Question 1. Drew starts a landscaping business that he runs as a sole proprietorship. He chooses not to register his business as an LLC with a state agency. He has one employee. Which of the following is true about Drew's business?
Drew is personally liable for business debts.
His business will continue after his death.
A mutual agency exists between Drew and his employee.
Ownership is by members.
Question 2. Galt Insurance Company sells worker's compensation insurance. Customers pay Galt Insurance Company in advance before any insurance coverage is provided. Galt received $10,000 in April, 20X1 for insurance that will be provided between May 20X1 and April 20X2. In April, the journal entry to record the $10,000 cash receipt should include a credit to ________.
revenue
unearned revenue
cash
prepaid expenses
Question 3. Lisa opened a shoe store in January, 2010. She purchased inventory from a previous owner by signing a long-term note payable. What affect did this transaction have on the accounting equation?
assets are decreased and owner's equity is decreased
assets are increased and owner's equity is increased
expense is increased and owner's equity is decreased
assets are increased and liabilities are increased
Question 4. Jill opened a clothing store on January 2, 20X1. She contributed $25,000 for inventory, equipment, and supplies. Additionally, she loaned the business $10,000 for working capital. The first payment on the loan is due January 31, 20X2. At Christmas, she took a draw of $5,000. The ending balance in equity was $34,500 on December 31, 20X1. The only liability of the clothing store is to Jill for the working capital loan. Jill's clothing store reported ________ for net income.
$19,500
$9,500
$14,500
$44,500
Question 5. Below is a list of account balances for Greene Industrial Cleaning Company:
|
Accounts receivable
|
$ 5,400
|
|
Accounts payable
|
3,200
|
|
Salary expense
|
6,000
|
|
Repairs expense
|
1,500
|
|
Truck
|
10,000
|
|
Equipment
|
6,300
|
|
Notes payable
|
3,500
|
|
Cash
|
6,800
|
|
Supplies expense
|
1,600
|
|
Service revenue
|
45,000
|
|
Fuel expense
|
3,800
|
|
Salary payable
|
200
|
|
Interest revenue
|
50
|
|
Owner draws
|
3000
|
Based on the account balances above, net income for Greene Industrial Cleaning is ________.
$29,100
$18,950
$34,150
$32,150