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Unlimited liability is an advantage of a sole proprietorship. ×A sole proprietorship is a business owned by one or more persons. ×As a general rule, revenues should not be recognized in the accounting records until it is received in cash. ×In the partnership form of business, the owners are called stockholders. ×The area of accounting aimed at serving the decision making needs of internal users is:A Financial accounting.B Managerial accounting.C External auditing.D SEC reporting.E Bookkeeping.The accounting concept that requires financial statement information to be supported by independent, unbiased evidence other than someone's belief or opinion is:A Business entity assumption.B Monetary unit assumption.C Going-concern assumption.D Time-period assumption.E ObjectivityExternal users of accounting information include all of the following except:A Shareholders.B Customers.C Purchasing managers.D Government regulators.E Creditors.The accounting assumption that requires every business to be accounted for separately from other business entities, including its owner or owners is known as the:A Time-period assumption.B Business entity assumption.C Going-concern assumption.D Revenue recognition principle.E Cost principle.If a parcel of land that was originally acquired for $85,000 is offered for sale at $150,000, is assessed for tax purposes at $95,000, is recognized by its purchasers as easily being worth $140,000, and is sold for $137,000, the land should be recorded in the purchaser's books at:A $95,000.B $137,000.C $138,500.D $140,000.E $150,000.The Maxim Company acquired a building for $500,000. Maxim had the building appraised, and found that the building was easily worth $575,000. The seller had paid $300,000 for the building 6 years ago. Which accounting principle would require Maxim to record the building on its records at $500,000?A Monetary unit assumption.B Going-concern assumption.C Cost principle.D Business entity assumption.E Revenue recognition principle.If the liabilities of a business increased $75,000 during a period of time and the owner's equity in the business decreased $30,000 during the same period, the assets of the business must have:A Decreased $105,000.B Decreased $45,000.C Increased $30,000.D Increased $45,000.E Increased $105,000.If the assets of a business increased $89,000 during a period of time and its liabilities increased $67,000 during the same period, equity in the business must have:A Increased $22,000.B Decreased $22,000.C Increased $89,000.D Decreased $156,000.E Increased $156,000. If a company paid $38,000 of its accounts payable in cash, what was the effect on the assets, liabilities, and equity?A Assets would decrease $38,000, liabilities would decrease $38,000, and equity would decrease $38,000.B Assets would decrease $38,000, liabilities would decrease $38,000, and equity would increase $38,000.C Assets would decrease $38,000, liabilities would decrease $38,000, and equity would not change.D There would be no effect on the accounts because the accounts are affected by the same amount.E None of these.How would the accounting equation of Boston Company be affected by the billing of a client for $10,000 of consulting work completed?A +$10,000 accounts receivable, -$10,000 accounts payable.B +$10,000 accounts receivable, +$10,000 accounts payable.C +$10,000 accounts receivable, +$10,000 cash.D +$10,000 accounts receivable, +$10,000 revenue.E +$10,000 accounts receivable, -$10,000 revenueAssets created by selling goods and services on credit are:A Accounts payable.B Accounts receivable.C Liabilities.D Expenses.E Equity.On June 30 of the current year, the assets and liabilities of Phoenix, Inc. are as follows: Cash $20,500; Accounts Receivable, $7,250; Supplies, $650; Equipment, $12,000; Accounts Payable, $9,300. What is the amount of owner's equity as of June 30 of the current year?A $8,300B $13,050C $20,500D $31,100E $40,400The excess of expenses over revenues for a period is:A Net assets.B Equity.C Net loss.D Net income.E A liability.The accounting equation implies that: Assets + Liabilities = Equity.×owner's equity are the owner's claim on assets.√Increases in liability accounts are recorded as debits.×Crediting an expense account decreases it.√If insurance coverage for the next three years is paid for in advance, the amount of the payment is debited to an asset account called Prepaid Insurance.√The purchase of supplies on credit should be recorded with a debit to Supplies and a credit to Accounts Payable.√If a company provides services to a customer on credit the selling company should credit Accounts Receivable.