(ACCT2010)[2018](f)quiz~=yfitkjdm^_76323.pdf downloaded by shcchan from http://petergao.net/ustpastpaper/down.php?course=ACCT2010&id=17 at 2021-08-30 17:15:06. Academic use within HKUST only.

1. Which of the following describes the primary objective of the balance sheet?
A) To measure the net income of a business up to a particular point in time.
B) To report the difference between cash inflows and cash outflows for the period.
C) To report the financial position of the reporting entity at a particular point in time.
D) To report the market value of assets, liabilities, and stockholders' equity at a
particular point in time.

2. Atlantic Corporation reported the following amounts at the end of the first year of
operations:
Common stock $200,000
Sales revenue $800,000
Total assets $600,000
Dividends declared $40,000
Total liabilities $320,000

What are the retained earnings of Atlantic at the end of the year, and what amount of
expenses were incurred during the year?
A) Retained earnings are $80,000 and expenses incurred totaled $680,000.
B) Retained earnings are $80,000 and expenses incurred totaled $720,000.
C) Retained earnings are $280,000 and expenses incurred totaled $480,000.
D) Retained earnings are $280,000 and expenses incurred totaled $520,000.

3. Willie Company's retained earnings increased $20,000 during 2016. What was Willie's
2016 net income or loss given that Willie declared $25,000 of dividends during 2016?
A) Net income was $5,000.
B) Net income was $45,000.
C) Net loss was $45,000.
D) Net loss was $5,000.

4. Which of the following is represented by elements of the statement of stockholders'

equity?
A) Common stock reinvested in the business.
B) Revenues plus dividends and expenses.
C) Earnings not distributed to owners.
D) Financing from creditors and stockholders.

5. Which of the following is the amount of revenue reported on the income statement of a
retail company?
A) The cash collected from customers during the current period.
B) Both cash and credit sales for the period.
C) Cash sales for the period and collections from customers.
D) Cash sales and stockholders' investments.

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(ACCT2010)[2018](f)quiz~=yfitkjdm^_76323.pdf downloaded by shcchan from http://petergao.net/ustpastpaper/down.php?course=ACCT2010&id=17 at 2021-08-30 17:15:06. Academic use within HKUST only.

6. Lena Company has provided the following data (ignore income taxes):

2016 revenues were $99,000.

2016 expenses were $47,800.
Dividends declared and paid during 2016 totaled $9,500.
Total assets at December 31, 2016 were $177,000.
Total liabilities at December 31, 2016 were $89,000.
Common stock at December 31, 2016 was $28,000.

Which of the following is correct?

A) 2016 net income was $41,700.
B) Total stockholders' equity at December 31, 2016 was $236,000.
C) Retained earnings at December 31, 2016 were $41,700.
D) Retained earnings at December 31, 2016 were $60,000.

7. On January 1, 2016, Miller Corporation had retained earnings of $8,000,000. During

2016, Miller reported net income of $1,500,000, declared dividends of $500,000, and
issued common stock for $1,000,000. What were Miller's retained earnings on
December 31, 2016?
A) $9,000,000.
B) $7,500,000.
C) $7,000,000.
D) $9,500,000.

8. Which of the following describes the amount of insurance expense reported on the
income statement?
A) The amount of cash paid for insurance in the current period.
B) The amount of cash paid for insurance in the current period less any unpaid
insurance at the end of the period.
C) The amount of insurance used up (incurred) in the current period to help generate
revenue.
D) The amount of cash paid for insurance that is reported within the statement of cash
flows.

9. At the beginning of 2016, a corporation had total assets of $270,000 and total liabilities
of $160,000. During 2016, assets increased $25,000 and liabilities increased $5,000.
What was stockholders' equity at December 31, 2016?
A) $140,000.
B) $130,000.
C) $190,000.
D) $80,000.

10. Which of the following transactions increases both cash and net income?
A) Cash receipts from a bank loan.
B) Cash receipts from sale of common stock.
C) Cash receipts from cost of goods sold.
D) Cash receipts from customers for services provided.

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(ACCT2010)[2018](f)quiz~=yfitkjdm^_76323.pdf downloaded by shcchan from http://petergao.net/ustpastpaper/down.php?course=ACCT2010&id=17 at 2021-08-30 17:15:06. Academic use within HKUST only.

