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Test Bank for College Accounting A Contemporary Approach 5th

Edition by M. David Haddock J

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Book Title: College Accounting A Contemporary Approach

Edition: 5th Edition

Author: M. David Haddock J

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Student name:__________
TRUE/FALSE - Write 'T' if the statement is true and 'F'
if the statement is false.
1) The entire process of analyzing, recording, and
reporting business transactions is based on the fundamental
accounting equation.

⊚ true
⊚ false

2) When using the fundamental accounting equation, an to total liabilities minus

accountant must make sure that total assets are always equal owner's equity.

⊚ true
⊚ false

3) Assets always equal debts of the business plus the

financial interest of the owner.

⊚ true
⊚ false

4) When cash is paid to a creditor, the firm's liabilities

decrease.

⊚ true
⊚ false

5) Al Dunn Bakery bought a new oven for $1,680. Al 30 days. Total assets
paid $660 as a cash down payment and will pay the balance in increased by $1,020.

⊚ true
⊚ false

6) Al Dunn Bakery

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bought a new oven for $1,380. Al paid $300 as a cash down
payment and will pay the balance in 30 days. Total assets
increased by $1,080.

⊚ true
⊚ false

7) If the owner takes cash out of the business for personal

use, the withdrawal should be recorded as an expense of the
business.

⊚ true
⊚ false

8) When services are provided on credit, the total amount

of liabilities increases.

⊚ true
⊚ false

9) A company has assets of $59,720 and liabilities of

$29,500. The owner's equity is $89,220.

⊚ true
⊚ false

10) A company has assets of $56,320 and liabilities of

$29,500. The owner's equity is $85,820.

⊚ true
⊚ false

11) The expenses for a period are reported on the balance

sheet.

⊚ true

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12) A double line drawn under the figures in a money
column shows that the computation is complete.

⊚ true
⊚ false

13) The first step in the accounting process is the analysis

of business transactions.

⊚ true
⊚ false

14) If there is an excess of expenses over revenues, the

excess represents a profit.

⊚ true
⊚ false

15) A withdrawal of funds by the owner for personal use

decreases owner’s equity.

⊚ true
⊚ false

16) The statement of owner's equity is prepared before the

balance sheet so that the ending capital balance is available.

⊚ true
⊚ false

17) If assets are $8,000 and liabilities are $2,000, owner's

equity is $6,000.

⊚ true
⊚ false

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18) The amount of net income or net loss is needed to
complete the statement of owner's equity.

⊚ true
⊚ false

19) The owner’s capital balance at the beginning of the

period is required on the statement of owner’s equity.

⊚ true
⊚ false

20) When assets equal liabilities + owner’s equity, a

company is said to break even.

⊚ true
⊚ false

21) The capital balance at the end of the period is reported

on both the statement of owner’s equity and the balance sheet.

⊚ true
⊚ false

MULTIPLE CHOICE - Choose the one alternative that

best completes the statement or answers the question.
22) The property that a business owns is referred to as its
__________.

C) owner's equity
A) assets D) capital
B) liabilities

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23) The debts or obligations of a business are known as its __________.

C) owner's equity
A) assets D) capital
B) liabilities

24) On the income statement, revenues minus expenses

equals __________ for a period of time.

D) net income or
A) working capital net loss
B) current assets
C) accounts receivable

25) The financial interest of the owner in a business is

called __________.

C) liabilities
A) assets D) accounts
B) owner's equity receivable

26) The account used to record amounts that are owed for
goods or services purchased on credit is known as
__________.

C) accounts
A) merchandise inventory payable
B) accounts receivable D) withdrawals

27) When a business sells services for cash, assets

increase and revenue __________.

C) is unchanged
A) increases D) may either
B) decreases increase or decrease

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28) The account used to record amounts that will be
collected from charge account customers in the future is
referred to as __________.

