PART A MULTIPLE CHOICE

1) Which of the following is an important reason for studying accounting?

a. Accounting information is useful in making economic decisions.
b. Accounting plays an important role in society.
c. The study of accounting can lead to a challenging career.
d. All of the above are important reasons for studying accounting.
2) Economic events that affect the financial position of a business are called
a. Separate entities.
b. Business transactions.
c. Money measures.
d. financial actions.
3) Which of the following forms of organization is not treated as a separate economic unit in
accounting?
a. Sole proprietorship
b. Committee
c. Partnership
d. Corporation
4) If a company has liabilities of $19,000 and owner's equity of $57,000, its assets are
a. $38,000.
b. $76,000.
c. $57,000.
d. $19,000
5) The payment of a liability
a. increases both assets and liabilities.
b. increases assets and decreases liabilities.
c. decreases assets and increases liabilities.
d. decreases both assets and liabilities.
6) The balance sheet is related to the income statement in the same way that a
a. point in time is related to a period of time.
b. period of time is related to a point in time.
c. point in time is related to another point in time.
d. period of time is related to another period of time.
7) Expenses and withdrawals appear, respectively, on the
a. balance sheet and income statement.
b. income statement and balance sheet.
c. statement of owner's equity and balance sheet.
d. income statement and statement of owner's equity.
8) Auditing, tax services, and management consulting are services provided by
a. government accountants.
b. certified management accountants.
c. certified public accountants.
d. accounting educators.
PART B ANSWER THE FOLLOWING QUESTIONS
1) Use the accounting equation to answer each question below. Show any calculations you make.
a. The assets of Newport Company are $650,000, and the owner's equity is $360,000. What is the amount of
the liabilities?
b. The liabilities and owner's equity of Fitzgerald Company are $95,000 and $32,000 respectively. What is the
amount of the assets?
c. The liabilities of Emerald Co. equal one-third of the total assets, and owner's equity is $120,000. What is
the amount of the liabilities?
d. At the beginning of the year, Sherman Company's assets were $220,000 and its owner's equity was
$100,000. During the year, assets increased $60,000 and liabilities decreased $10,000. What was the owner's
equity at the end of the year?
2) Identify the following transactions by marking each an owner's investment (I), owner's withdrawal
(W), revenue (R), expense (E), or not an owner's equity transaction (NOE).
a. Received cash for providing a service.
b. Took assets out of the business for personal use.
c. Received cash from a customer previously billed for a service.
d. Transferred assets to the business from a personal account.
e. Paid a service station for gasoline for business vehicle.
f. Performed a service and received a promise of payment.
g. Paid cash to purchase equipment.
h Paid cash to an employee for services performed.

3) During the month of April, Andres Company had the following transactions:
a. Paid salaries for April, $5,400.
b. Purchased equipment on credit, $9,000.
c. Purchased supplies with cash, $300.
d. Additional investment by owner, $12,000.
e. Received payment for services performed, $1,800.
f. Made partial payment on equipment purchased in transaction b, $3,000.
g. Billed customers for services performed, $4,800.
h. Cash withdrawal by owner, $4,500.
i Received payment from customers billed in transaction g, $900.
j. Received utility bill, $210.

On a sheet of paper, list the letters a through j, with columns labeled Assets, Liabilities, and Owner's Equity.
In the columns, indicate whether each transaction caused an increase (+), a decrease (-),
or no change (NC) in assets, liabilities, and owner's equity.

4) For each of the following categories, describe a transaction that would have the required effect on the
elements of the accounting equation.
Increase one asset and decrease another asset.
Decrease an asset and decrease a liability.
Increase an asset and increase a liability.
Increase an asset and increase owner's equity.
Decrease an asset and decrease owner's equity.

5) The total assets and liabilities at the beginning and end of the year for Pizarro Company are listed
below.
Assets Liabilities
Beginning of the year $110,000 $ 45,000
End of the year 200,000 120,000
Determine Pizarro Company's net income for the year under each of the following alternatives:
a. The owner made no investments in or withdrawals from the business during the year.
b. The owner made no investments in the business, but the owner withdrew $22,000 during the year.
c. The owner made an investment of $13,000 but made no withdrawals (Dividends) during the year.
d. The owner made an investment of $10,000 in the business and withdrew $22,000 during the year.

6) 1. Indicate below whether each of the following accounts is an asset (A), a liability (L), or a part of
owner's equity (OE):
Land Accounts Payable Supplies Cash Salaries Payable Accounts Receivable
Baurzhan’s, Capital
2. Indicate below whether each account would be shown on the income statement (IS), the statement
of owner's equity (OE), or the balance sheet (BS):
Repair Revenue Automobile Fuel Expense Cash Rent Expense Accounts
Payable Baurzhan’s, Withdrawals
7) Listed in random order below are the balances for balance sheet items for the Glick J Company as of
June 30,19xx.
Accounts Payable $20,000 Supplies 5,000
Building 45,000 Accounts Receivable $25,000
R. Glick, Capital 85,000 Equipment 20,000
Cash 10,000
Sort the balances and prepare a balance sheet

8) Determine the amounts that correspond to the letters by completing the following independent sets
of financial statements. (Assume no new investments

Income Statement Set A Set B Set C

Revenues $1100 $g $240
Expenses a 5200 m
Net Income b h 80

Statement of Owner's Equity

Beginning Balance $2900 $15400 $200
Net Income c 1600 n
Less Withdrawals (200) i o
Ending Balance $3000 $j $p

Balance Sheet
Total Assets $d $21000 $q
Liabilities $1600 $5000 $r
Owner’s Equity e k 280
Total Liabilities and Owner’s Equity $f $l $480