1-A building is offered for sale at $500,000 but is currently assessed at $400,000.

The purchaser of the

building believes the building is worth $475,000, but ultimately purchases the building for $450,000. The
purchaser records the building at:
a) $50,000 b) $400,000 c) $450,000 d) $475,000 e) $500,000
2-External users of accounting information include all of the following except:
a) Shareholders. b) Customers. c) Purchasing managers. d) Government regulators. e) Creditors
3-The group that attempts to create more harmony among the accounting practices of different countries is
the:
a) AICPA b) IASB. c) CAP. d) SEC.
e) FASB
4- Internal users include lenders and managers.
a) True. b) False.
5- A partnership is a business owned by two or more persons.
a) True. b) False.
6- Owners of a partnership are called shareholders or stockholders. a) True. b) False
a) True. b) False.
7-Sony borrows $50,000 cash from the National Bank. How does this transaction affect the accounting
equation for Sony?
a) Assets increase by $50,000; liabilities increase by $50,000; no effect on equity.
b) Assets increase by $50,000; no effect on liabilities; equity increases by $50,000.
c) Assets increase by $50,000; liabilities decrease by $50,000; no effect on equity.
d) No effect on assets; liabilities increase by $50,000; equity increases by $50,000.
e) No effect on assets; liabilities increase by $50,000; equity decreases by $50,000
8- EY performs services for a customer and bill the customer for $500. How would EY record this
transaction?
a) Cash increase by $500; revenues increase by $500.
b) Accounts receivable increase by $500; revenues decrease by $500.
c) Accounts receivable increase by $500; Accounts payable increase by $500.
d) Accounts receivable increase by $500; revenues increase by $500.
e) Accounts payable increase by $500; revenues increase by $500
9- If the assets of a company increase by $100,000 during the year and its liabilities increase by $35,000
during the same year, then the change in equity of the company during the year must have been:
a) An increase of $135,000. b) A decrease of $135,000.
c) An increase of $65,000. d) A decrease of $65,000. e) An increase of $100,000
10- Determine the net income of a company for which the following information is available for the month of
May: $180,000 Employee salaries expense.. Interest expense. Rent expense. Consulting revenue. 10,000
20,000 400,000
a) $190,000. b) $210,000. c) $230,000. d) $400,000. e) $610,000
11- The accounting equation can be restated as: Assets - Equity = Liabilities.
a) True. b) False
12- Owner's equity is increased when cash is received from customers in payment of previously recorded
accounts receivable.
a) True b) False
13- An income statement reports on investing and financing activities.
a) True b) False
14- Flash has beginning equity of $257,000, net income of $51,000, withdrawals of $40,000 and investments
by owners of $6,000. Its ending equity is:
a) $223,000. b) $240,000. c) $268,000. d) $274,000. e) $208,000
15- A company's balance sheet shows: cash $24,000, accounts receivable $30,000, equipment $50,000, and
equity $72,000. What is the amount of liabilities:
a) $104,000. b) $76,000. c) $32,000. d) $68,000. e) $176,000
16- London Company received its utility bill for the current period of $700 and immediately paid it. Its
journal entry to record this transaction includes a:
a) Credit to Utility Expense for $700. b) Debit to Utility Expense for S700.
c) Debit to Accounts Payable for $700. d) Debit to Cash for $700.
e) Credit to capital for $700

