TOPIC 2 BASIC ACCOUNTING CONCEPTS -TUTORIAL

The historical cost principle requires that when assets are acquired, they be recorded at

• appraisal value.

• cost.

• market price.

• book value.

GAAP stands for

• Generally Accepted Auditing Procedures.

• Generally Accepted Accounting Principles.

• Generally Accepted Auditing Principles.

• Generally Accepted Accounting Procedures

The Dulce Company has five plants nationwide that cost a total of $200 million. The current fair value of the plants is $600 million. The plants will be recorded and reported as assets at

• $200 million.

• $600 million.

• $400 million.

• $800 million.

The accounting equation for Cineo Enterprises is as follows:

Assets Liabilities Owner’s Equity

$120,000 = $60,000 + $60,000

If Cineo purchases office equipment on account for $15,000, the accounting equation will change to

• $120,000 = $60,000 + $60,000

• $135,000 = $60,000 + $75,000

• $135,000 = $67,500 + $67,500

• $135,000 = $75,000 + $60,000

As of June 30, 2020, Little Giantz Company has assets of $100,000 and owner’s equity of $60,000. What are the liabilities for Little Giantz Company as of June 30, 2020?

• $40,000

• $60,000

• $100,000

• $160,000

Owner's equity is decreased by all of the following except

• owner's investments.

• owner's withdrawals

• expenses.

• owner's drawings.

If total liabilities decreased by $30,000 and owner’s equity decreased by $15,000 during a period of time, then total assets must change by what amount and direction during that same period?

• $45,000 increase

• $15,000 decrease

• $15,000 increase

• $45,000 decrease

Sam Ryo is the proprietor (owner) of Sam's, a retailer of golf apparel. When recording the financial transactions of Sam's, Sam does not record an entry for a car he purchased for personal use. Sam took out a personal loan to pay for the car. What accounting concept guides Sam's behavior in this situation?

• Pay back concept

• Monetary unit assumption

• Economic entity assumption

• Cash basis concept

Collection of a $1,500 Accounts Receivable

• increases an asset $1,500; decreases an asset $1,500.

• increases an asset $1,500; decreases a liability $1,500.

• decreases a liability $1,500; increases owner's equity $1,500.

• decreases an asset $1,500; decreases a liability $1,500

If services are rendered for credit, then

• assets will decrease.

• liabilities will increase.

• owner's equity will increase.

• liabilities will decrease.