11. Which of the following best describes assets?

A) Resources with possible future economic benefits owed by an entity as a result of
past transactions.
B) Resources with probable future economic benefits owned by an entity as a result of
past transactions.
C) Resources with probable future economic benefits owned by an entity as a result of
future transactions.
D) Resources with possible future economic benefits owed by an entity as a result of
future transactions.

12. Which of the following is a constraint in providing useful financial reporting

information to decision-makers?
A) Comparability
B) Timeliness
C) Cost-benefit
D) Understandability

13. Chad Jones is the sole owner and manager of Jones Glass Repair Shop. Jones purchased
a truck, to be used in the business, for its market value of $35,000. Which of the
following fundamentals requires Jones to record the truck at the price paid to buy it?
A) Separate-entity assumption.
B) Revenue principle.
C) Monetary unit assumption.
D) Historical cost principle.

14. For accounting information to be useful, it must be which of the following?

A) It must be consistent and comparable.
B) It must be a faithful representation and relevant.
C) It must be comparable and reliable.
D) It must be relevant and consistent.

15. Which of the following does not correctly describe business transactions or events?
A) They include exchanges of assets or services by one business for assets, services, or
promises to pay from another business.
B) They include the using up of insurance paid for in advance.
C) They have an economic impact on a business entity.
D) They do not include measurable internal events such as the use of assets in
operations.

16. Alpha Company issued 1,000 shares of $10 par value common stock to stockholders, in
exchange for $15,000 cash. Which of the following correctly describes the impact of
this transaction on Alpha's financial statements?
A) A $15,000 investment is reported as a long-term investment.
B) Stockholders have invested $25,000 as stockholders' equity.
C) Additional paid-in capital of $5,000 is reported in stockholders' equity.
D) Common stock is reported at $15,000 in stockholders' equity.

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(ACCT2010)[2018](f)quiz~=yfitkjdm^_76323.pdf downloaded by shcchan from http://petergao.net/ustpastpaper/down.php?course=ACCT2010&id=17 at 2021-08-30 17:15:06. Academic use within HKUST only.

17. Which of the following direct effects on the accounting equation is not possible as a
result of a single business transaction which impacts only two accounts?
A) An increase in a liability and a decrease in an asset.
B) An increase in stockholders' equity and an increase in an asset.
C) An increase in an asset and a decrease in an asset.
D) A decrease in stockholders' equity and a decrease in an asset.

18. A company's January 1, 2016 balance sheet reported total assets of $150,000 and total
liabilities of $60,000. During January 2016, the company completed the following
transactions: (A) paid a note payable using $10,000 cash (no interest was paid); (B)
collected a $9,000 accounts receivable; (C) paid a $5,000 accounts payable; and (D)
purchased a truck for $5,000 cash and by signing a $20,000 note payable from a bank.
The company's January 31, 2016 balance sheet would report which of the following?

A. Assets Liabilities Stockholder's Equity

$150,000 $60,000 $90,000

B. Assets Liabilities Stockholder's Equity

$155,000 $65,000 $90,000

C. Assets Liabilities Stockholder's Equity

$160,000 $75,000 $85,000

D. Assets Liabilities Stockholder's Equity

$170,000 $100,000 $70,000

19. A company's January 1, 2016 balance sheet reported total assets of $120,000 and total
liabilities of $40,000. During January 2016, the following transactions occurred: (A) the
company issued stock and collected cash totaling $30,000; (B) the company paid an
account payable of $6,000; (C) the company purchased supplies for $1,000 with cash;
(D) the company purchased land for $60,000 paying $10,000 with cash and signing a
note payable for the balance. What is total stockholders' equity after the transactions
above?
A) $30,000.
B) $110,000.
C) $80,000.
D) $194,000.

20. When a company buys equipment for $150,000 and pays for one third in cash and the
other two thirds is financed by a note payable, which of the following are the effects on
the accounting equation?
A) Total assets increase $150,000.
B) Total liabilities increase $150,000.
C) Total liabilities decrease $50,000.
D) Total assets increase $100,000.

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(ACCT2010)[2018](f)quiz~=yfitkjdm^_76323.pdf downloaded by shcchan from http://petergao.net/ustpastpaper/down.php?course=ACCT2010&id=17 at 2021-08-30 17:15:06. Academic use within HKUST only.

