University of Windsor

Odette School of business

BSMM 8110 –Accounting Concepts and Techniques
First quiz- winter semester 2020

Professor: Dr. S. Mitra Name_______________________________

Points: 50

Identify and circle the correct answer to the following questions. Each question carries 2 points.

1. Which of the following is included as a component of stockholders’ equity?

A) Buildings
B) Retained earnings
C) Prepaid property taxes
D) Accounts payable
E) Dividends

2. In which financial statement does interest expense appear?

A) Statement of stockholders’ equity
B) Balance sheet
C) Income statement
D) Statement of cash flows
E) All of the above

3. During 2010, Skechers U.S.A., Inc. had Sales of $2,006.9 million, Gross profit of $911.9 million, and Selling,
general, and administrative expenses of $719.7 million. What was Skechers’ Cost of goods sold for 2010?
A) $ 375.3 million
B) $1,095.0 million
C) $ 192.2 million
D) $2,918.8 million
E) There is not enough information to calculate the amount.

4. A company that receives money in advance of performing a service

a. debits Cash and credits Unearned (Deferred) Service Revenue.
b. debits Unearned (Deferred) Service Revenue and credits Accounts Payable
c. debits Cash and credits Prepaid Insurance.
d. debits Cash and credits Accounts Receivable.

5. Barnes Company’s trial balance reported the following balances at the end of its first year:
Cash $14,000
Prepaid insurance 700
Accounts receivable 3,500
Accounts payable 2,800
Notes payable 4,200
Common stock 5,400
Dividends 700
Revenues 29,000
Expenses 17,500

What amount did Barnes Company’s trial balance show as total credits?
a. $42,100
b. $41,400
c. $40,700
d. $42,800

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 6. At February 1, 2022, the balance in Goebel Inc.'s supplies account was $3,500. During February. Goebel
purchased supplies of $3,000 and used supplies of $4,000. At the end of February, the balance in the
Supplies account should be
a. $3,500 debit.
b. $4,500 credit.
c. $10,500 debit.
d. $2,500 debit.

7. At October 1, 2022, Metz Industries had an Accounts Payable balance of $140,000. During the month, the
company made purchases on account of $100,000 and made payments on account of $160,000. At October
31, 2022, the Accounts Payable balance is
a. $140,000 debit
b. $20,000 credit
c. $80,000 credit
d. $160,000 credit

8. Which of the following would not affect a company's net income?

A. A change in the company's income taxes.
B. Changing the selling price of a company's product.
C. Paying a dividend to shareholders.
D. Advertising a new product.

9. Financing that individuals or institutions have provided to a company is:

A. always classified as liabilities.
B. classified as liabilities when provided by creditors and shareholders' equity when provided by owners.
C. always classified as shareholders' equity.
D. classified as shareholders' equity when provided by creditors and liabilities when provided by owners.

10. A company buys equipment for $500,000 and signs a promissory note for the full amount. How does this
transaction affect the accounting equation?
A. Assets:  Property and equipment,  Cash; Liabilities: no change; Shareholders' Equity: no change.
B. Assets:  Property and equipment; Liabilities:  Notes payable; Shareholders' Equity; no change.
C. Assets:  Property and equipment; Liabilities: no change; Shareholders' Equity:  Retained earnings.
D. Assets:  Property and equipment; Liabilities: no change; Shareholders' Equity:  Contributed capital.

11. When a company has performed a service but has not yet received payment, it
a. debits accounts receivable and credits service revenue.
b. debits revenue from services and credits accounts receivable.
c. debits revenue from services and credits accounts payable.
d. makes no entry until the cash is received.

12. Franklin Company purchased equipment for $45,000, paying cash of $5,000 and signing a note payable for the
balance due. This transaction
a. increases assets, liabilities and stockholder’s equity.
b. increases assets and liabilities; decreases stockholders’ equity.
c. increases assets and liabilities.
d. has no effect on the basic accounting equation.

13. Retained earnings at the end of the period is equal to

a. retained earnings at the beginning of the period plus net income minus liabilities.
b. retained earnings at the beginning of the period plus net income minus dividends.
c. net income.
d. assets plus liabilities.

