University of Windsor
Odette School of business
BSMM 8110 –Accounting Concepts and Techniques
First quiz- winter 2022
Professor: Dr. S. Mitra
Points: 50
Name_______________________________
Identify and circle the correct answer to the following questions. Each question carries 2 points.
1.
Which of the following would affect shareholders' equity?
A. A company borrows $100 million and buys $100 million in equipment.
B. A company pays $100 million to shareholders as a dividend.
C. A company sells $100 million in assets for $100 million cash.
D. A company receives payment for $100 million in accounts receivable.
2.
At the end of last year, the company's assets totaled $860,000 and its liabilities totaled $740,000. During the
current year, the company's total assets increased by $58,000 and its total liabilities increased by $24,000. At
the end of the current year:
A. shareholders' equity was $154,000.
B. shareholders' equity was $120,000.
C. shareholders' equity was $34,000.
D. shareholders' equity was $178,000.
3.
If XYZ Company had $12 million in revenue and net income of $3 million then its:
A. expenses must have been $15 million.
B. expenses must have been $9 million.
C. assets must have been $12 million.
D. assets must have been $3 million.
4.
Which of the following would not affect a company's net income?
A. A change in the company's income taxes.
B. Changing the selling price of a company's product.
C. Paying a dividend to shareholders.
D. Advertising a new product.
5.
Financing that individuals or institutions have provided to a company is:
A. always classified as liabilities.
B. classified as liabilities when provided by creditors and shareholders' equity when provided by owners.
C. always classified as shareholders' equity.
D. classified as shareholders' equity when provided by creditors and liabilities when provided by owners.
6.
Which of the following are the three basic elements of the balance sheet?
A. Assets, liabilities, and retained earnings.
B. Assets, liabilities, and contributed capital.
C. Assets, liabilities, and revenues.
D. Assets, liabilities, and shareholders' equity.
7.
A company's balance sheet contained the following information:
Contributed Capital
Accounts Payable
$12,000
$64,000
Total Assets
Retained Earnings
$176,000
$28,000
Assuming Notes Payable is the only other item on the balance sheet:
A. Notes Payable must equal $200,000.
B. Notes Payable must equal $8,000.
C. Notes Payable must equal $72,000.
D. Notes Payable must equal $344,000.
8.
A current asset is one that:
A. the company has owned for over one year.
B. the company will use up or convert into cash in five years or more.
C. the company will use up or convert into cash in one year or less.
D. the company will use up or convert into cash in more than one year.
9.
The Buddy Burger Corporation owes $1.5 million to the Alberta Wholesale Meat Company from whom Buddy
Burger buys its burger meat. Which account would Buddy Burger use to report the amount owed?
A. Deferred Revenue
B. Accounts Payable
C. Supplies
D. Accounts Receivable
10. A company buys equipment for $500,000 and signs a promissory note for the full amount. How does this
transaction affect the accounting equation?
A. Assets: ­ Property and equipment, ¯ Cash; Liabilities: no change; Shareholders' Equity: no change.
B. Assets: ­ Property and equipment; Liabilities: ­ Notes payable; Shareholders' Equity; no change.
C. Assets: ­ Property and equipment; Liabilities: no change; Shareholders' Equity: ¯ Retained earnings.
D. Assets: ­ Property and equipment; Liabilities: no change; Shareholders' Equity: ¯ Contributed capital.
11. A company receives $10 million cash from investors in exchange for new common stock. Several weeks later,
the company buys a $25 million machinery using all of the cash from the stock issue and signing a promissory
note for the remainder. The accounts involved in these two transactions are:
A. Long-term Investments; Cash; Equipment; and Accounts Payable.
B. Shareholders' Equity; Cash; Long-term Investments; and Notes Payable.
C. Contributed Capital; Cash; Equipment; and Notes Payable.
D. Retained Earnings; Equipment; and Notes Payable.
12. Park & Company was recently formed with a $5,000 investment in the company by shareholders. The company
then borrowed $2,000 from a local bank, purchased $1,000 of supplies on account, and also purchased $5,000
of equipment by paying $2,000 in cash and signing a promissory note for the balance. Based on these
transactions, the company's total assets are:
