1

If assets total $400,000 and owners' equity totals $250,000, then total liabilities must be

A)

B)

C)

D)

2
In which order are liabilities usually listed in the balance sheet

A)

B)

C)

D)

3
Office equipment was purchased for cash. What effect did this transaction have in the finan
position of the company?

A)

B)

C)

D)

4
4
Office equipment was purchased by issuing a check for $10,000 and a note payable for the
$60,000. What effect did this transaction have in the financial position of the company?

A)

B)

C)

D)

5
A balance sheet, or statement of financial position, is

A)

B)

C)

D)

6
The income statement

A)

B)

C)

D)

7
7
The beginning balance of cash was $0. The ending balance of cash is $45,600. In the state
cash flows, cash flows from operating activities were a positive $24,000, and the cash flow
investing activities was a negative $6,000. The cash flows from financing activities were wh
following?
A)

B)

C)

D)

8
Articulation refers to the relationship among the financial statements. What item in the inco
statement ties that statement to the balance sheet?

A)

B)

C)

D)

9
In the short run, what distinguishes liquidity from profitability?

A)

B)

C)

D)

10
10
A 'strong' statement of cash flows would show that the major sources of cash came from w
following?

A)

B)

C)

D)
 QUIZ

If assets total $400,000 and owners' equity totals $250,000, then total liabilities must be

$450,000 

$550,000 

$150,000 

$250,000 

In which order are liabilities usually listed in the balance sheet

The order in which they were incurred

The order of smallest to largest

Alphabetical order

The order in which they are expected to be repaid

Office equipment was purchased for cash. What effect did this transaction have in the financial 
position of the company?

Assets, decrease; Liabilities, no change; Owners' Equity, decrease.

Assets, decrease; Liabilities, increase; Owners' Equity, no change.

Assets, no change; Liabilities, no change; Owners' Equity, no change.

Assets, increase; Liabilities, increase; Owners' Equity, no change.
Office equipment was purchased by issuing a check for $10,000 and a note payable for the balance of 
$60,000. What effect did this transaction have in the financial position of the company?

Assets, no change; Liabilities, no change; Owners' Equity, no change.

Assets, decrease; Liabilities, increase; Owners' Equity, no change.

Assets, decrease; Liabilities, no change; Owners' Equity, decrease.

Assets, increase; Liabilities, increase; Owners' Equity, no change.

A balance sheet, or statement of financial position, is

an expansion of the basic accounting equation.

used to report the results of business operations over a period of time.

composed of four distinct major sections.

prepared ahead of the income statement.

The income statement

is a summary of revenues and expenses.

is used to report the results of operations over a specific period of time.

explains, in part, how the company's financial position changed over a specific time period.

is all of the above.
The beginning balance of cash was $0. The ending balance of cash is $45,600. In the statement of
cash flows, cash flows from operating activities were a positive $24,000, and the cash flows used by
investing activities was a negative $6,000. The cash flows from financing activities were which of the 
following?

Negative cash flow of $28,400

Positive cash flow of $27,600

Negative cash flow of $45,600

Positive cash flow of $18,000

Articulation refers to the relationship among the financial statements. What item in the income
statement ties that statement to the balance sheet?

Revenues

Expenses

Net income

all of the above

In the short run, what distinguishes liquidity from profitability?

There are no distinguishable differences.

Profitability increases owners' equity, liquidity does not.

Creditors are more interested in profitability than liquidity.

Owners have an interest in profitability but not in liquidity.
A 'strong' statement of cash flows would show that the major sources of cash came from which of the 
following?

Investing activities

Operating activities

Financing activities

Owners
Multiple Choice Quiz

1 The purpose of adjusting entries is to:

A) recognize revenue earned but not yet recorded.

B) recognize expenses incurred but not yet recorded.
C) recognize the earned portion of services paid for in advance.
D) recognize all of the above.

2 Every adjusting entry involves the recognition of either revenue or expense. Which of the follow
A) There also must be a corresponding change in capital stock.
B) There also must be a corresponding change in either assets or liabilities.
C) There also must be a corresponding change in the cash account.
D) Both (A) and (B).

3 When recording the adjusting entry to recognize the consumed portion of unexpired insurance,
include which of the following?
A) A debit to Insurance Expense
B) A debit to Unexpired Insurance
C) A credit to Cash
D) A credit to Insurance Expense

4 The original cost of a physical asset was $45,000. It was purchased on January 5, 2004. It has an
10 years and has been depreciated under the straight-line method for 5 years. At the end of the
entries have been recorded and posted, the book value of the physical asset will be which of the
A) $22,500
B) $27,000
C) $18,000
D) $40,500

5 On November 18, the company received $24,000 for services to be performed over the followin
A) A debit to Unearned Services Revenue and a credit to Accounts Receivable for $8,000.
 B) A credit to Services Revenue and a debit to Cash for $16,000
C) A credit to Services Revenue and a debit to Accounts Receivable for $8,000
D) A debit to Unearned Services Revenues and a credit to Services Revenue for $8,000

6 On November 16, the company borrowed $24,000 for 90 days at 6% interest. Interest expense w
end of November. The adjusting entry made on December 31 would include which of the follow
A) A debit to Interest Expense of $360
B) A debit to Interest Expense of $120
C) A credit to Interest Payable of $180
D) A credit to Interest Payable of $480

7 When adjusting for revenue that has accrued (been earned) but has not been recorded, which o
A) An asset account is increased and a revenue account is increased.
B) A revenue account is increased and an expense account is increased.
C) A revenue account is increased and a liability account is decreased.
D) A revenue account is increased and a liability account is increased.

8 The realization principle requires:

A) that revenues earned but not yet received be recognized through an adjusting entry.
B) that unearned revenues originally recorded as earned be converted to a liability through an
C) that the consumption of assets originally recorded as assets be recognized as expenses thro
D) both (A) and (B).

9 Which of the following is false?

A) The materiality concept permits charging purchases of low cost items directly to an expens
B) Debiting utilities expense when paid, rather than as the services are used, adheres to the m
C) Immaterial amounts of unrecorded expenses may be ignored during the adjusting process.
D) Adjusting entries may be made based on estimates.

An adjusting entry was made in which Unearned Services Revenue was debited for $4,000 and S
10 credited for $4,000. However, this journal entry was posted to the Unearned Services Revenue a
the Office Supplies 10pense account as a credit. As a consequence of this error, the:

A) trial balance will have a credit balance $4,000 greater than the debit balance.
B) trial balance will have equal totals of debit and credit balances.
C) trial balance will have a debit balance $4,000 greater than the credit balance.
D) net income will be overstated $4,000.
expense. Which of the following is also true?

tion of unexpired insurance, the adjusting entry will

on January 5, 2004. It has an estimated useful life of

for 5 years. At the end of the 6th year, after adjusting
ical asset will be which of the following?

performed over the following three months. Cash was debited for $24,000 and Unearned Services Revenue was credited for $24,000. Non
s Receivable for $8,000.
 e for $8,000
s Revenue for $8,000

% interest. Interest expense was not adjusted at the

d include which of the following?

s not been recorded, which of the following will occur?

ugh an adjusting entry.

erted to a liability through an adjusting entry.
e recognized as expenses through an adjusting entry.

t items directly to an expense account.

es are used, adheres to the matching principle.
during the adjusting process.

was debited for $4,000 and Services Revenue was

Unearned Services Revenue account as a debit and to
of this error, the:

debit balance.

credit balance.
e was credited for $24,000. None of the services were provided in November. One-third of the services were completed by December 31.
ere completed by December 31. The adjusting entry for December 31 would include which of the following?