POA.Test1.2022.3

A building is offered for sale at $500,000 but is currently assessed at $400,000. The purchaser of the building believes the building is worth $475,000, but ultimately purchases the building for $450,000. The purchaser records the building at:

• $50,000.

• $400,000.

• $450,000.

• $475,000.

• $500,000.

On December 30 of the current year, KPMG signs a $150,000 contract to provide accounting services to one of its clients in the next year. KPMG has a December 31 year-end. Which accounting principle or assumption requires KPMG to record the accounting services revenue from this client in the next year and not in the current year?

• Business entity assumption

• Revenue recognition principle

• Monetary unit assumption

• Cost principle

• Going-concern assumption

If the assets of a company increase by $100,000 during the year and its liabilities increase by $35,000 during the same year, then the change in equity of the company during the year must have been:

• An increase of $135,000.

• A decrease of $135,000.

• A decrease of $65,000.

• An increase of $65,000.

• An increase of $100,000.

For each transaction a through f, identify its impact on the accounting equation (select from 1 through 5 below).

a. The company pays cash toward an account payable.​ ​​ (a)   ​

b. The company purchases equipment on credit.​ ​ (b)  

c. The owner invests cash in the business.​ (c)  

d. The owner withdraws cash from the business.​ (d)  

e. The company purchases supplies for cash.​ (e)  

1. Decreases an asset and decreases equity.

2. Increases an asset and increases a liability.

3. Decreases an asset and decreases a liability.

4. Increases an asset and decreases an asset.

5. Increases an asset and increases equity.

• 3
• 2
• 5
• 1
• 4

Enter the number for the item that best completes each of the descriptions below.

1. Chart   2. General ledger   3. Journal   4. Account    5. Source document

a. A(n) ​ (a)   of accounts is a list of all accounts a company uses, not including account balances.

b. The ​ (b)   is a record containing all accounts used by a company, including account balances.

c. A(n) ​ (c)   describes transactions entering an accounting system, such as a purchase order.

d. Increases and decreases in a specific asset, liability, equity, revenue, or expense are recorded in a(n)​ ​ (d)   .

e. A(n) ______ has a complete record of every transaction recorded.​ (e)  

• 1
• 2
• 3
• 4
• 5

Courtney Company purchased equipment for $1,800 cash. As a result of this event,

• equity decreased by $1,800.

• assets increased by $1,800.

• assets remain unchanged.

• equity remain unchanged

Which of the following definitions for the going concern concept in accounting is the closest to the definition given in IAS 1, Presentation of Financial Statements?

• The directors do not intend to liquidate the entity or to cease trading in the foreseeable future.

• The entity is able to pay its debts as and when they fall due

• The directors expect the entity’s assets to yield future economic benefits.

• Financial statements have been prepared on the assumption that the entity is solvent and would be able to pay all creditors in full in the event of being wound up.

An accountant has debited an asset account for $800 and credited a liability account for $600. Which of the following would be an incorrect way to complete the recording of the transaction?

• Credit an asset account for $200.

• Credit another liability account for $200.

• Credit a stockholders’ equity account for $200.

• Debit a stockholders’ equity account for $200.

Which of the following is not part of the recording process?

• Analyzing transactions.

• Preparing a trial balance.

• Entering transactions in a journal.

• Posting journal entries.

The expense recognition principle matches:

• customers with businesses.

• expenses with revenues.

• assets with liabilities.

• creditors with businesses.