×A record of the increases and decreases in a specific asset, liability, equity, revenue, or expense is a(n):A Journal.B Posting.C Trial balance.D Account.E Chart of accounts. Which of the following statements is correct?A When a future expense is paid in advance, the payment is normally recorded in a liability account called Prepaid Expense.B Promises of future payment by the buyer are called accounts receivable.C Increases and decreases in cash are always recorded in the owner's capital account.D An account called Land is commonly used to record increases and decreases in both the land and buildings owned by a business.E Accrued liabilities include accounts receivable.Prepaid expenses are:A Payments made for products and services that do not ever expire.B Classified as liabilities on the balance sheet.C Decreases in equity.D Assets that represent prepayments of future expenses.E Promises of payments by customers.A debit:A Always increases an account.B Is the right-hand side of a T-account.C Always decreases an account.D Is the left-hand side of a T-account.E Is not need to record a transaction.Which of the following statements is incorrect?A The normal balance of accounts receivable is a debit.B The normal balance of owner's withdrawals is a debit.C The normal balance of unearned revenues is a credit.D The normal balance of an expense account is a credit.E The normal balance of the owner's capital account is a credit.The first step in the processing of a transaction is to analyze the transaction and source documents.√Preparation of a trial balance is the first step in the analyzing and recording process.×Source documents provide evidence of business transactions and are the basis for accounting entries.√A revenue account normally has a debit balance.×Accounts are normally decreased by debits.×All of the following statements regarding a sales invoice are true except:A A sales invoice is a type of source document.B A sales invoice is used by sellers to record the sale.C A sales invoice is used by buyers to record purchases.D A sales invoice gives rise to an entry in the accounting process.E A sales invoice does not provide objective evidence about a transaction.The accounting process begins with:A Analysis of business transactions and source documents.B Preparing financial statements and other reports.C Summarizing the recorded effect of business transactions.D Presentation of financial information to decision-makers.E Preparation of the trial balance.Source documents include all of the following except:A Sales tickets.B Ledgers.C Checks.D Purchase orders.A ledger is:A A record containing increases and decreases in a specific asset, liability, equity, revenue, or expense item.B A journal in which transactions are first recorded.C A collection of documents that describe transactions and events entering the accounting process.D A list of all accounts with their debit balances at a point in time.E A record containing all accounts and their balances used by a company.Robert Haddon contributed $70,000 in cash and land worth $130,000 to open a new business, RH Consulting. Which of the following general journal entries will RH Consulting make to record this transaction?A Debit Assets $200,000; credit Haddon, Capital, $200,000.B Debit Cash and Land, $200,000; credit Haddon, Capital, $200,000.C Debit Cash $70,000; debit Land $130,000; credit Haddon, Capital, $200,000.D Debit Haddon, Capital, $200,000; credit Cash $70,000, credit Land, $130,000.On January 1 a company purchased a five-year insurance policy for $1,800 with coverage starting immediately. If the purchase was recorded in the Prepaid Insurance account, and the company records adjustments only at year-end, the adjusting entry at the end of the first year is:A Debit Prepaid Insurance, $1,800; credit Cash, $1,800.B Debit Prepaid Insurance, $1,440; credit Insurance Expense, $1,440.C Debit Prepaid Insurance, $360; credit Insurance Expense, $360.D Debit Insurance Expense, $360; credit Prepaid Insurance, $360.E Debit Insurance Expense, $360; credit Prepaid Insurance, $1,440.A company had no office supplies available at the beginning of the year. During the year, the company purchased $250 worth of office supplies. On December 31, $75 worth of office supplies remained. How much should the company report as office supplies expense for the year?A $75.B $125.C $175.D $250On April 1, a company paid the $1,350 premium on a three-year insurance policy with benefits beginning on that date. What will be the insurance expense on the annual income statement for the year ended December 31?A $1,350.00.B $450.00.C $1,012.50.D $337.50.If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Fees, the end-of-period adjusting entry to record the portion of those fees that has been earned is:A Debit Cash and credit Legal Fees Earned.B Debit Cash and credit Unearned Legal Fees.C Debit Unearned Legal Fees and credit Legal Fees Earned.D Debit Legal Fees Earned and credit Unearned Legal Fees.E Debit Unearned Legal Fees and credit Accounts Receivable.The periodic expense created by allocating the cost of plant and equipment to the periods inwhich they are used, representing the expense of using the assets, is called:A Accumulated depreciation.B A contra account.C The matching principle.D Depreciation expense.An account linked