Reference no: EM132486184

Question 1: During Year 2, Millstone Company provided $6,500 of services for cash, paid cash dividends of $1,000 to owners, and paid $4,000 cash for expenses. Liabilities were unchanged. Which of the following statements accurately describes the effect of these events on the elements of the company's financial statements?

A) Assets increased by $6,500.

B) Assets increased by $1,500.

C) Equity increased by $2,500.

D) Assets increased by $5,500.

Question 2: At the end of Year 2, retained earnings for the Baker Company was $3,500. Revenue earned by the company in Year 2 was $1,500, expenses paid during the period were $800, and dividends paid during the period were $500. Based on this information alone, what was the amount of retained earnings at the beginning of Year 2?

A) $3,300

B) $3,700

C) $2,800

D) $3,800

Question 3: Which of the following is not an example of an asset use transaction?

A) Paying cash dividends

B) Paying cash expenses

C) Paying off the principal of a loan

D) Paying cash to purchase land

Question 4: Borrowing cash from the bank is an example of which type of transaction?

A) Asset source

B) Claims exchange

C) Asset use

D) Asset exchange

Question 5: Which of the following cash transactions would not affect total assets?

A) Borrowing cash from a bank

B) Issuing common stock for cash

C) Purchasing land for cash

D) Providing services for cash

Question 6: Which of the following appears in the investing activities section of the statement of cash flows?

A) Cash inflow from interest revenue

B) Cash inflow from the issuance of common stock

C) Cash outflow for the payment of dividends

D) Cash outflow for the purchase of land

Question 7: Santa Fe Company was started on January 1, Year 1, when it acquired $9,000 cash by issuing common stock. During Year 1, the company earned cash revenues of $4,500, paid cash expenses of $3,750, and paid a cash dividend of $250. Which of the following is true based on this information?

A) The December 31, Year 1 balance sheet would show total equity of $8,750.

B) The Year 1 income statement would show net income of $500.

C) The Year 1 statement of cash flows would show net cash inflow from operating activities of $4,500.

D) The Year 1 statement of cash flows would show a net cash inflow from financing activities of $8,750.

Question 8: Robertson Company paid $1,850 cash for rent expense. What happened as a result of this business event?

A) Total equity decreased.

B) Liabilities decreased.

C) The net cash flow from operating activities decreased.

D) Both total equity and net cash flow for operating activities decreased.

Question 9: Mayberry Company paid $30,000 cash to purchase land. What happened as a result of this business event?

A) Total equity was not affected.

B) The net cash flow from investing activities decreased.

C) Total assets were not affected.

D) Total assets and total equity were not affected, and net cash flow from investing activities decreased.