62 Free Test Bank for Introduction to Financial Accounting 10th Edition by Horngren

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An example of stockholders' equity is

•  A) accounts payable.
•  B) accounts receivable.
•  C) capital stock.
•  D) marketable securities.
•  E) cash and cash equivalents.

Assets amount to $20,000 at the beginning of the period and $25,000 at the end of the period. Liabilities amount to $12,000 at the beginning of the period and $10,000 at the end of the period. What is the amount of the change and the direction of the change in owners' equity for the period?

•  A) Increase of $2,000
•  B) Decrease of $2,000
•  C) Increase of $5,000
•  D) Decrease of $7,000
•  E) Increase of $7,000

Notes Payable are classified as

•  A) equity.
•  B) assets.
•  C) owner investments.
•  D) liabilities.
•  E) expenses.

Which of the following equations represents the balance sheet equation?

•  A) Net income = revenues - expenses
•  B) Assets = liabilities + revenues - expenses
•  C) Assets + owners' equity = liabilities
•  D) Assets + liabilities = owners' equity
•  E) Assets = liabilities + owners' equity

The new accountant at Shiley Industries is asked to prepare the financial statements for the month of February. Which financial statement will he NOT prepare?

•  A) Balance sheet
•  B) Income statement
•  C) Statement of earnings and taxation
•  D) Statement of cash flows
•  E) Statement of stockholders' equity

What effect does the purchase of store equipment for cash have on the balance sheet equation?

•  A) Assets increase and liabilities decreases
•  B) Assets increase and liabilities increases
•  C) Assets decrease and liabilities decrease
•  D) Assets decrease and liabilities increase
•  E) There is no effect on the accounting equation.

If liabilities increase by $8,000 during a given period and stockholders' equity decreases by $4,000 during the same period, assets must have

•  A) increased by $12,000.
•  B) increased by $4,000.
•  C) decreased by $4,000.
•  D) decreased by $12,000.
•  E) This cannot be determined with the given information.

What accounts are affected by an initial investment of cash by an owner into his business?

•  A) Cash and Owner payable
•  B) Cash and Paid in capital in excess of par
•  C) Owner payable and Owners' equity
•  D) Cash and Owners' equity
•  E) Cash and Paid in capital in excess of par

Scullin, Inc., acquired land costing $25,000. Beta, Inc., paid $10,000 in cash and issued a short-term note for the balance. The effect of this transaction on Scullin, Inc., would be to

•  A) increase the land account by $25,000, decrease the cash account by $10,000, and decrease the balance in the notes payable account by $15,000.
•  B) increase the land account by $25,000, decrease the cash account by $10,000, and decrease the balance in the notes receivable account by $15,000.
•  C) increase the land account by $25,000, decrease the cash account by $10,000, and increase the balance in the notes receivable account by $15,000.
•  D) increase the land account by $10,000 and decrease the cash account by $10,000.
•  E) increase the land account by $25,000, decrease the cash account by $10,000, and increase the balance in the notes payable account by $15,000.

Yanke Manufacturing sold unused land at cost, which was $11,000. The buyer paid $8,000 in cash, with the balance to be paid on a note due in 6 months. The effect on Yanke Manufacturing is to

•  A) decrease the land account by $11,000, increase the cash account by $8,000, and increase the balance in the notes payable account by $3,000.
•  B) decrease the land account by $11,000, increase the cash account by $8,000, and increase the balance in the notes receivable account by $3,000.
•  C) decrease the land account by $11,000, increase the cash account by $8,000, and decrease the balance in the notes receivable by $3,000.
•  D) decrease the land account by $8,000 and increase the cash account by $8,000.
•  E) decrease the land account by $11,000, increase the cash account by $8,000, and decrease the balance in the notes payable account by $3,000.

Patrik's Party Supplies acquired 60 tables from a manufacturer at a cost of $100 per table and purchased the tables on account. The effect of this transaction on Patrik's Party Supplies would be to

•  A) increase inventory by $6,000 and increase capital by $6,000.
•  B) increase inventory by $6,000 and decrease capital by $6,000.
•  C) increase inventory by $6,000 and decrease cash by $6,000.
•  D) increase inventory by $6,000 and increase accounts payable by $6,000.
•  E) increase inventory by $6,000 and decrease accounts payable by $6,000.

Kindra Novelties acquired equipment costing $3,000 on account. The effect of this transaction on Kindra Novelties would be to

•  A) increase equipment by $3,000 and decrease capital by $3,000.
•  B) increase equipment by $3,000 and increase capital by $3,000.
•  C) increase equipment by $3,000 and increase accounts payable by $3,000.
•  D) increase equipment by $3,000 and decrease accounts payable by $3,000.
•  E) No transaction is recorded since no cash has been paid.

Which of the following statements is false?

•  A) If you increase an asset account, you may increase a liability account.
•  B) If you increase an asset account, you may decrease an asset account.
•  C) If you decrease an asset account, you may increase an owners' equity account.
•  D) If you decrease an asset account, you may decrease owners' equity account.

An entity

•  A) is a separate economic unit.
•  B) allows a section of an organization to be a separate economic unit.
•  C) helps accountants relate events to a defined area of accounting.
•  D) All of the above
•  E) None of the above

The primary purpose of financial accounting is to

•  A) supply information for external users' decision making.
•  B) provide data for internal users' decision making.
•  C) create data for income taxes.
•  D) report the audit.
•  E) organize the data for management.

Tanner, Inc., acquired some office equipment, including a desk costing $900. The owner of the business next door said that he had been searching for a desk just like that one, so Tanner, Inc., sold the desk to its business neighbor at cost, receiving $400 in cash, with the remainder to be paid in 30 days. The effect of this transaction on Tanner, Inc., would be to

•  A) increase the cash account by $400, increase the capital account by $500, and decrease the equipment account by $900.
•  B) increase the cash account by $400, increase the accounts payable account by $500, and decrease the equipment account by $900.
•  C) increase the cash account by $400, decrease the accounts payable account by $500, and decrease the equipment account by $900.
•  D) increase the cash account by $400, increase the accounts receivable account by $500, and decrease the equipment account by $900.
•  E) increase the cash account by $400, decrease the accounts receivable account by $500, and decrease the equipment account by $900.

Jared Office Supplies has 2,500 folders in inventory that cost $1.00 each. The company's supplier announced that, effective immediately, all future folders will cost $1.10 each. Jared Office Supplies should

•  A) increase the inventory account by $250 and increase the capital account by $250.
•  B) increase the inventory account by $250 and decrease the capital account by $250.
•  C) increase the inventory account by $250 and increase the accounts payable account by $250.
•  D) increase the inventory account by $250 and decrease the accounts payable account by $250.
•  E) There is no effect from the price change on the accounts of Jared Office Supplies.

The accounting equation can be stated as which of the following?

•  A) Assets - liabilities = owners' equity
•  B) Assets + liabilities = owners' equity
•  C) Liabilities + assets = owners' equity
•  D) Owners' equity + assets = liabilities
•  E) Liabilities - owners' equity = assets

Stockholders' equity at the beginning and end of the period amounts to $16,000 and $19,000, respectively. Assets at the beginning and end of the period amount to $26,000 and $21,000, respectively. Liabilities at the beginning of the period were $11,000. Liabilities at the end of the period amount to

•  A) $8,000.
•  B) $6,000.
•  C) $2,000.
•  D) $5,000.
•  E) $3,000.