21. Which of the following would lengthen the operating cycle?

A) Faster collection of accounts receivables.
B) Selling inventory in a shorter period of time.
C) Increasing the number of customers who paid cash.
D) Relaxing credit terms and allowing customers more time to pay.

22. The following information has been provided by Hable Company:

• Advertising expense $9,900
• Interest expense $3,700
• Rent expense for store $12,000
• Loss on sale of property and equipment $5,700
• Cost of goods sold $21,300
• Depreciation expense $7,100
• Prepaid insurance expense $1,000

How much were Hable's total expenses in calculating operating income?

A) $50,300.
B) $54,000
C) $56,000
D) $43,200

23. Which of the following best describes the time period assumption?
A) It assumes we value a business as of the end of every month.
B) It is the cutoff point for asset and liability recognition.
C) It implies that financial statements are prepared at the end of a business entity's
operating cycle.
D) It assumes we divide the long life of a business into a series of shorter time periods
for accounting and reporting purposes.

24. Which of the following correctly describes the impact of collecting cash from customers
for services to be provided in the future?
A) Assets and stockholders' equity increase.
B) Assets and revenues increase.
C) Assets and liabilities increase.
D) Assets and operating income increase.

25. Smith Corporation has provided the following information:

• Credit sales totaled $279,000.
• Cash sales totaled $125,000.
• Cash collections from customers for services yet to be provided totaled $38,000.
• An $11,000 gain from the sale of property and equipment occurred.
• Interest income totaled $7,700.

How much of these items were included in operating income?

A) $415,000.
B) $411,700.
C) $442,000.
D) $460,700.

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(ACCT2010)[2018](f)quiz~=yfitkjdm^_76323.pdf downloaded by shcchan from http://petergao.net/ustpastpaper/down.php?course=ACCT2010&id=17 at 2021-08-30 17:15:06. Academic use within HKUST only.

26. Colby Corporation has provided the following information:

• Operating revenues from customers were $199,700.
• Operating expenses for the store were $111,000.
• Interest expense was $9,200.
• Gain from sale of plant and equipment was $3,300.
• Dividend payments to Colby's stockholders were $7,700.
• Income tax expense was $36,000.
• Prepaid rent expense was $5,000.

How much was Colby's net income?

A) $39,100.
B) $46,800.
C) $48,300.
D) $52,700.

27. Which of the following does not correctly describe the cash basis of accounting?
A) It is not accepted for external reporting purposes.
B) Revenues are recognized when cash is collected from customers.
C) Expenses are recognized when they are paid for.
D) Cash payments for long-term assets are recognized as an expense at the time of
payment.

28. Lantz Company has provided the following information:

• Credit sales totaled $479,000.
• Cash sales totaled $255,000.
• Cash collections from customers for services yet to be provided totaled $88,000.
• A $22,000 loss from the sale of property and equipment occurred.
• Interest income was $7,700.
• Interest expense was $19,900.
• Supplies expense was $336,000.
• Rent expense for the store was $36,000.
• Wages expense was $49,000.
• Other operating expenses totaled $79,000.
• Unearned revenue was $4,000.

What is the amount of Lantz's income before income taxes?

A) $553,800.
B) $465,800.
C) $199,800.
D) $531,800.

29. Which of the following statements is false?

A) The income statement covers a period of time.
B) A loss on the sale of plant and equipment is considered a peripheral activity and is
not reported on the income statement.
C) Rent expense is a component of operating income.
D) Interest expense is not a component of operating income.

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(ACCT2010)[2018](f)quiz~=yfitkjdm^_76323.pdf downloaded by shcchan from http://petergao.net/ustpastpaper/down.php?course=ACCT2010&id=17 at 2021-08-30 17:15:06. Academic use within HKUST only.

30. Which of the following statements does not properly describe the accrual basis of
accounting?
A) Accrual accounting should not be used when providing financial statements to
external decision makers.
B) Expenses are recognized when incurred in generating revenues regardless of the
timing of cash flows.
C) Revenues are recognized when the company transfers promised goods or services
to customers regardless of the timing of cash flows.
D) Generally accepted accounting principles require use of the accrual basis.

- The End -