C) merchandise
A) accounts payable inventory
B) accounts receivable D) withdrawals

29) The __________ is the financial report that shows the

assets, liabilities, and owner's equity of a business on a
specific date.

C) balance sheet
A) statement of owner’s equity D) income
B) profit and loss statement statement

30) If assets are $17,000 and owner's equity is $10,000,

liabilities are __________.

C) $17,000
A) $7,000 D) $27,000
B) $10,000

31) When a business pays cash for salaries, assets

decrease and expenses __________.

C) are unchanged
A) decrease D) may increase
B) increase or decrease

32) In a business transaction, when revenue increases,

owner's equity will ___________.

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 C) either increase
A) remain unchanged or decrease
B) decrease D) increase

33) In a business transaction, when expenses increase,

owner's equity will __________.

C) either increase
A) remain unchanged or decrease
B) decrease D) increase

34) Funds taken from the business by the owner for

personal use are called __________.

C) liabilities
A) withdrawals D) expenses
B) assets

35) The __________ reports the changes that have

occurred in the owner's financial interest during the reporting
period.

C) profit and loss

A) income statement statement
B) statement of owner's equity D) balance sheet

36) When revenue is greater than expenses, the result is

net __________.

C) loss
A) receivable D) income
B) sales

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37) When revenue and expenses are equal, the firm is said to __________.

D) experience a
A) break even gain
B) be profitable
C) experience a loss

38) The three-line heading of a financial statement shows

who, what, and __________.

C) why
A) when D) how
B) where

39) Which of the following equations is the Fundamental

Accounting Equation?

D) Assets =
A) Assets + Liabilities = Owner’s Equity Liabilities − Owner’s
B) Assets + Owner’s Equity = Liabilities Equity
C) Assets = Liabilities + Owner’s Equity

40) The balance sheet shows:

D) the financial
A) the results of business operations. position of a business at a
B) all revenues and expenses. given time.
C) the amount of net income or loss.

41) The Income Statement shows:

D) the financial
A) the change in owner's equity for a period of time. position of a business at a
given time.
B) assets and liabilities.
C) the amount of net income or net loss.

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42) Amounts that a business must pay in the future are known as:

C) capital.
A) assets. D) expenses.
B) liabilities.

43) Which of the following is a liability account?

C) fees income
A) accounts payable D) salary expense
B) equipment

44) Ginger Yale Ice Company receives money from a

customer on account. Recording this transaction will:

C) decrease
A) increase Accounts Receivable. Accounts Payable.
B) decrease G. Yale, Capital. D) increase Cash.

45) If a business issues a check for $100 to purchase office

supplies, what is the effect on the accounting equation?

D) Total Assets
A) Owner’s Equity will increase will remain the same
B) Assets will decrease
C) Owner’s Equity will decrease

46) If the following are the only accounts of Jones Supply Supplies: ?????
Company, what is the missing Supplies balance? Accounts Payable: $4,000
John Smith, Capital:
Cash: $9,730 $10,820

C) $14,820
A) $2,910 D) $24,550
B) $5,090

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47) If the following are the only accounts of Jones Supply Supplies: ?????
Company, what is the missing Supplies balance? Accounts Payable: $4,000
John Smith, Capital:
Cash: $8,000 $9,000

C) $13,000
A) $3,000 D) $21,000
B) $5,000

48) When analyzing the effect of a business transaction,

which of the following is not a step taken to describe the
financial event?

