FOW 13 | PA | Midterm Mocktest 1

1. In the first month of operations, the total of the debit entries to the cash account amounted to $1,200 and the total of the credit entries to the cash account amounted to $700. The cash account has a(n)

• $700 credit balance
• $1,200 debit balance.
• $500 debit balance.
• $500 credit balance.

2. An accountant has debited an asset account for $1,200 and credited a liability account for $500. What can be done to complete the recording of the transaction?

• Nothing further must be done.
• Debit a Stockholders' equity account for $700
• Debit another asset account for $700.
• Credit a different asset account for $700

3. Collection of a $10,000 Accounts Receivable

• Increases an asset $10,000; decreases a liability $10,000
• Decreases a liability $10,000; increases owner's equity $10,000
• Increases an asset $10,000; decreases an asset $10,000
• Decreases an asset $10,000; decreases a liability $10,000

4. On October 5, Karl received a cash payment for services previously billed to a client. Karl paid his telephone bill, and he also bought equipment on credit. For the three transactions, at least one of the entries will include a

• credit to Retained Earnings.
• credit to Notes Payable.
• debit to Accounts Receivable.
• credit to Accounts Payable.

5. During the year 2024, WSU company earned revenues of $150,000, had expenses of $45,000, purchased assets with a cost of $12,000 and had owner drawings of $8,000. Net income for the year is

• $105,000
• $97,000
• $85,000
• $109,000

6. The historical cost of an asset and its fair value are

• Irrelevant when the asset is used by the business in its operations
• The same on the date of acquisition
• The same when the asset is sold
• Never the same

7. If total liabilities decreased by $15,000 and owner’s equity decreased by $5,000 during a period of time, then total assets must change by what amount and direction during that same period?

• $20,000 increase
• $10,000 increase
• $20,000 decrease
• $10,000 decrease

8. On August 31, a business pays $2,000 cash for television ads that appeared during August. Which of the following accounts is debited?

• Cash
• Accounts Payable
• Prepaid Advertising
• Advertising Expense

9. Which one of the following represents the expanded basic accounting equation?

• Assets = Liabilities + Owner's Capital + Owner's Drawings - Revenue-Expenses
• Assets + Owner's Drawings + Expenses = Liabilities + Owner's Capital+ Revenues.
• Assets- Liabilities - Owner's Drawings = Owner's Capital + Revenues- Expenses.
• Assets = Revenues + Expenses - Liabilities.

10. According to the ________, acquired assets should be recorded at the amount actually paid rather than at the estimated market value.

• Monetary Unit Assumption
• Fair Value Principle
• Economic Entity Assumption
• Historical Cost Principle