Question 1: A partnership is a business that is __________.
A. easy to form
B. ends with the death of a partner
C. owned by more than one person
D. All of these answers are correct
Question 2: Bonnie's Baskets purchases $4,000 worth of office equipment on account. This causes
A. Cash and Capital to decrease
B. Office Equipment and Accounts Payable to increase.
C. Office Equipment to decrease and Accounts Payable to increase
D. Accounts Payable to increase and Capital to decrease
Question 3: A legal firm would be considered a __________.
A. merchandise company
B. manufacturer
C. service company
D. None of the above answers are correct.
Question 4: Which is an advantage of a sole proprietorship form of business?
A. There is limited personal risk
B. The business can continue indefinitely
C. The owner makes all the decisions
D. All of these answers are correct
Question 5: Logan's Motor Sports buys $30,000 of equipment on credit. Which of the following is a true statement?
A. Total assets increase
B. Total assets are unchanged
C. Total liabilities decrease
D. Total liabilities are unchanged
Question 6:
Which of the following is a characteristic of a sole proprietorship?
A. business owned by more than one person
B. easy to form
C. each stockholder acts as an owner of the company
D. can continue indefinitely
Question 7: Katie's Vegetarian Restaurant, with total assets of $90,000, borrows $15,000 from the bank. Which of the following is a true statement upon borrowing the money?
A. Total assets are now $105,000.
B. Total assets are now $80,000.
C. Total assets are now $15,000.
D. Total assets are now $75,000.
Question 8: If total liabilities increased by $6,000 and the assets increased by $8,000 during the accounting period, what is the change in the owner's equity amount?
A. increase of $2,000
B. decrease of $2,000
C. increase of $10,000
D. decrease of $10,000
Question 9: Assets are equal to __________.
A. liabilities + owner's equity
B. liabilities - owner's equity
C. liabilities - revenues
D. revenues - expenses
Question 10: Which of the following would result if the business purchased supplies on credit?
A. Supplies would increase and Cash would decrease
B. Supplies would increase and Capital would increase
C. Supplies would increase and Accounts Payable would increase
D. The purchase of supplies is not a business transaction
Question 11: Strum Hardware has total assets of $50,000. What are the total assets if new equipment is purchased for $10,000 cash?
A. $45,000
B. $50,000
C. $55,000
D. $60,000
Question 12: How does the purchase of office equipment on account affect the accounting equation?
A. assets increase; liabilities decrease
B. assets increase; owner's equity increases
C. assets increase; liabilities increase
D. liabilities increase; owner's equity decreases
Question 13: Which of the following will be recorded in the owner's equity column as an increase?
A. an exchange of assets
B. the purchase of an asset on credit
C. an investment by the owner
D. a withdrawal by the owner
Question 14: A corporation __________.
A. can continue indefinitely
B. is owned by stockholders
C. has limited risk to stockholders
D. All of these answers are correct
Question 15: Which of the following would result if a business purchased Equipment paying a 40% down payment in cash?
A. Equipment would increase and Cash would decrease
B. Accounts Payable would increase
C. Since the equipment has not been paid in full, there is nothing to record
D. Both A and B are correct
Question 16: A purchase of a vehicle for cash would have what effect on the accounting equation?
A. Total asset amount remains the same
B. Total liabilities are overstated
C. Total owner's equity is overstated
D. Both A and B are correct
Question 17: The purchase of supplies for cash would affect which account category?
A. assets
B. liabilities
C. capital
D. expense
Question 18: If total liabilities are $18,000 and owner's equity is $21,000, the total assets must be
A. $39,000
B. $5,000
C. $20,000
D. $17,000
Question 19: The claims of creditors against the assets are __________.
A. expenses
B. revenues
C. liabilities
D. owner's equity
Question 20: Accounting provides information to __________.
A. managers
B. government
C. investors
D. All of these answers are correct