KETE201_Chapter 1

Which of the following accounting principles would require that all goods and services purchased be recorded at cost? 

• Going-concern principle

• Continuing-concern principle

• Historical cost principle

• Business entity principle

Resources owned or controlled by a company that are expected to yield future benefits are:

• Assets

• Revenues

• Liabilities

• Owner's Equity

If equity is $300,000 and liabilities are $192,000, then assets equal

• $108,000

• $192,000

• $300,000

• $492,000

Accounting

• Is an information and measurement system

• Identifies, records, and communicates information about business activities

• Involves interpreting information and designing information systems to provide useful reports that monitor and control a company's activities

• All of these

Which of the following statements is true about assets? 

• They are economic resources owned or controlled by the business

• They are expected to provide future benefits to the business

• They appear on the balance sheet

• Claims on them can be shared between creditors and owners

• All of these

Which accounting principle requires that financial statements be prepared under the assumption that the business will continue to operate indefinitely?

• Matching principle

• Revenue recognition principle

• Going-concern principle

• Conservatism principle

What is the primary purpose of a balance sheet?

• To show the profitability of a company over a period

• To provide a snapshot of a company's financial position at a specific point in time

• To report the changes in equity during a period

• To summarize cash inflows and outflows

Which of the following is considered a liability?

• Common stock

• Accounts payable

• Retained earnings

• Inventory

On June 30 of the current year, the assets and liabilities of Phoenix Phildell are as follows: Cash $20,500; Accounts Receivable, $7,250; Supplies, $650; Equipment, $12,000; Accounts Payable, $9,300. What is the amount of owner's equity as of July 1 of the current year? 

• $8,300

• $13,050

• $20,500

• $31,100

• $40,400

Photometer Company paid off $30,000 of its accounts payable in cash. What would be the effects of this transaction on the accounting equation? 

• Assets, $30,000 increase; liabilities, no effect; equity, $30,000 increase.

• Assets, $30,000 decrease; liabilities, $30,000 decrease; equity, no effect

• Assets, $30,000 decrease; liabilities, $30,000 increase; equity, no effect

• Assets, no effect; liabilities, $30,000 decrease; equity, $30,000 increase.

• Assets, $30,000 decrease; liabilities, no effect; equity, $30,000 decrease.