MGMT 200 EXAM 1 QUESTIONS AND
CORRECT ANSWERS
Which of the following describes the purpose(s) of closing entries?
a. Reduce the balances of the temporary accounts to zero to prepare them for
measuring activity in the next period.
b. Adjust the balances of asset and liability accounts for unrecorded activity during the
period.
c. Transfer the balances of temporary accounts to common stock.
d. Transfer the balances of temporary accounts to common stock; reduce the balances
of the temporary accounts to zero to prepare them for measuring activity in the next
period - Answer-a. Reduce the balances of the temporary accounts to zero to prepare
them for measuring activity in the next period.
After closing entries are posted to the accounts in the general ledger, all asset and
liability accounts have a balance of zero.
a. True
b. False - Answer-b. false
Assume that J&K, Inc. performed advertising services for a bakery on account for
$1,500. How would this transaction affect J&K, Inc.?
a. Increase both assets and liabilities by $1,500.
b. Increase both assets and equity by $1,500.
c. Increase both liabilities and equity by $1,500.
d. Decrease liabilities by $1,500, and increase equity by $1,500. - Answer-b. increase
both assets and equity by $1,500
Which of the following is a business event that is not considered a recordable
transaction?
a. a company pays an employee for work performed
b. a customer places an order for a product
c. a company receives a product previously ordered
d. a customer purchases a service - Answer-b. a customer places an order for a product
Using the information below from the accounting records of Gulf Corporation,
stockholders' claims to the company's resources amount to:
Assets=$1,000,000
Liabilities=$500,000
Net income=$200,000
Retained earnings=$200,000
,a. $1,000,000
b. $300,000
c. $250,000
d. $500,000 - Answer-d. $500,000
The financial statements of Royce Corporation contain the following. How much is its
net income?
Wages payable=$11,000
Revenues=$15,000
Accounts receivable=$16,000
Expenses=$10,000
Cash=$7,000
a. $6,000
b. $5,000
c. $22,000
d. $7,000 - Answer-b. $5,000
How many of the following accounts would appear in a year-end income statement?
Accounts Payable, Salaries Expense, Cash, Common Stock, Service Revenue, Truck
Expense, Retained Earnings, Utilities Expense
a. five
b. four
c. three
d. two - Answer-b. four
Given the information below about Woodcrest Corporation, what was the amount of
dividends the company paid in the current period?
Beginning retained earnings=$50,000
Ending retained earnings=$100,000
Decrease in cash=$50,000
Income=$75,000
Change in stockholders' equity=$15,000
A. $125,000
B. $50,000
C. $25,000
D. $15,000 - Answer-c. $25,000
accounting is a system of maintaining records of a company's operations and
communicating that to decision makers.
true or false? - Answer-true
what makes accounting a valuable discipline?
a. it stores financial information in accounts
b. provides information to make decisions
c. records events and transactions
, d. produces financial reports - Answer-b. provides information to make decisions
financial accounting does not deal with which of the following?
a. measuring a company's economic activity
b. preparing financial reports
c. communicating financial results to investors
d. providing information to internal users - Answer-d. providing information to internal
users
which of the following groups is NOT among the external users for whom financial
statements are prepared?
a. creditors
b. managers
c. regulators
d. investors
e. customers - Answer-b. managers
product profitability reports for a business are considered
a. financial accounting
b. managerial accounting - Answer-b. managerial accounting
preparing a budget for a business is considered
a. financial accounting
b. managerial accounting - Answer-b. managerial accounting
which of the following would NOT be an objective of external users reading a company's
financial statements
a. understanding the current financial statements of the company
b. assessing the company's contribution to social politics
c. predicting the company's future financial performance
d. evaluating the company's ability to generate cash from the business - Answer-b.
assessing the company's contribution to social politics
what is the primary purpose of financial accounting?
a. communicate business activities to internal management
b. determine the amount of tax liabilities owed to various government jurisdictions
c. measure the profitability of the company in order to assist employees with making
decisions
d. measure business activities and communicate those measures to external users to
make decisions - Answer-d. measure business activities and communicate those
measures to external users to make decisions
when a company receives a product previously ordered, a recordable accounting
transaction has occurred
a. yes
b. no - Answer-a. yes
CORRECT ANSWERS
Which of the following describes the purpose(s) of closing entries?
a. Reduce the balances of the temporary accounts to zero to prepare them for
measuring activity in the next period.
b. Adjust the balances of asset and liability accounts for unrecorded activity during the
period.
c. Transfer the balances of temporary accounts to common stock.
d. Transfer the balances of temporary accounts to common stock; reduce the balances
of the temporary accounts to zero to prepare them for measuring activity in the next
period - Answer-a. Reduce the balances of the temporary accounts to zero to prepare
them for measuring activity in the next period.
