Reference no: EM13834568
1. XYZ Company deposited $15,000 in a bank account in return for issuing shares in the corporation. This transaction would affect which two financial statement elements?
- Assets and stockholders' equity
- Assets and liabilities
- Liabilities and stockholders' equity
- None of these choices
2. If a $20,000 purchase of equipment for cash is INCORRECTLY recorded as an increase to equipment and as an increase to cash, at the end of the period, assets will:
- exceed liabilities and stockholders' equity by $10,000.
- equal liabilities and stockholders' equity.
- exceed liabilities and stockholders' equity by $20,000.
- exceed liabilities and stockholders' equity by $40,000.
3. A business pays cash to settle its phone bill. How would this be recorded?
- Decrease assets (cash) and decrease retained earnings (phone expense).
- Increase assets (cash) and decrease retained earnings (phone expense).
- Decrease assets (cash) and increase retained earnings (phone expense).
- Increase assets (cash) and increase retained earnings (phone expense).
4. A utility bill was received on October 31, 2011, for services received during October 2011. The bill was paid in November 2011. Under the accrual basis of accounting, when would the utility expense be recorded?
- In October
- When it was paid
- In November
- Not recorded at all
5. The payment of $10,000 for expenses was recorded by Spears Co. as an increase in cash of $10,000, and a decrease in retained earnings of $10,000. What is the effect of this error on the accounting equation?
- Total assets will exceed total liabilities and stockholders' equity by $20,000.
- Total assets will exceed total liabilities and stockholders' equity by $10,000.
- Total assets will be less than total liabilities and stockholders' equity by $20,000.
- The error will not affect the accounting equation.
6. For EFG Co., the transaction "Purchase of store equipment with cash" would __________.
- increase total assets
- decrease total assets
- have no effect on total assets
- increase expenses
7. Which of the following would result in no net change in assets?
- Stock issued for cash.
- Expenses paid with cash.
- Cash collected for fees earned.
- Equipment purchased for cash.
8. A to Z Corporation engaged in the following transaction: "Issued a $30,000 note payable to borrow cash from the bank." On the Statement of Cash Flows, the transaction would be classified as __________.
- Cash Flows from Operating Activities
- Cash Flows from Investing Activities
- Cash Flows from Financing Activities
- This transaction would not appear on the Statement of Cash Flows.
9. Payment of cash dividends are recorded as:
- a decrease in cash and an increase in expenses.
- a decrease in cash and a decrease in retained earnings.
- an increase in dividend expense and a decrease in cash.
- a decrease in cash and a decrease in capital stock.
10. The income statement for August indicates net income of $50,000. The corporation also paid $10,000 in dividends during the same period. If there was a $20,000 beginning balance in stockholders' equity, what is the ending balance in stockholders' equity?
- $40,000
- $70,000
- $10,000
- $60,000
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