29 Jun Question 1. Rules and concepts th
Question
1. Rules and concepts that govern the reporting of financial statements are called:
a. Principles of Accounting
b. Generally Accepted Accounting Principles
c. Securities Exchange Commission
d. Accounting Assumptions
2. The private group that currently has the authority to establish generally accepted accounting
principles in the United States is the:
a. APB
b. IASB
c. SEC
d. FASB
3. The two primary external users of the financial statements are: (Hint: consider appropriate
synonyms.)
a. IRS and owners
b. IRS and creditors
c. management and creditors
d. creditors and owners
4. An asset is best defined as:
a. residual interest of owners.
b. economic resource obtained as a result of past transactions. Assets will be used to generate
revenues.
c. something that has been used to generate revenues.
d. something owned.
5. Revenue is properly recognized:
a. When cash from a sale is received
b. When the customer’s order is received.
c. Only if the transaction creates an account receivable.
d. Upon completion of the sale or when services have been performed.
6. The Maxim Company acquired a building for $500,000. Maxim had the building appraised, and
found that the building was easily worth $575,000. The seller had paid $300,000 for the building 6
years ago. Which accounting principle would require Maxim to record the building on its records at
$500,000?
a. Monetary unit assumption.
b. Going-concern assumption.
c. Cost principle.
d. Business entity assumption.
7. Which of the following accounting concept prescribes when a company should record its expenses
incurred to generate the revenue reported? a. Going-concern assumption.
b. Time period (periodicity) assumption
c. Matching (expense recognition) principle.
d. Business entity assumption.
8. If a company paid $38,000 of its accounts payable in cash, what was the effect on the assets,
liabilities, and equity?
a. Assets would decrease $38,000, liabilities would decrease $38,000, and equity would decrease
$38,000.
b. Assets would decrease $38,000, liabilities would decrease $38,000, and equity would increase
$38,000.
c. Assets would decrease $38,000, liabilities would decrease $38,000, and equity would not change.
d. There would be no effect on the accounts because the accounts are affected by the same amount.
9. A credit entry:
a. Increases asset and expense accounts, and decreases liability, equity, and revenue accounts.
b. Decreases asset and expense accounts, and increases liability, equity, and revenue accounts.
c. Is recorded on the left side of a T-account.
d. Is always an increase in an account.
10. Of the following accounts, the one that normally has a credit balance is:
a. Cash.
b. Dividends.
c. Wages Payable.
d. Sales Salaries Expense.
Questions 11-35 relate to the ongoing business activities of Zoogle Company—a newly formed
company that provides dog-walking and pet-sitting services for families in the city. As of
January 1, 2014, the company employs one person, who was given the title of “general
manager.” Note that some questions pertain to a one month period and others a full year.
11. On January 1, 2014, Zoogle Corporation paid $3,000 cash to rent office space for the
period from January 1 to June 30, 2014. Assuming that the appropriate adjusting journal entry is
made on January 31 for the rent events, what amount would Zoogle Corporation report for rent
expense for month ending January 31, 2014?
a. $ 0
b. $ 250
c. $ 500
d. $ 3,000
12. Zoogle recognizes revenue according to the revenue principle. Friends of Zoogle’s general
manager are allowed to purchase services on account, whereas other customers are required to pay
for services in advance. During January 2014 Zoogle:
1 – provided $600 of services to friends on account and has collected one-half of those accounts (in
cash),
2 – received $200 cash in advance from other customers and has provided $100 worth of services to
these other customers. What amount of revenue should Zoogle report for the month of January 2014?
a. $900
b. $800
c. $700
d. $500
13. Zoogle decided to start selling pet supplies and purchased $10,000 of merchandise on April 15
with terms of 3/10, n/45. On April 20, it returned $800 of that merchandise. On April 24, it paid the
balance owed for the merchandise taking any discount it is entitled to. The cash paid on April 24
equals:
a. $10,000
b. $9,800
c. $9,700
d. $8,924
14. If Zoogle had cash sales of $94,275, credit sales of $83,450, sales returns and allowances of
$1,700, and sales discounts of $3,475. Zoogle’s net sales for this period equal:
a. $172,550
b. $174,250
c. $176,025
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