D) determine the
A) identify the property amount of the increase or
B) identify who owns the property decrease
C) determine the location of the property

49) At the end of the first month of operations for SloMo Company, $17,500; Allen
Delivery Service, the business had the following accounts: Office Equipment,
Accounts Receivable, $11,600; Prepaid Insurance, $540; $15,000.The total assets
Equipment, $26,700 and Cash, $21,900. On the same date, for the SloMo Delivery
SloMo owed the following creditors: Simpson Supply Service are:

C) $33,500
A) $48,600 D) $60,740
B) $34,040

50) At the end of the first month of operations for SloMo Company, $17,000; Allen
Delivery Service, the business had the following accounts: Office Equipment,
Accounts Receivable, $11,350; Prepaid Insurance, $400; $14,500.The total assets
Equipment, $26,200 and Cash, $21,650. On the same date, for the SloMo Delivery
SloMo owed the following creditors: Simpson Supply Service are:

C) $33,000
A) $21,650 D) $59,600
B) $33,400

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51) At the end of the first month of operations for SloMo Company, $18,200; Allen
Delivery Service, the business had the following accounts: Office Equipment,
Accounts Receivable, $11,950; Prepaid Insurance, $490; $15,700.The total amount
Equipment, $27,400 and Cash, $22,250. On the same date, of Liabilities is:
SloMo owed the following creditors: Simpson Supply

C) $15,700
A) $27,400 D) $33,900
B) $22,250

52) At the end of the first month of operations for SloMo Company, $17,000; Allen
Delivery Service, the business had the following accounts: Office Equipment,
Accounts Receivable, $11,350; Prepaid Insurance, $400; $14,500.The total amount
Equipment, $26,200 and Cash, $21,650. On the same date, of Liabilities is:
SloMo owed the following creditors: Simpson Supply

C) $14,500
A) $31,500 D) $28,100
B) $17,000

53) If the beginning capital balance for William’s

Consulting Service is $31,550, net income is $4,000, and the
ending capital balance is $27,600, what were the withdrawals
for the period?

C) $7,950
A) $50 D) $27,600
B) $3,950

54) If the beginning capital balance for William’s

Consulting Service is $23,000, net income is $4,000, and the
ending capital balance is $20,000, what were the withdrawals
for the period?

C) $7,000
A) $1,000 D) $20,000
B) $3,000

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55) If during the year total assets increase by $77,000 and
total liabilities decrease by $17,000, by how much did owner's
equity increase/decrease?

D) $77,000
A) $94,000 increase increase
B) $60,000 decrease
C) $94,000 decrease

56) If during the year total assets increase by $75,000 and

total liabilities decrease by $16,000, by how much did owner's
equity increase/decrease?

D) $75,000
A) $91,000 increase increase
B) $59,000 decrease
C) $91,000 decrease

57) Which financial statement is reported as of a specific

date?

D) Statement of
A) Balance Sheet Changes in Financial
B) Statement of Owner's Equity Position
C) Income Statement

58) The Daniel Insurance Agency reported revenues of

$30,500 and expenses of $33,190 for the current period. What
was the final figure reported on the company’s income
statement?

D) $33,190 net
A) $2,690 net loss loss
B) $2,690 net income
C) $30,500 net income

59) The Daniel

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Insurance Agency reported revenues of $29,000 and expenses reported on the company’s
of $31,000 for the current period. What was the final figure income statement?

D) $31,000 net
A) $2,000 net loss loss
B) $2,000 net income
C) $29,000 net income

60) The three-line heading at the top of a financial

statement displays what information on the second line?

D) period of time
A) name of the company covered by the financial
B) result of the financial statement statement
C) name of the financial statement

61) If the income statement covered a six-month period statement heading would
ending on November 30, 2019, the third line of the income read:

D) Month of
A) Month Ended November 30, 2019. November, 2019.
B) November 30, 2019.
C) Six-month Period Ended November 30, 2019.

62) When the owner invests equipment in a business,

D) liabilities
A) assets increase and owner's equity decreases. decrease and owner's
B) assets and revenue increase. equity increases.
C) assets and owner's equity increase.

63) When equipment is purchased on credit,

D) assets and
A) assets and liabilities increase. expenses increase.
B) assets increase and liabilities decrease.
C) assets and owner's equity increase.

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64) When rent is prepaid, which of the following occurs?