with another account that has an opposite normal balance and that is subtracted from the balance of the related account is a(n):A Accrued expense.B Contra account.C Accrued revenue.D Intangible asset.On June 30 of the current calendar year, Apricot Co. paid $7,500 cash for management services to be performed over a two-year period. Apricot follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. The adjusting entry on December 31 for Apricot would include:A A debit to an expense for $5,625.B A debit to a prepaid expense for $5,625.C A debit to an expense for $1,875.D A debit to a prepaid expense for $1,875.On June 30 Apricot Co. paid $7,500 cash for management services to be performed over a two-year period. Apricot follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. On June 30 Apricot should record:A A credit to an expense for $7,500.B A debit to an expense for $7,500.C A debit to a prepaid expense for $7,500.D A credit to a prepaid expense for $7,500. If a company failed to make the end-of-period adjustment to remove from the Unearned Management Fees account the amount of management fees that were earned, this omission would cause:A An overstatement of net income.B An overstatement of assets.C An overstatement of liabilities.D An overstatement of equity.An adjusting entry could be made for each of the following except:A Prepaid expenses.B Depreciation.C Owner withdrawals.D Unearned revenues.Revenues are:A The same as net income.B The excess of expenses over assets.C Resources owned or controlled by a companyD The increase in equity from a company’s earning activities.E The costs of assets or services used.Another name for equity is:A Net income.B Expenses.C Net assets.D Revenue.E Net loss.A payment to an owner is called a(n):A Liability.B Withdrawal.C Expense.D Contribution.E Investmen The assets of a company total $700,000; the liabilities, $200,000. What are the claims of the owners?A 900,000.B $700,000.C $500,000.D 200,000.E It is impossible to determine unless the amount of this owners' investment is known. Photometer Company paid off $30,000 of its accounts payable in cash. What would be the effectsof this transaction on the accounting equation?A Assets, $30,000 increase; liabilities, no effect; equity, $30,000 increase.B Assets, $30,000 decrease; liabilities, $30,000 decrease; equity, no effect.C Assets, $30,000 decrease; liabilities, $30,000 increase; equity, no effect.D Assets, no effect; liabilities, $30,000 decrease; equity, $30,000 increase.E Assets, $30,000 decrease; liabilities, no effect; equity $30,000 decrease.Zion Company has assets of $600,000, liabilities of $250,000, and equity of $350,000. It buys office equipment on credit for $75,000. What would be the effects of this transaction on the accounting equation?A Assets increase by $75,000 and expenses increase by $75,000.B Assets increase by $75,000 and expenses decrease by $75,000.C Liabilities increase by $75,000 and expenses decrease by $75,000.D Assets decrease by $75,000 and expenses decrease by $75,000.E Assets increase by $75,000 and liabilities increase by $75,000.Every business transaction leaves the accounting equation in balance. √Owner's investments are increases in equity from a company's earnings activities. ×Owner’s withdrawals are expenses. ×Net income occurs when revenues exceed expenses. √In a double-entry accounting system, the total amount debited must always equal the total amount credited. √Increases in liability accounts are recorded as credits. √Asset accounts normally have credit balances and revenue accounts normally have debit balances. ×If a company purchases land paying cash, the journal entry to record this transaction will include a debit to Cash. ×If a company provides services to a customer on credit the selling company should debit cash. ×When a company bills a customer for $600 for services rendered, the journal entry to record this transaction will include a $600 debit to Services Revenue. ×A formal promise to pay (in the form of a promissory note) a future amount is a(n):A Unearned revenue.B Prepaid expense.C Credit account.D Note payable.A credit is used to record:A An increase in an expense account.B A decrease in an asset account.C A decrease in an unearned revenue account.D A decrease in a revenue account.Rocky Industries received its telephone bill in the amount of $300, and immediately paid it. Rocky's general journal entry to record this transaction will include aA Debit to Telephone Expense for $300.B Credit to Accounts Payable for $300.C Debit to Cash for $300.D Credit to Telephone Expense for $300. Management Services, Inc. provides services to clients. On May 1, a client prepaid Management Services $60,000 for 6-months services in advance. Management Services' general journal entry to record this transaction will include a:A Debit to Unearned Management Fees for $60,000.B Credit to Management Fees Earned for $60,000.C Credit to Cash for $60,000.D Credit to Unearned Management Fees for $60,000。