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1) On January 1, 2015, Davin Avenue Associates, Inc. purchased a copier for $6,000 cash and decided to depreciate it over 5 years. What amounts associated with the copier will appear on Davin’s financial statements for the year ending December 31, 2015?
Income Statement Statement of
a. ($ 1,200) ($ 6,000)
b. ($ 1,200) $ 0
c. ($ 6,000) $ 0
d. $ 0 ($ 1,200)
2) Which of the following concepts is important to accrual accounting?
a. Time period, because accrual accounting divides earnings into time periods
b. Monetary unit, because inflation is a big factor in the environment
c. Cash basis, because if cash is not received, revenue is not accrued
d. Entity concept, because personal transactions must be separated from business transactions
3. Which of the following statements does not present financial information based on the accrual basis of accounting?
a. Balance Sheet
b. Income Statement
c. Statement of Retained Earnings
d. Statement of Cash Flows
4. Harvest Catering is a local catering service. Conceptually, when should Harvest recognize revenue from its catering service?
a. At the date the customer places the order
b. At the date the meals are served
c. At the date the invoice is mailed to the customer
d. At the date the customer's payment is received
5. When is revenue from the sale of merchandise normally recognized?
a. On the date the sale is made.
b. When the customer pays for the merchandise.
c. Either on the date on which the sale occurs, or the date on which the customer pays
d. When the merchandise is sold, if sold for cash, or when payment is received, if sold on credit
6. Carl and Stefanie each invest $15,000 in a business and are given shares of stock in Thibeau Industries as evidence of their ownership interests. For this transaction, identify the effect on the
a. Assets increase and liabilities increase.
b. Assets increase and
c. Liabilities increase and stockholders’ equity decreases.
d. Liabilities decrease and assets decrease.
7. Land is purchased on credit. For this transaction, identify the effect on the accounting equation.
a. Assets increase and liabilities increase.
b. Assets increase and owners’ equity increases.
c. Liabilities increase and owners’ equity decreases.
d. Liabilities decrease and assets decrease.
8. Services are provided for customers who are sent bills for the amount they owe. For this transaction, identify the effect on the accounting equation.
a. Assets increase and liabilities increase.
b. Assets increase and stockholders’ equity increases.
c. Liabilities increase and stockholders’ equity decreases.
d. Liabilities decrease and assets decrease.
9. Blecker Corp. made cash sales to customers. What effect does this transaction have on the accounting equation?
a. Liabilities increase and stockholders’ equity increases.
b. There is no effect on the accounting equation as one asset account increases while another asset account decreases.
c. Assets increase and liabilities increase.
d. Assets increase and stockholders’ equity increases.
10. During May, Aniston, Inc. purchased office supplies for cash. The supplies will be used in June. What effect does this purchase transaction have on the accounting equation?
a. Assets increase and stockholders’ equity decreases.
b. Assets increase and liabilities increase.
c. Assets decrease and liabilities decrease.
d. There is no effect on the accounting equation as one asset account increases while another asset account decreases.
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