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Financial Accounting 1

Financial Accounting 1



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Published by marget

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Published by: marget on Aug 17, 2009
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1. Which of the following equations properly represents aderivation of the fundamental accounting equation?a.Assets + Liabilities = Owner’s equityb.Assets = Owners equityc.Cash = Assetsd.
Assets – Liabilities = Owner’s equity
2.Retained earnings will change over time because of severalfactors. Which of the following factors would explain an increase inretained earnings?a.Net lossb.
Net Income
c.Dividendsd.Investment by stock holders3.Which of these items would be accounted for as an expense?a.Repayment of a bank loanb.Dividends to stockholdersc.Purchase of land
d.payment to the current periods rent
4.Which of the following would not be included on a balancesheet?a.Accounts receivableb.Accounts payable
d.Cash5 Which of the following statements is true concerning assets?a. They are recorded at cost and adjusted for inflation.b. They are recorded at market value for financial reporting becausehistorical cost is arbitrary.c. Accounting principles require that companies report assets on theincome statement.
d. Assets are measured using the cost concept.
6.Which of the following is a correct expression of the accountingequation?a. Assets - Liabilities + Owners’ Equityb. Assets = Liabilities - Owners’ Equityc. Assets + Owners’ Equity = Liabilities
d. Assets = Liabilities + Owners’ Equity
7. How is the balance sheet linked to the other financialstatements?a. The beginning retained earnings balance on the statement of retained earnings becomes the amount of retained earnings reportedon the balance sheet.b. Retained earnings is added to total assets and reported on thebalance sheet.
c. Net income increases retained earnings on the statement of retained earnings, which ultimately increases retained earningson the balance sheet.
d. There is no link between the balance sheet and the other statements.8. Information that is material means that an error or alternativemethod of handling a transaction
a. would possibly affect the judgment of someone relying on thefinancial statements.
b. would not affect the decisions of users.c. might cause a company to understate its earnings for theaccounting period.d. could increase the profitability of a company.
9. The process of recording the economic effects of businesstransactions in a book of original entry:a. double entry systemb. debitc. credit
d. journalizing
e. posting10. If the sum of the debits and credits in a trial balance is not equal,thena. there is no concern because the two amounts are not meant to beequal.b. the chart of accounts also does not balance.c. it is safe to proceed with the preparation of financial statements.
d. most likely an error was made in posting journal entries to thegeneral ledger or in preparing the trial balance.
11. Treml Corp. had Rs. 1800 of goods on hand at January 1, 2006.During 2006, goods worth Rs.7,000 were purchased. At December 31, 2006, the actual goods on hand amounts to Rs.2,300. After theadjustments are recorded and posted at December 31, 2006, thebalances in theGoods and cost of Goods Expense accounts will be:a. Goods,Rs.7,000; Cost of goods, Rs.2,300.b. Goods,Rs.1,800; Cost of goods Rs.7,000.
c. Goods, Rs.2,300; Cost of goods Rs.6,500.
d. Goods, Rs.2,300; Cost of goods Rs.3,900.Use the information presented below to answer the questions thatfollow.

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