by the business owner will increase equity; and revenues will decrease equity.
B. Additional investments by the business owner will decrease equity; and revenues will increase equity.
C. Increases in expenses will decrease equity; and owner withdrawals will decrease equity.
D. Revenues will increase equity; and owner withdrawals will increase equity.
E. Revenues will decrease equity; and owner withdrawals will increase equity.
Problem 5. Assume that a company's beginning owner's capital was $20,000. During the period, withdrawals were $24,000, and the owner made additional investments during the period of $50,000. The ending capital balance was $90,000. What was the net income or net loss for the period?
A. Net income, $56,000
B. Net loss, $44,000
C. Net income, $44,000
D. Net income, $30,000
E. None of the above
Problem 6. If during the accounting period the company's assets decreased by $15,000, and equity increased by $4,000, then by how much did liabilities change?
A. Increased by $12,000
B. Increased by $8,000
C. Decreased by $12,000
D. Decreased by $19,000
E. Decreased by $6,000
Problem 7. Company assets total $150,000 and its liabilities total $30,000. What is the equity of this company?
A. $120,000
B. $100,000
C. $150,000
E. $180,000
F. None of the above
Problem 8. The three basic business entities discussed in this chapter include sole proprietorship, partnership, and corporation. Which of these entities is considered a legal entity and is also subject to federal income taxation at the entity level?
A. Sole proprietorship.
B. Partnership.
C. Corporation.
D. All three entities satisfy both requirements.
E. None of these entities satisfy both requirements.
Problem 9. If at the end of the accounting period the company's liabilities total $19,000 and its equity totals $40,000, then what must be the total of assets?
A. $14,000
B. $40,000
C. $21,000
D. $59,000
E. None of the above
Problem 10. When cash is received from a customer in payment of an account receivable, how are the elements of the accounting equation affected?
A. Decrease assets (cash) and increase assets (accounts receivable)
B. Increase assets (cash) and decrease assets (accounts receivable)
C. Increase assets and increase liabilities
D. Increase assets and increase equity
E. None of the above