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The following questions are meant to help you practice answering multiple choice questions over the A201 material. These questions are not meant to be a substitute for a thorough review of the course material including reading the chapters, answering end of chapter exercises, and reviewing course notes.

1) Which one of the following groups of accounts contains only assets? a) Equipment, patents, accounts receivable
b) Accounts receivable, building, retained earnings
c) Accounts payable, notes payable, contributed capital d) Retained earnings, goodwill, and accounts payable

2) At the end of 2001, Kazlo Company has total assets and liabilities at $40,000 and $13,000, respectively. Kazlo reported net income for 2002 in the amount of $10,000. How much is stockholders’ equity at the end of 2002? e) $20,000

f) $22,000
g) $31,000
h) $37,000.

3) The major accounting difference between interest paid to creditors and dividends paid to owners is that interest paid i) decreases retained earnings and dividends paid increases retained earnings. j) impacts cash flows, while dividends do not.

k) is not on the income statement while dividends paid are. l) is on the income statement and dividends paid are not.

4) Watson Company has retained earnings of $12,000, total assets totaling $38,000, and total liabilities of $20,000. How much is total stockholders’ equity? m) $6,000
n) $12,000
o) $18,000
p) $32,000

5) If the beginning and ending balances in retained earnings are $12,000 and $10,000, respectively, and dividends during the year are $10,000, then net income for the year is q) $14,000.

r) $8,000.
s) $18,000.
t) $32,000.

6) By recognizing the economic effects of inflation on the accounting financial statements, which accounting assumption is ignored? u) Economic entity assumption
v) Going concern assumption
w) Stable dollar assumption
x) Fiscal period assumption

7) Expensing the cost of a pencil holder that cost $1.25 instead of capitalizing it as a plant asset and depreciating it over its estimated useful life of 10 years y) violates the economic entity assumption.

z) violates GAAP since pencil holders are important assets. {) is justified because of materiality.
|) is appropriate because of the stable dollar assumption.

8) Below are several accounts from Ragged Company’s accounting records.

Total assets, end of year$100,000
Total liabilities, end of year36,000
Capital stock, end of year 12,000
Retained earnings, beginning of year18,000
Dividends for the period 31,000
Net income65,000

The amount of retained earnings at the end of the year is
}) $34,000.
~) $40,000.
) $52,000.
) $64,000.

9) Which one of the following statements best describes the concept of consistency? ) When uncertainty exists, understating assets, overstating liabilities, accelerating recognition of losses, and delaying recognition of gains is preferred. ) Accounting numbers are consistently market value. ) Different firms use identical accounting measurement methods for similar events. ) Similar events are measured using identical accounting procedures from period to period.

10) Which one of the following statements best describes objectivity? ) When uncertainty exists, understating assets, overstating liabilities, accelerating recognition of losses, and delaying recognition of gains is preferred. ) The measurement of an event is verifiable and reliable. ) Different firms use identical accounting measurement methods for similar events. )...
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