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17- Rome contributed $250,000 cash and land worth $500,000 to open his new business, Rome Consulting.
Which of the following journal entries does Rome Consulting make to record this transaction:
a) cash Assets 750000, L.Shue, Capital 750000 b) cash Assets 750000, Assets 750000
c) Cash 250000, Land 500000 d) L.Shue, Capital 750000, Cash 250000
18-The purchase of supplies on account should result in:
a) A debit to Supplies Expense and a credit to Cash.
b) A debit to Supplies Expense and a credit to Accounts Payable.
c) A debit to Supplies and a credit to Accounts Payable.
d) A debit to Supplies and a credit to Accounts Receivable
19- The expanded accounting equation is:
a) Assets + Liabilities = Owner's Capital + Owner's Drawings + Revenues + Expenses.
b) Assets = Liabilities + Owner's Capital + Owner's Drawings + Revenues Expenses.
c) Assets = Liabilities Owner's Capital - Owner's Drawings Revenues Expenses.
d) Assets = Liabilities + Owner's Capital - Owner's Drawings + Revenues Expenses
20- A trial balance prepared at year-end shows total credits exceed total debits by $765. This discrepancy
could have been caused by:
a) An error in the general journal where a $765 increase in Accounts Payable was recorded as a $765 decrease in
Accounts Payable.
b) The ledger balance for Accounts Payable of $7,650 be- ing entered in the trial balance as $765.
c) A general journal error where a $765 increase in Accounts Receivable was recorded as a $765 increase in Cash.
d) The ledger balance of $850 in Accounts Receivable was entered in the trial balance as $85.
e) An error in recording a $765 increase in Cash as a credit
21- Prior to recording adjusting entries, the Supplies account has a $450 debit balance. A physical count of
supplies shows $125 of unused supplies still available. The required adjusting entry is:
a) Debit Supplies $125; Credit Supplies Expense $125.
b) Debit Supplies $325; Credit Supplies Expense $325.
c) Debit Supplies Expense $325; Credit Supplies $325.
d) Debit Supplies Expense $325; Credit Supplies $125.
e) Debit Supplies Expense $125; Credit Supplies $125
22- On May 1, 2021, a two-year insurance policy was purchased for $24,000 with coverage to begin
immediately. What is the amount of insurance expense that appears on the company's income statement for
the year ended December 31, 2021:
a) $4,000. b) $8,000. c) $12,000. d) $20,000. e) $24,000
23- A trial balance will not balance if:
a. a correct journal entry is posted twice.
b. the purchase of supplies on account is debited to Supplies and credited to Cash.
c. a $100 cash drawing by the owner is debited to Owner's Drawings for $1,000 and credited to Cash for
$100.
d. a $450 payment on account is debited to Accounts Payable for $45 and credited to Cash for $45
24- The trial balance of M&S Company had accounts with the following normal balances: Cash $5,000,
Service Revenue $85,000, Salaries and Wages Payable $4,000, Salaries and Wages Expense $40,000, Rent
Expense $10,000, Owner's Capital $42,000, Owner's Drawings $15,000, and Equipment $61,000. In
preparing a trial balance, the total in the debit column is:
a) $131,000. b) $216,000. c) $91,000. d) $116,000
25- Which of the following statements about the accrual basis of accounting is false?
a) Events that change a company's financial statements are recorded in the periods in which the events occur.
b) Revenue is recognized in the period in which services are performed.
c) This basis is in accordance with generally accepted accounting principles.
d) Revenue is recorded only when cash is received, and expense is recorded only when cash is paid
26- Accumulated Depreciation is:
a) a contra asset account. b) an expense account.
c) liability account. d) an owner's equity account
27- A broad principle that requires identifying the activities of a business with specific time periods such as
months, quarters, or years is the:
a) Operating cycle of a business. b) Time period assumption.
c) Going-concern assumption. d) Matching principle.
e) Accrual basis of accounting

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28- Adjusting entries:
a) Affect only income statement accounts. b) Affect only balance sheet accounts.
c) Affect both income statement and balance sheet accounts. d) Affect only cash flow statement accounts
29- If a company failed to make the end-of-period adjustment to remove from the Unearned Management
Fees account the amount of management fees that were earned, this omission would cause:
a) An overstatement of net income. b) An overstatement of assets.
c) An overstatement of liabilities. d) An overstatement of equity.
30- On June 30 Apricot Co. paid $7,500 cash for management services to be performed over a two-year
period. Apricot follows a policy of recording all prepaid expenses to asset accounts at the time of cash
payment. On June 30 Apricot should record:
a) A credit to an expense for $7,500. b) A debit to an expense for $7,500.
c) A debit to a prepaid expense for $7,500. d) A credit to a prepaid expense for $7,500.
e) A debit to Cash for $7,500
33- If throughout an accounting period the fees for legal services paid in advance by clients are recorded in
an account called Unearned Legal Fees, the end-of-period adjusting entry to record the portion of those fees
that has been earned is:
a) Debit Cash and credit Legal Fees Earned.
b) Debit Cash and credit Unearned Legal Fees.
c) Debit Unearned Legal Fees and credit Legal Fees Earned.
d) Debit Legal Fees Earned and credit Unearned Legal Fees
34- On April 1, a company paid the $1,350 premium on a three-year insurance policy with benefits beginning
on that date. What will be the insurance expense on the annual income statement for the year ended
December 31?
a) $1,350.00. b) $450.00. c) $1,012.50. d) $337.50. e) $37.50
Answer the following questions.
- Q1:. a. Office Mart has assets equal to $123,000 and liabilities equal to $53,000 at year-end. What is the
total equity for Office Mart at year- end?
a- using the accounting equation:
Assets = liabilities + Equity
123.000 = 53.000 + ?
Thus, equity = 70.000
- b. At the beginning of the year, Logan Company's assets are $200,000 and its equity is $150,000. During the
year, assets increase $70,000 and liabilities increase $30,000. What is the equity at the end of the year?
b- using the accounting equation at the beginning of the year
Assets = liabilities + Equity
200.000 = ? + 150.000
Thus, beginning liabilities = 50.000
Using the accounting equation at the end of the year :
Assets = liabilities + Equity
200.000 + 70.000 = 50.000 + 30.000 + ?
270.000 = 80.000 + ?
Thus, ending equity = 190.000
Alternative approach to solving part (b): ∆Assets($70,000) = ∆Liabilities($30,000) + ∆Equity(?)
where "∆" refers to "change in." Thus: Ending Equity $150,000 + $40,000 = $190,000
- C. At the beginning of the year, Keller Company's liabilities equal $60,000. During the year, assets increase
by $80,000, and at year-end assets equal $180,000. Liabilities decrease $10,000 during the year. What are the
beginning and ending amounts of equity?
Assets = liabilities + Equity
180.000 = 60.000 – 10.000 + ?
180.000 = 50.000 + 130.000
Using the accounting equation at the beginning of the year
Assets = liabilities + Equity
180.000- 80.000 = 60.000 +?
100.000 = 60.000 + 130.000