Sample Quiz Questions Chap. 1 and 2
True/False (Circle the Correct Response)
T F
A balance sheet should be dated for a period (such as “For the year ended
December 31, 20A”), whereas an income statement should be dated at a point in
time (such as “December 31, 20A”).
T F
Accounting is a system that collects and processes financial information about an
organization and reports that information to decision makers.
T F
The Financial Accounting Standards Board (FASB) is an agency of the federal
government that establishes generally accepted accounting principles for
businesses.
T F
A decision maker who wants to understand a company's financial statements must
carefully read the notes to the financial statements because the notes provide
useful supplemental information.
Transactions have a dual economic effect on the fundamental accounting model.
An "account" is a standardized format used to accumulate the effects of
transactions on each financial statement item.
T F
T F
Multiple Choice (Circle the Correct Response)
1. Mark Corporation reported the following for 20B; total assets, $65,000; total
liabilities, $20,000; contributed capital, $30,000. Therefore, retained earnings was
A)
B)
C
D)
E)
$45,000.
$35,000.
$25,000.
$10,000.
None of the above the correct answer is___________________.
2. A business’s balance sheet cannot be used to accurately predict what the business
might be sold for because
A)
B)
C)
D)
it identifies all the revenues and expenses of the business.
assets are generally listed on the balance sheet at their historical cost, not their
current value.
it gives the results of operations for the current period.
some of the assets and liabilities on the balance sheet may actually be those of
another entity.
3. The operating activities section is often believed to be the most important part of a
statement of cash flows because
A)
B)
C)
D)
it gives the most information about how operations have been financed.
it shows the dividends that have been paid to shareholders.
it indicates a company’s ability to generate cash from sales to meet current
cash needs.
it shows the net increase or decrease in cash during the period.
-Continued on Back Side-
4. Liabilities are defined as
A)
B)
C)
D)
E)
Possible debts or obligations of an entity as a result of future transactions
which will be paid with assets or services.
Possible debts or obligations of an entity as a result of past transactions which
will be paid with assets or services.
Probable debts or obligations of an entity as a result of future transactions
which will be paid with assets or services.
Probable debts or obligations of an entity as a result of past transactions which
will be paid with assets or services.
None of the above is correct.
5. An example of an external exchange would be
A)
B)
C)
D)
E)
the purchase of inventory on credit from a supplier
cash received from a credit customer
cash dividend paid to stockholders
A and B only are external exchanges
All of the above are external exchanges
6. Which of the following direct effects on the fundamental accounting model is not
possible as a result of transaction analysis?
A)
B)
C)
D)
E)
Increase a liability and increase an asset.
Decrease stockholders' equity and increase an asset.
Increase an asset and decrease an asset.
Decrease stockholders' equity and decrease an asset.
None of the above is correct.
7. The assumption that a business can continue to remain in operation into the future
is the
A)
B)
C)
D)
Cost principle.
Unit-of-measure assumption.
Continuity assumption.
Separate-entity assumption.
8. Assume a company's January 1, 20A, financial position was: Assets, $40,000 and
Liabilities, $15,000. During January 20A, the company completed the following
transactions: (a) paid on a note payable, $4,000 (no interest); (b) collected accounts
receivable, $4,000; (c) paid accounts payable, $2,000; and (d) purchased a truck,
$1,000 cash, and $8,000 notes payable. The company's January 31, 20A, financial
position is
A)
B)
C)
D)
E)
Assets
Liabilities
$42,000
$17,000
$44,000
$17,000
$43,000
$18,000
$42,000
$ 9,000
None of the above is correct.
Stockholders'Equity
$25,000
$27,000
$25,000
$33,000