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 14. Pinson Company began the year 2022 with retained earnings of $670,000. During the year, the company sold
additional shares of stock for $1,000,000, recorded revenues of $600,000, expenses of $380,000, and paid
dividends of $140,000. What was Pinson’s retained earnings balance at the end of 2022?
a. $1,030,000
b. $750,000
c. $1,130,000
d. $600,000

15. On January 14, Decker industries purchased supplies of $500 on account. The entry to record the purchase will
include
a. a debit to Supplies and a credit to Accounts Payable.
b. a debit to Supplies Expense and a credit to Accounts Receivable.
c. a debit to Supplies and a credit to Cash.
d. a debit to Accounts Receivable and a credit to Supplies.

16. The primary purpose of the trial balance is to

a. disclose the complete effect of a transaction in one place.
b. make sure a journal entry is not posted twice.
c. transfer journal entries to the ledger accounts.
d. prove the equality of the debit and credit amounts after posting.

17. Virginian Enterprises received a bill from Livingstone Landscaping for $14,500. They paid $5,000 on receipt of
the bill and agreed to pay the remainder by the end of the month. This transaction
a. decreases assets, liabilities and stockholder’s equity.
b. increases liabilities; decreases assets and stockholders’ equity.
c. increases assets and liabilities.
d. has no effect on the basic accounting equation.

18. In September, a customer signed a contract to have his house painted and paid for the job in October. The
painting company bought the paint in August on account and paid for it in September. The painting company
painted the house in November. According to the revenue and matching principles, the painting company should
record:
A. the revenues in November and the expenses in September.
B. the revenues and the expenses in September.
C. the revenues and the expenses in November.
D. the revenues in September and the expenses in August.

19. The Fastbank Motorcycle Company (FMC) receives a $10 million order from dealers wanting to buy its most
popular model on credit. No money changes hands. Due to excess demand, FMC cannot supply the motorcycles
until next quarter. How will these events affect the balance sheet?
A. Accounts Receivable will increase by $10 million this quarter and Inventories will decrease next quarter.
B. Both Accounts Receivable and Accounts Payable will increase by $10 million this quarter.
C. Both Accounts Receivable and Shareholders' Equity will increase by $10 million this quarter.
D. These events will not impact the balance sheet this quarter.

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 20. Customers paid $8,000 on their accounts. Which accounts of the customers are affected by this transaction?
A. Revenue and Retained Earnings increase by $8,000.
B. Cash and Revenue increase $8,000. Liabilities and Expenses increase by $8,000.
C. Cash increases by $8,000 and Accounts Receivable decreases by $8,000. Revenue and Retained
Earnings are unchanged.
D. Revenue and Retained Earnings decrease by $8,000.

21. In a study session, a classmate makes this statement “Dividends are listed as expenses on the income statement.”
What is your best response to this statement?
a. I’ve been struggling with that concept and I feel that dividends should be shown on the balance sheet as
assets.
b. You are right. Revenues and expenses are shown on the income statement. Dividends are a cost of
generating revenues and that makes them an expense. Why else would a corporation pay dividends?
c. Dividends represent a portion of corporate profits paid to the shareholders. They belong on the
retained earnings statement.
d. Dividends are deducted from retained earnings on the balance sheet.

22. During September 2022, Blowing Rock Diner’s total liabilities decreased by $75,000 and its stockholders’ equity
increased by $15,000. The company’s total assets must change by what amount and in what direction during
that same period?
a. $60,000 decrease
b. $60,000 increase
c. $75,000 increase
d. $90,000 increase

23. All of the following are interrelationships that are important to understand when preparing financial statements
except
a. the net income from the income statement is used in the retained earnings statement.
b. the ending retained earnings from the retained earnings statement is used in the stockholder's equity
section of the balance sheet.
c. the cash on the balance sheet should be equal to the cash at the end of the period on the statement of
cash flows.
d. all of the payments on the balance sheet should be equal to the cash payments for operating
activities on the statement of cash flows.

24. Your company buys a $2 million warehouse paying $300,000 in cash and issuing $1.7 million in promissory
notes. This will be posted as:
A. $2 million credited and $300,000 debited to assets; $1.7 million debited to liabilities.
B. $2 million debited to assets and $2 million credited to liabilities.
C. $2 million debited and $300,000 credited to assets; $1.7 million credited to liabilities.
D. $2 million credited to assets and $2 million debited to liabilities.

25. Park & Company was recently formed with a $5,000 investment in the company by shareholders. The company
then borrowed $2,000 from a local bank, purchased $1,000 of supplies on account, and also purchased $5,000
of equipment by paying $2,000 in cash and signing a promissory note for the balance. Based on these
transactions, the company's total assets as of now are:
A. $7,000.
B. $9,000.
C. $10,000.
D. $11,000.

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