1. Which of the following accounts would not appear on a balance sheet?

1. Which of the following accounts would not appear on a balance sheet? 

 

Equipment

Interest Payable

Interest Revenue

Retained Earnings

 

2. Which of the following statements about the Public Company Accounting Oversight Board (PCAOB) is not true? 

 

The PCAOB was created by the Sarbanes-Oxley Act to regulate the accounting firms that audit financial statements of public companies.

Independent auditors are required to register with the PCAOB.

The PCAOB has the power to impose sanctions against a registered accounting firm.

The PCAOB requires public accounting firms to conduct peer reviews of other such firms and make their report public.

 

3. Which financial statement matches asset increases from operating a business with asset decreases from operating the business? 

 

Statement of changes in equity

Balance sheet

Income statement

Statement of cash flows

 

4. The Blumer Company entered into the following transactions during 2010:

• The company was started with $22,000 of common stock issued to investors for cash.

• On July 1, the company purchased land that cost $15,500 cash.

• There was $700 of supplies purchased on account.

 

The amount of total liabilities appearing on the December 31, 2010 balance sheet would be: 

 

$3,600

$4,000

$475

$700 

5. Rowena Company spent cash to purchase equipment. As a result of this event:

 

total liabilities increased.

total assets increased.

net income increased.

total assets were unchanged.

 

6. ABC Company acquired $23,000 by issuing common stock to investors. Which of the following choices accurately reflects how this event would affect the company’s financial statement?

 

Row Assets = Liab. + Equity Rev. – Exp. = Net Inc.

Cash Flow

One 23,000 = NA + 23,000 NA – NA = NA 23,000 FA

Two 23,000 = NA + 23,000 23,000 – NA = 23,000 NA

Three 23,000 = NA + 23,000 23,000 – NA = 23,000 23,000 FA

Four 23,000 = 23,000 + NA 23,000 – NA = 23,000 23,000 OA

 

Row One

Row Two

Row Three

Row Four

 

7. Parrot Company paid a $300 cash dividend. Which of the following choices accurately reflects how this event would affect the company’s financial statements?

  

Balance Sheet Income Statement

Row Assets = Liab. + Equity Rev. – Exp. = Net Inc.

Statement of Cash Flows

One NA = 300 + (300) NA – 300 = (300) NA

Two (300) = NA + (300) NA – 300 = (300) (300) FA

Three (300) = NA + (300) NA – NA = NA (300) FA

Four (300) = NA + (300) NA – NA = NA (300) OA

 Row OneRow TwoRow ThreeRow Four 

8. Sefcik Company purchased supplies on account. Which of the following choices accurately reflects how this event would affect the company’s financial statements? 

Row Assets = Liab. + Equity Rev. – Exp. = Net Inc. Cash Flow

One + = NA + – NA – + = – NA

Two + – = NA + NA NA – NA = NA – OA

Three + = + + NA NA – NA = NA NA

Four + – = NA + NA NA – NA = NA NA

 Row OneRow TwoRow ThreeRow Four 

9. Ohio Company provided services to a customer for $1,700 cash. As a result of this event: 

 

total assets decreased.

total liabilities increased.

retained earnings increased.

cash flows from financing activities increased.

 

10. The claims of a business’s creditors are called: 

 

assets.

liabilities.

equity.

revenue.

 

11. The Sarbanes-Oxley Act: 

 

was prompted by corporate bankruptcies and audit failures.

limits an auditor’s ability to provide non-audit services to a client.

clarifies the responsibility of a company’s management for its financial statements.

all of the above.

 

12. Hardin Company began operations in 2010. During the year, the following cash transactions 

occurred:

• Issued stock for $40,000

• Borrowed $24,000 from bank

• Provided services to customers for $53,000 cash

• Paid back $8,000 of the loan from the bank

• Paid rent expense, $9,000

• Paid operating expenses, $29,000

 

Assuming that Hardin engaged in no transactions during the year other than those listed above, what was the amount of net income or loss for the year? 

 

$19,000 net income

$15,000 net income 

$12,000 net income

$11,000 net loss

 

13. In event of liquidation of a business: 

 

creditors have priority claim on the business’s assets.

investors have priority claim on the business’s assets.

resource users have priority claim on the business’s assets.

stakeholders are assured of receiving the resources they had provided to the business.

 

14. The Blumer Company entered into the following transactions during 2010: There was $700 of supplies purchased on account. Sales on account amounted to $9,500. Cash collections of receivables were $5,500. Supplies on hand as of December 31, 2010 amounted to $225. The beginning balance of supplies at January 1, 2010 was $100.

 

The adjusting entry necessary to record the supplies expense would result in a: 

 

$700 increase in assets and liabilities.

$700 decrease in assets and equity.

$575 decrease in assets and equity. solution: 700+100-225 = 575 decrease

$575 increase in assets and liabilities.

 

15. The amount of land owned by a business appears on which financial statement? 

 Income statement

Statement of changes in stockholders’ equity

Statement of cash flowsBalance sheet 

16. The purpose of the accrual basis of accounting is to: 

 

report revenue when cash is received.

improve the matching of revenue and expense in the proper period.

report expenses when cash disbursements are made.

improve the company’s earnings per share.

 

17. Which of the following groups has primary responsibility for establishing generally accepted accounting principles for businesses in the United States? 

 

The U.S. Supreme Court

Each state’s Secretary of the Treasury

The Financial Accounting Standards Board

The Internal Revenue Service

 

18. In 1998, Parker Corporation purchased land for

$130,000

. In 2010, Parker Company had the land appraised, and its value was estimated to be

$190,000

. Also during 2010, another company offered Parker

$145,000

for the parcel of land. When the balance sheet is prepared at the end of 2010, at what dollar amount should the land be reported? 

$190,000$145,000$130,000

None of the above

 

19. Which of the following accounts is a permanent account (an account that is not closed)? 

 

Prepaid Insurance

Service Revenue

Salaries Expense

Rent Expense

 

20. Which of the following lists represents the correct sequence of stages in an accounting cycle? 

 

Record transactions, prepare statements, adjust accounts, and close temporary accounts

Prepare statements, close temporary accounts, record transactions, and adjust accounts

Close temporary accounts, record transactions, prepare statements, and adjust accounts

Record transactions, adjust accounts, prepare statements, and close temporary accounts