After closing entries are posted to the accounts in the general ledger, all asset and
liability accounts have a balance of zero.
a. True
b. False - Answer-b. false
Assume that J&K, Inc. performed advertising services for a bakery on account for
$1,500. How would this transaction affect J&K, Inc.?
a. Increase both assets and liabilities by $1,500.
b. Increase both assets and equity by $1,500.
c. Increase both liabilities and equity by $1,500.
d. Decrease liabilities by $1,500, and increase equity by $1,500. - Answer-b. increase
both assets and equity by $1,500
Which of the following is a business event that is not considered a recordable
transaction?
a. a company pays an employee for work performed
b. a customer places an order for a product
c. a company receives a product previously ordered
d. a customer purchases a service - Answer-b. a customer places an order for a product
Using the information below from the accounting records of Gulf Corporation,
stockholders' claims to the company's resources amount to:
Assets=$1,000,000
Liabilities=$500,000
Net income=$200,000
Retained earnings=$200,000
,a. $1,000,000
b. $300,000
c. $250,000
d. $500,000 - Answer-d. $500,000
The financial statements of Royce Corporation contain the following. How much is its
net income?
Wages payable=$11,000
Revenues=$15,000
Accounts receivable=$16,000
Expenses=$10,000
Cash=$7,000
a. $6,000
b. $5,000
c. $22,000
d. $7,000 - Answer-b. $5,000
How many of the following accounts would appear in a year-end income statement?
Accounts Payable, Salaries Expense, Cash, Common Stock, Service Revenue, Truck
Expense, Retained Earnings, Utilities Expense
a. five
b. four
c. three
d. two - Answer-b. four
Given the information below about Woodcrest Corporation, what was the amount of
dividends the company paid in the current period?
Beginning retained earnings=$50,000
Ending retained earnings=$100,000
Decrease in cash=$50,000
Income=$75,000
Change in stockholders' equity=$15,000
A. $125,000
B. $50,000
C. $25,000
D. $15,000 - Answer-c. $25,000
accounting is a system of maintaining records of a company's operations and
communicating that to decision makers.
true or false? - Answer-true
what makes accounting a valuable discipline?
a. it stores financial information in accounts
b. provides information to make decisions
c. records events and transactions
, d. produces financial reports - Answer-b. provides information to make decisions
financial accounting does not deal with which of the following?
a. measuring a company's economic activity
b. preparing financial reports
c. communicating financial results to investors
d. providing information to internal users - Answer-d. providing information to internal
users
which of the following groups is NOT among the external users for whom financial
statements are prepared?
a. creditors
b. managers
c. regulators
d. investors
e. customers - Answer-b. managers
product profitability reports for a business are considered
a. financial accounting
b. managerial accounting - Answer-b. managerial accounting
preparing a budget for a business is considered
a. financial accounting
b. managerial accounting - Answer-b. managerial accounting
which of the following would NOT be an objective of external users reading a company's
financial statements
a. understanding the current financial statements of the company
b. assessing the company's contribution to social politics
c. predicting the company's future financial performance
d. evaluating the company's ability to generate cash from the business - Answer-b.
assessing the company's contribution to social politics
what is the primary purpose of financial accounting?
a. communicate business activities to internal management
b. determine the amount of tax liabilities owed to various government jurisdictions
c. measure the profitability of the company in order to assist employees with making
decisions
d. measure business activities and communicate those measures to external users to
make decisions - Answer-d. measure business activities and communicate those
measures to external users to make decisions
when a company receives a product previously ordered, a recordable accounting
transaction has occurred
a. yes
b. no - Answer-a. yes