C) owner’s equity
A) liabilities increase decreases
B) assets are unchanged D) assets increase

65) If a business receives $5,000 on account from clients effect on the accounting
who owed money for services previously billed, identify the equation:

remains the same.

A) assets decrease and liabilities increase. D) owner's equity
B) liabilities decrease and owner's equity decreases. increases and revenue
C) assets remain the same and owner's equity increases.

66) When the owner withdraws cash for personal use,

D) owner's equity
A) assets decrease and expenses increase. decreases and revenue
B) assets decrease and owner's equity increases. decreases.
C) assets decrease and owner's equity decreases.

67) When an electric bill is paid, which of the following

increases?

C) liabilities
A) assets D) owner's equity
B) expenses

68) Identify the account below that is classified as an asset

account and would therefore appear on the left side of the
accounting equation.

B) Owner's
A) Accounts Payable. Capital.

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 C) Accounts Receivable. D) Fees Income.

69) Withdrawals are reported on which of the following

financial statements?

D) statement of
A) balance sheet owner's equity
B) income statement
C) profit and loss statement

70) The financial statement that is prepared first is:

D) the statement
A) up to the accountant. of owner's equity.
B) the income statement.
C) the balance sheet.

71) The rent paid for future months is a(n):

C) expense.
A) asset. D) revenue.
B) liability.

72) Owner's equity is alternatively referred to as which of

the following?

C) net worth
A) accounts payable D) withdrawals
B) assets

73) Which financial statement is a representation of the

accounting equation?

C) Balance Sheet
A) Income Statement
B) Statement of Owner's Equity

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 D) Profit and Loss Statement

74) The Statement of Owner’s Equity is calculated as

follows:

D) beginning
A) beginning capital + net income − withdrawals + capital + net income +
additional investments = ending capital withdrawals + additional
B) beginning capital + net loss + withdrawals + investments = ending
additional investments = ending capital capital
C) beginning capital + net loss − withdrawals +
additional investments = ending capital

75) Which of the following statements regarding the

fundamental accounting equation is accurate?

D) It is out of
A) It is out of balance when a company has net balance when a company
income. has a net loss.
B) It is in balance after only certain transactions.
C) It is in balance after every transaction.

76) At the end of the first month of operations for $3,680 of Salaries
Jackson’s Catering Service, the business had the following Expenses. Calculate the net
accounts: Cash, $20,500; Prepaid Rent, $500; Equipment, income to be reported by
$7,500 and Accounts Payable $4,000. By the end of the the company for this first
month, Jackson’s had earned $33,800 of Revenues, and used month.
$1,940 of Utilities Expenses, $4,300 of Rent Expense and

C) $27,560
A) $33,800 D) $24,380
B) $23,880

77) At the end of the

first month of operations
for Jackson’s Catering
Service, the business had

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the following accounts: Cash, $21,000; Prepaid Rent, $500; be reported by the
Equipment, $7,500 and Accounts Payable $4,000. By the end company for this first
of the month, Jackson’s had earned $32,000 of Revenues, and month.
used $1,800 of Utilities Expenses, $4,000 of Rent Expense
and $3,600 of Salaries Expenses. Calculate the net income to

C) $26,200
A) $32,000 D) $23,100
B) $22,600

78) At the end of its first year of operations, Shapiro’s

Consulting Services reported net income of $27,900. They Calculate the ending
also had account balances of: Cash, $16,700; Office Supplies, balance to be reported on
$3,200, Equipment, $24,400 and Accounts Receivable, the Statement of Owner’s
$8,000. The owner’s total investment for this first year was Equity in the Owner’s
$16,200 and the owner withdrew $2,140 for personal use. Capital account.

