Key Accounting Principles and Equation Practice
Which of the following is not a step in the accounting process?
- Recording.
- Verification.
- Identification.
- Communication.
Which of the following statements about users of accounting information is incorrect?
- Regulatory authorities are internal users.
- Taxing authorities are external users.
- Present creditors are external users.
- Management is an internal user.
The historical cost principle states that:
- Only transaction data capable of being expressed in terms of money should be included in the accounting records.
- Assets should be initially recorded at cost and adjusted when the fair value changes.
- Activities of an entity are to be kept separate and distinct from its owner.
- Assets should be recorded at their cost.
Stockholders’ equity is equal to:
- Assets plus liabilities.
- Assets minus liabilities.
- Assets minus revenues.
- Revenues minus expenses.
As of December 31, Stoneland Company has assets of $3,500 and stockholders’ equity of $2,000. What are the liabilities for Stoneland Company as of December 31?
- $1,500.
- $2,500.
- $2,000.
- $1,000.
During 2015, Gibson Company’s assets decreased $50,000 and its liabilities decreased $90,000. Its stockholders’ equity therefore:
- Decreased $40,000.
- Increased $140,000.
- Decreased $140,000.
- Increased $40,000.
Which of the following events is not recorded in the accounting records?
- A cash investment is made into the business.
- Equipment is purchased on account.
- The declaration of cash dividends.
- An employee is terminated.
Payment of accounts payable affects the components of the accounting equation in the following way:
- Decreases assets and increases stockholders’ equity.
- Increases assets and decreases liabilities.
- Decreases assets and decreases liabilities.
- Decreases stockholders’ equity and decreases liabilities.
All of the financial statements are for a period of time except the:
- Income statement.
- Balance sheet.
- Statement of cash flows.
- Retained earnings statement.
Milo has the following year-end account balances: Accounts Receivable, $5,000; Supplies, $12,000; Equipment, $18,000; Accounts Payable, $17,000; Stockholders’ Equity, $43,000. Given the account balances listed, the balance in the Cash account should be:
- $25,000.
- $95,000.
- $43,000.
- None of these answer choices are correct.
Simon Company had the following summarized operations for the month of May: Revenues earned: for cash, $32,000; and on account, $18,000; and Expenses incurred: for cash, $5,000; and on account, $10,000. In addition, the company purchased Equipment for $8,000 on account and Supplies for $5,000 for cash. The net income for the month of May is:
- $45,000.
- $35,000.
- $27,000.
- $14,000.
Monique Enterprises had a stockholders’ equity balance of $158,000 at the beginning of the period. At the end of the accounting period, the stockholders’ equity balance was $198,000.
Assuming no additional investment or distributions during the period, what is the net income for the period?
Net income: $
Assuming an additional investment of $16,000 but no distributions during the period, what is the net income for the period?
Net income: $