69 Free Test Bank for Introduction to Financial Accounting 11th Edition by Horngren

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The accountant at Forgum Corporation is asked to prepare the financial statements for the month of July. 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

Assets amount to $35,000 at the beginning of the period and $40,000 at the end of the period. Liabilities amount to $10,000 at the beginning of the period and $20,000 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 $15,000
•  B) Decrease of $10,000
•  C) Increase of $5,000
•  D) Increase of $10,000
•  E) Decrease of $5,000

Sounds Good Entertainment acquired office equipment valued at $4,000 and office supplies valued at $600 by paying cash of $1,300 with the balance on account. The effect of this transaction on Sounds Good Entertainment would be to

•  A) increase the cash account by $1,300, increase the accounts payable account by $3,300, and increase the office equipment account by $4,600.
•  B) increase the office equipment account by $4,600, decrease the cash account by $1,300, and decrease the accounts payable account by $3,300.
•  C) decrease the cash account by $1,300, increase the accounts payable account by $3,300, increase the office equipment account by $4,000, and increase the office supplies by $600.
•  D) increase the cash account by $1,300, increase the capital account by $3,300, decrease the equipment account by $4,000, and increase the office supplies account by $600.
•  E) increase the office supplies account by $600, decrease the office equipment account by $4,000, increase the accounts payable account by $4,000, and decrease the cash account by $600.

Which of the following describes a liability?

•  A) Future economic benefit
•  B) Economic obligations to creditors
•  C) Paid-in capital
•  D) Investment by owners
•  E) Present value of customer future payments

Mexland Company, acquired land costing $25,000. Mexland Company paid $10,000 in cash and issued a short-term note for the balance. The effect of this transaction on Mexland Company, 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.

Home Theater Advantage sells audio equipment. Home Theater Advantage acquired 50 speakers from a manufacturer at a cost of $200 per speaker and purchased the speakers on account. The effect of this transaction on Home Theater Advantage would be to

•  A) increase inventory by $10,000 and increase capital by $10,000.
•  B) increase inventory by $10,000 and decrease capital by $10,000.
•  C) increase inventory by $10,000 and decrease cash by $10,000.
•  D) increase inventory by $10,000 and increase accounts payable by $10,000.
•  E) increase inventory by $10,000 and decrease accounts payable by $10,000.

Income taxes owed to the federal government would be classified as a(n)

•  A) liability on the balance sheet.
•  B) asset on the balance sheet.
•  C) liability on the statement of cash flows.
•  D) equity on the balance sheet.
•  E) They would not appear on a financial statement.

Zeus Greek Foods purchased a $21,000 van for use in the business. The company made a $15,000 cash down payment, and signed a note for the balance. The effect of this transaction on Zeus Greek Foods would be to

•  A) increase the van account by $21,000, decrease the cash account by $15,000, and decrease the notes receivable account by $6,000.
•  B) increase the van account by $21,000, decrease the cash account by $15,000, and decrease the notes payable account by $6,000.
•  C) increase the van account by $15,000 and decrease the cash account by $15,000.
•  D) increase the van account by $21,000, decrease the cash account by $15,000, and increase the notes payable account by $6,000.
•  E) decrease the van account by $15,000 and increase the cash account by $15,000.

Kitty Clips acquired $2,800 worth of merchandise inventory on account. Upon inspection, the company discovered that $400 worth of the merchandise inventory was defective. Kitty Clips returned the defective merchandise inventory and received full credit. The effect of the return transaction on Kitty Clips would be to

•  A) decrease the merchandise inventory account by $400 and increase the accounts payable account by $400.
•  B) decrease the merchandise inventory account by $400 and decrease the accounts payable account by $400.
•  C) decrease the merchandise inventory account by $400 and increase the accounts receivable account by $400.
•  D) decrease the merchandise inventory account by $400 and decrease the accounts receivable account by $400.
•  E) Because the merchandise inventory was never used, Kitty Clips would not record the return of the merchandise inventory.

Mailers Manufacturing, acquired equipment for $19,000. Mailers Manufacturing, paid $6,000 in cash, with the balance due on a note. The effect of this transaction on Mailers Manufacturing, would be to

•  A) increase the equipment account by $19,000, decrease the cash account by $6,000 and increase the notes payable account by $13,000.
•  B) increase the equipment account by $19,000, decrease the cash account by $6,000, and decrease the notes receivable by $13,000.
•  C) increase the equipment account by $6,000, and decrease the cash account by $6,000.
•  D) increase the equipment account by $6,000, decrease the cash account by $6,000, and increase the notes payable account by $13,000.
•  E) increase the equipment account by $19,000, and increase the notes payable account by $6,000.