Connect Financial Accounting Chapter 1 Quiz

Q1. Cragmont has beginning equity of $277,000, net income of $63,000, dividends of $25,000 and no additional investments by stockholders during the period. Its ending equity is:

  • $365,000
  • $239,000
  • $189,000
  • $315,000
  • $277,000

Q2. A company’s balance sheet shows: cash $24,000, accounts receivable $30,000, equipment $50,000, and equity $72,000. What is the amount of liabilities?

  • $104,000
  • $76,000
  • $32,000
  • $68,000
  • $176,000

Q3. The Superior Company acquired a building for $500,000. The building was appraised at a value of $575,000. The seller had paid $300,000 for the building 6 years ago. Which accounting principle would require Superior to record the building on its records at $500,000?

  • Monetary unit assumption
  • Going-concern assumption
  • Measurement (cost) principle
  • Business entity assumption
  • Revenue recognition principle

Q4. The assets of a company total $700,000; the liabilities, $200,000. What are the net assets?

  • $900,000
  • $700,000
  • $500,000
  • $200,000
  • It is impossible to determine unless the amount of stockholder investment is known

Q5. Cage Company had income of $350 million and average invested assets of $2,000 million. Its return on assets (ROA) is:

  • 1.8%
  • 35%
  • 17.5%
  • 5.7%
  • 3.5%

Q6. If equity is $300,000 and liabilities are $192,000, then assets equal:

  • $108,000
  • $192,000
  • $300,000
  • $492,000
  • $792,000

Q7. The accounting equation for Ying Company shows a decrease in its assets and a decrease in its equity. Which of the following transactions could have caused that effect?

  • Cash was received from providing services to a customer.
  • The company paid an amount due on credit.
  • Equipment was purchased for cash.
  • A utility bill was received for the current month, to be paid in the following month.
  • Advertising expense for the month was paid in cash.

Q8. If assets are $99,000 and liabilities are $32,000, then equity equals:

  • $32,000
  • $67,000
  • $99,000
  • $131,000
  • $198,000

Q9. Which of the following accounting principles prescribes that a company record its expenses incurred to generate the revenue reported?

  • Going-concern assumption.
  • Expense recognition (Matching) principle.
  • Measurement (Cost) principle.
  • Business entity assumption
  • Consideration assumption.

Q10. Rushing had income of $150 million and average invested assets of $1,800 million. Its return on assets is:

  • 8.3%
  • 83.3%
  • 12%
  • 120%
  • 16.7%

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