A. $7,000.
B. $9,000.
C. $10,000.
D. $11,000.
13. Your company buys a $2 million warehouse paying $300,000 in cash and issuing $1.7 million in promissory
notes. This will be posted as:
A. $2 million credited and $300,000 debited to assets; $1.7 million debited to liabilities.
B. $2 million debited to assets and $2 million credited to liabilities.
C. $2 million debited and $300,000 credited to assets; $1.7 million credited to liabilities.
D. $2 million credited to assets and $2 million debited to liabilities.
14. Sparkling Pools received a bill for $1,200 for running newspaper ads during the last two weeks of July; the bill
will be paid on August 1. Advertising expense should be:
A. credited for $1,200 in July.
B. credited for $1,200 in August.
C. debited for $1,200 in July.
D. debited for $1,200 in August.
15. Which of the following groups of accounts contains only those accounts that normally have credit balances?
A. Accounts Payable; Retained Earnings; Service Revenue.
B. Equipment; Cash; Contributed Capital.
C. Notes Payable; Wages Payable; Rent Expense.
D. Accounts Receivable; Accounts Payable; Deferred Revenue.
16. In September, a customer signed a contract to have his house painted and paid for the job in October. The
painting company bought the paint in August on account and paid for it in September. The painting company
painted the house in November. According to the revenue and matching principles, the painting company
should record:
A. the revenues in November and the expenses in September.
B. the revenues and the expenses in September.
C. the revenues and the expenses in November.
D. the revenues in September and the expenses in August.
17. The main purpose of preparing a trial balance is to ensure that:
A. The total of recorded debits and total of recorded credits are equal.
B. The company is making a profit.
C. The total of revenue is equal to expenses.
D. The total of recorded debits in revenue accounts are equal to total of recorded credits
18. The revenue recognition principle is a requirement under accrual accounting to record revenues when
A. they are earned, not necessarily when cash is received.
B. the cash is received, not necessarily when they are earned.
C. they can be matched to expenses.
D. None of the choices are correct.
19. Cash basis accounting
A. is not allowed under GAAP.
B. reports revenues when cash is received and expenses when cash is paid.
C. in case of credit transactions, can distort the reporting of a company's financial performance.
D. all of the choices are correct.
20. The Fastbank Motorcycle Company (FMC) receives a $10 million order from dealers wanting to buy its most
popular model on credit. No money changes hands. Due to excess demand, FMC cannot supply the motorcycles
until next quarter. How will these events affect the balance sheet?
A. Accounts Receivable will increase by $10 million this quarter and Inventories will decrease next quarter.
B. Both Accounts Receivable and Accounts Payable will increase by $10 million this quarter.
C. Both Accounts Receivable and Shareholders' Equity will increase by $10 million this quarter.
D. These events will not impact the balance sheet this quarter.
21. During November 2017, Asler, Inc., performs consulting services. The client does not pay Asler until January
2018.
A. Using the accrual basis of accounting, the revenue is reported in January 2018
B. Using the cash basis of accounting, the revenue is reported in November 2017.
C. Using the accrual basis of accounting, the revenue is reported in November 2017.
D. Using the accrual basis of accounting, the revenue is reported when Asler's expenses are paid.
22. Which of the following is not an expense and would not show on income statement?
A. Paying for supplies.
B. Paying a dividend.
C. Paying for electricity used by production equipment.
D. Paying wages for production workers.
23. If a company is paid in full for services provided this month, how will the basic accounting equation be
affected?
A. Liabilities will decrease.
B. Shareholders' equity will increase as revenue is recorded.
C. Liabilities will increase.
D. Shareholders' equity will increase as gains are recorded.
24. Which of the following would eventually cause a reduction in retained earnings?
A. Interest earned on investment.
B. A decrease in deferred revenue.
C. An increase in prepaid utilities.
D. A loss on disposal of land.
25. Customers paid $8,000 on their accounts. Which accounts of the customers are affected by this transaction?
A. Revenue and Retained Earnings increase by $8,000.
B. Cash and Revenue increase $8,000. Liabilities and Expenses increase by $8,000.
C. Cash increases by $8,000 and Accounts Receivable decreases by $8,000. Revenue and Retained
Earnings are unchanged.
D. Revenue and Retained Earnings decrease by $8,000.