Quiz chương 1

The historical cost principle states that:

• assets should be initially recorded at cost and adjusted when fair value changes.

• the activities of an entity must be kept separate and distinct from its owner.

• assets should be recorded at their cost.

• only transaction data that can be expressed in monetary terms should be included in the accounting records.

What are the three types of enterprises?

• proprietorship, small enterprises, and partnerships.

• proprietorship, partnerships, and joint-stock companies.

• proprietorship, partnerships, and corporation.

• financial companies, production, and services.

Net profit occurs over a period of time when:

• assets exceed liabilities.

• assets exceed revenue.

• expenses exceed revenue.

• revenue exceeds expenses.

As of December 31, 2020, Stoneland AG has assets of €3,500 and equity of €2,000. What is the total liabilities of Stoneland AG as of December 31, 2020?

• €1,500.

• €1,000.

• €2,500.

• €2,000.

Performing services on the account will have the following effects on the components of the basic accounting equation:

• increase assets and decrease equity.

• increase assets and increase equity.

• increase assets and increase liabilities.

• increase liabilities and increase equity.

Which of the following events is not recorded in the accounting records?

• Equipment purchased on account.

• An employee being fired.

• A cash investment made into the business.

• The company paying dividends in cash.

In 2020, the assets of Xia Lin Company decreased by ¥500,000 and liabilities decreased by ¥900,000. Therefore, its equity:

• increased by ¥400,000.

• decreased by ¥1,400,000.

• decreased by ¥400,000.

• increased by ¥1,400,000.

Payment of an account payable affects the components of the accounting equation in the following way.

• decrease equity and decrease liabilities.

• increase assets and decrease liabilities.

• decrease assets and increase equity.

• decrease assets and decrease liabilities.

Which of the following is incorrect?

• The cash flow statement summarizes information about cash inflows (receipts) and cash outflows (expenditures) over a specific period of time.

• The financial position statement reports assets, liabilities, and equity at a specific point in time.

• The income statement presents revenue, expenses, assets, and liabilities over a specific period of time.

• The retained earnings statement summarizes changes in retained earnings over a specific period of time.

On the last day of the term, Jim Otto Company purchased a machine worth $900 on credit. This transaction will affect:

• only the income statement.

• only the statement of financial position .

• only the income statement and the retained earnings statement.

• the income statement, the retained earnings statement, and the statement of financial position.