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1. If during the current accounting
period the company’s assets increased by $24,000 and equity increased by $5,000,
then how did liabilities change?

A. Increased by $29,000
B. Increased by $24,000
C. Decreased by $5,000
E. Decreased by $19,000
F.Increased by $19,000

2. Purchasing equipment on account (payment to be made in
the future) will have what effect on the components of the accounting equation?

A. Increase
in equipment (assets) and a decrease in equity
B Increase
in equipment (assets) and an increase in equity
C Increase
in equipment (assets) and an increase in liabilities
D Increase
in equipment (assets) and a decrease in liabilities
E. None of
the above

3.Which of the following financial statements refers to a
specific date (point in time)?

A. Income
statement
B. Statement
of owner’s equity
C. Statement
of cash flows
D. Balance
Sheet
E. Answers
A, B & C are all correct

4. The basic accounting equation is Assets = Liabilities +
Equity. The Equity term of the equation can be further broken down into several
other terms. Assume that the entity is a sole proprietorship. Which of the
following statements is correct?

A. Additional
investments by the business owner will increase equity; and revenues will
decrease equity.
B. Additional
investments by the business owner will decrease equity; and revenues will
increase equity.
C. Increases
in expenses will decrease equity; and owner withdrawals will decrease equity.
D. Revenues
will increase equity; and owner withdrawals will increase equity.
E. Revenues
will decrease equity; and owner withdrawals will increase equity.

5. Assume that a company’s beginning owner’s capital was
$20,000. During the period, withdrawals were $24,000, and the owner made
additional investments during the period of $50,000. The ending capital balance
was $90,000. What was the net income or net loss for the period?

A. Net
income, $56,000
B. Net loss,
$44,000
C. Net
income, $44,000
D. Net
income, $30,000
E. None of
the above

6. If during the accounting period the company’s assets
decreased by $15,000, and equity increased by $4,000, then by how much did
liabilities change?

A. Increased
by $12,000
B. Increased
by $8,000
C. Decreased
by $12,000
D. Decreased
by $19,000
E. Decreased
by $6,000

7. Company assets total $150,000 and its liabilities total
$30,000. What is the equity of this company?

A. $120,000
B. $100,000
C. $150,000
E. $180,000
F. None of
the above

8.The three basic business entities discussed in this
chapter include sole proprietorship, partnership, and corporation. Which of
these entities is considered a legal entity and is also subject to federal
income taxation at the entity level?

A. Sole
proprietorship.
B. Partnership.

C. Corporation.

D. All three
entities satisfy both requirements.
E. None of
these entities satisfy both requirements.

9.If at the end of the accounting period the company’s
liabilities total $19,000 and its equity totals $40,000, then what must be the
total of assets?

A. $14,000
B. $40,000
C. $21,000
D. $59,000
E. None of
the above

10.When cash is received from a customer in payment of an
account receivable, how are the elements of the accounting equation affected?

A. Decrease
assets (cash) and increase assets (accounts receivable)
B. Increase
assets (cash) and decrease assets (accounts receivable)
C. Increase
assets and increase liabilities
D. Increase
assets and increase equity
E. None of
the above