Basic Accounting

Owner's equity is decreased by

• assets

• revenues

• expenses

• liabilities

If an individual asset is increased, then

• a. there must be an equal decrease in a specific liability.

• b. there must be an equal decrease in owner's equity.

• c. there must be an equal decrease in another asset.

• d. none of these is possible.

At the beginning of the year, Midtown Athletic had an inventory of 400,000. During the

year, the company purchased goods costing 1,600,000. If Midtown Athletic reported

ending inventory of $600,000 and sales of 2,000,000, the company’s cost of goods sold

and gross profit rate must be

• a. 1,000,000 and 50%.

• b. 1,400,000 and 30%.

• c. 1,000,000 and 30%.

• d. 1,400,000 and 70%.

Benson Company began the year with owner’s equity of P175,000. During the year, the

company recorded revenues of P250,000, expenses of 190,000, and had owner

drawings of P20,000. What was Benson’s owner’s equity at the end of the year?

• a. 255,000

• b. 215,000

• c. 405,000

• d. 235,000

The adjusting entry for income earned but not yet collected will

• A. Increase liability

• B. Increase asset

• C. Decrease asset

• D. Decrease liability

When the allowance method of recognizing uncollectible accounts is used, the entry to record the writeoff of a specific account would?

• A. Decrease both accounts receivable and the allowance for uncollectible accounts.

• B. Decrease accounts receivable and increase the allowance for uncollectible accounts.

• C. Increase the allowance for uncollectible accounts and decrease net income.

• D. Decrease both accounts receivable and net income.

Janzen Company began the year with owner’s equity of 217,000. During the year, Janzen received additional owner investments of 294,000, recorded expenses of 840,000, and had owner drawings of 56,000. If Janzen’s ending owner’s equity was 531,000, what was the company’s revenue for the year?

• a. 860,000

• b. 916,000

• c. 1,154,000

• d. 1,210,000

The assumption that the unit of measure remains sufficiently constant over time is part of the

• a. economic entity assumption.

• b. cost principle.

• c. historical cost principle.

• d. monetary unit assumption.

Cost of goods sold is computed from the following equation:

• a. beginning inventory – cost of goods purchased + ending inventory.

• b. sales – cost of goods purchased + beginning inventory – ending inventory.

• c. sales + gross profit – ending inventory + beginning inventory.

• d. beginning inventory + cost of goods purchased – ending inventory.

10. Inventoriable costs may be thought of as a pool of costs consisting of which two elements?

• a. The cost of beginning inventory and the cost of ending inventory

• b. The cost of ending inventory and the cost of goods purchased during the year

• c. The cost of beginning inventory and the cost of goods purchased during the year

• d. The difference between the costs of goods purchased and the cost of goods sold during the year