What is the amount of liabilities for the firm

Question

Question 1.  A decision whether to borrow money or sell stock is an example of

•  a financing decision
•  an investing decision
•  an operating decision
•  a future decision

Question 2. After months of planning, Alana opened a Natural Foods store on April 1 by investing $15,000 of her own money.  She spent $10,000 on furnishings and fixtures that had been delivered and set up the night before.  A friend had loaned Alana $5,000, which she used to purchase inventory prior to opening.  When Alana opened for business on April 1, her accounting system should have contained what balances for total assets and total liabilities.

Total AssetsTotal Liabilities

•  $20,000 $0
•  >$20,000 $5,000
•  $15,000 $5,000
•  $15,000 $0

Question 3. The following amounts of capital were obtained to start operations of Lightning Enterprises at the beginning of 2007:

Owners' contribution of cash                                $80,000
Owners' contribution of machinery & equipment      18,000
Loan from the bank                                              46,000
                                                                       $144,000
What is the amount of liabilities for this firm?

•  $18,000
•  $46,000
•  $98,000
•  $126,000
•  $144,000

Question 4. Which of the following is an operating activity?

•  purchase of equipment
•  payment of cash dividends
•  sale of equipment
•  purchase of inventory

Question 5. Net cash flow is generally NOT thought to be a valid measure of an organization's performance for a period because it

•  is usually smaller than the amount of net income
•  includes the results of activities not related to operations
•  focuses only on the net change in owners' equity
•  violates the periodic measurement concept

Question 6. Orlando owns a supper club and needed to obtain funds for the business.  A bank loaned the supper club $20,000.  Concerning the supper club, which of the following increased because of this loan?

•  owners' equity
•  liabilities
•  revenues
•  expenses

Question 7. A firm must depend on its ____ activities to generate profits.

•  investing
•  operating
•  nonrecurring
•  financing

Question 8.  During May, the Family Resort had revenues of $20,000 and expenses of $8,000. The owner withdrew $7000 cash from the business during the month. If owners' equity on May 31 was $18,200, owners' equity on May 1 must have been

•  $13,200
•  $12,000
•  $6,200
•  $37,200

Question 9: Assets are resources controlled by an organization and available for its use in the future.

•  True
•  False

Question 10.  Investing decisions involve choices about when and where to obtain financial resources and the amount needed.

•  True
•  False

Question 11.  The purpose of financial reports is to provide information useful to current and potential investors and creditors in making decisions.

•  True
•  False

Question 12. The Fast Freight Company purchased a new delivery truck by making a cash down payment and signing a note payable for the balance. How will assets, liabilities, and owners' equity be affected by this transaction?
 
- Assets        Liabilities      Equity
decreased     increased    no change

- Assets      Liabilities          Equity
increased    increased        no change

- Assets     Liabilities          Equity
increased     decreased     increased

- Assets         Liabilities     Equity
no change     increased     decreased

- Assets         Liabilities     Equity
no change     decreased     increased

Question 13.  Which of the following accounts is a liability?

•  interest expense
•  interest payable
•  interest revenue
•  interest receivable

Question 14.  Which of the following accounts would be increased as a result of the sale of inventory to a customer?

 cost of goods sold
 owners' equity
 accounts payable
 inventory

Question 15.  Match the event below to the proper category of activity.

Operating ActivityFinancing Activity

 paying employee salaries paying off a bank loan
 obtaining a loan designing a new product
 buying factory equipment refunding a customer's money
 paying off a bank loan buying new tools

Question 16. What effect do revenues and expenses eventually have on Retained Earnings?
 
Revenues     Expenses
decrease     decrease

Revenues     Expenses
decrease     increase
  
Revenues     Expenses
increase     increase

Revenues     Expenses
increase     decrease

Question 17.  Tyler & Company had the following account balances at the end of September:

Cash received from customers    $5,400
Sales revenue (all on account)      7,000
Purchase of land (all for cash)         700
Cash paid for equipment               2,200
Cost of goods sold                        3,000
Other operating expenses                900
   
What amounts should be reported for each of the following?

Net IncomeCash Flow

 $8,500 $1,600
 $3,800 $3,200
 $6,300 $(500)
 $3,100 $2,500

Question 18. Which of these is NOT an expense? 

• cost of goods sold
• wages paid to employees for services consumed
• merchandise inventory purchased
• taxes paid to government

Question 19. At the end of an accounting period, the amount of net income earned by a company is transferred to the balance sheet and reported under which one of the following categories?

• owners' equity
• liabilities
• assets
• all of the above