C) $44,100
A) $60,800 D) $41,960
B) $27,900

79) At the end of its first year of operations, Shapiro’s

Consulting Services reported net income of $27,000. They Calculate the ending
also had account balances of: Cash, $16,000; Office Supplies, balance to be reported on
$3,200, Equipment, $24,000 and Accounts Receivable, the Statement of Owner’s
$8,000. The owner’s total investment for this first year was Equity in the Owner’s
$15,000 and the owner withdrew $2,000 for personal use. Capital account.

C) $42,200
A) $58,000 D) $40,000
B) $27,000

80) At the end of its

first year of operations,
Shapiro’s Consulting
Services reported net
income of $27,000. They
also had account balances

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of: Cash, $16,000; Office Supplies, $3,200; Equipment, What are the total
$24,000 and Accounts Receivable, $8,000. The owner’s total liabilities of Shapiro’s
investment for this first year was $15,000 and the owner Consulting Services at the
withdrew $2,000 for personal use. end of the first year of
operations?

C) $24,200
A) $11,200 D) $42,000
B) $27,000

81) Which of these accounts would appear on a firm’s

income statement?

D) liabilities and
A) assets and liabilities expenses
B) revenues and expenses
C) assets and revenues

82) Owner's equity is:

C) the amount the

A) the amount taken out of a business by the owner owner owes the business.
for personal use. D) the revenues
B) the financial interest of the owner of a business. less the expenses.

83) Pepper Company reported revenues of $12,600, Rent Expense, what was its
supplies expense of $3,000, and net income of $2,000 for the balance at the end of the
most recent period. If the company’s only other expense was period?

C) $14,600
A) $7,600 D) $15,600
B) $9,600

84) Pepper Company

reported revenues of
$12,000, supplies expense

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of $3,000, and net income of $2,000 for the most recent
period. If the company’s only other expense was Rent
Expense, what was its balance at the end of the period?

C) $14,000
A) $7,000 D) $15,000
B) $9,000

85) The balance sheet shows each of the following except

the:

D) amount owed
A) net income of the business. creditors.
B) amount and types of property the business owns.
C) owner's interest.

86) The Balance Sheet heading includes each of the

following except:

D) date of the
A) firm's name. report.
B) firm's address.
C) title of the report.

87) What is the correct order in which to prepare the three

financial statements?

Owner’s Equity
A) Balance Sheet; Income Statement; Statement of D) Statement of
Owner’s Equity Owner’s Equity; Balance
B) Income Statement; Statement of Owner’s Equity; Sheet; Income Statement
Balance Sheet
C) Income Statement; Balance Sheet; Statement of

88) Which of the following is an example of an

expense?

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 D) the receipt of
A) an owner withdrawal for personal use cash from a credit
B) the payment of a creditor on account customer
C) the payment of the monthly utility bill

89) Revenue by definition is:

D) the collection
A) an amount a business must pay in the future. of amounts owed by
B) amounts earned from the sale of goods or customers.
services.
C) the payment of amounts owed to creditors.

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Answer Key

Test name: ch2.01

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1) TRUE
2) FALSE
3) TRUE
4) TRUE
5) TRUE
6) TRUE
7) FALSE
8) FALSE
9) FALSE
10) FALSE
11) FALSE
12) TRUE
13) TRUE
14) FALSE
15) TRUE
16) TRUE
17) TRUE
18) TRUE
19) TRUE
20) FALSE
21) TRUE

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22) A
23) B
24) D
25) B
26) C
27) A
28) B
29) C
30) A
31) B
32) D
33) B
34) A
35) B
36) D
37) A
38) A
39) C
40) D
41) C
42) B

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43) A
44) D
45) D
46) B
47) B
48) C
49) D
50) D
51) D
52) A
53) C
54) C
55) A
56) A
57) A
58) A
59) A
60) C
61) C
62) C
63) A

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64) B
65) C
66) C
67) B
68) C
69) D
70) B
71) A
72) C
73) C
74) A
75) C
76) B
77) B
78) D
79) D
80) A
81) B
82) B
83) A
84) A

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85) A
86) B
87) B
88) C
89) B

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