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If the liabilities of a company increased $92,000 during a period of time and equity in the business decreased $30,000 during the same period, did the assets of the company increase or decrease? By what amount?

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Assets increased by ...

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Dawson Electronic Services had revenues of $80,000 and expenses of $50,000 for the year. Its assets at the beginning of the year were $400,000. At the end of the year assets were worth $450,000. Calculate its return on assets.


A) 7.1%
B) 7.5%
C) 6.7%
D) 20.0%
E) 18.8%

F) A) and B)
G) B) and E)

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Identify the risk and the return in each of the following examples. a. Investing $500 in a certificate of deposit at 4.5% interest. b. Placing a $100 bet on an NBA game. c. Investing $10,000 in Microsoft stock. d. Borrowing $20,000 in student loans.

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a. The risk involved is that the investo...

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Determine the net income of a company for which the following information is available for the month of July. Employee salaries expense.... $180,000 Interest expense.................... 10,000 Rent expense........................ 20,000 Consulting revenue............... 400,000


A) $190,000.
B) $210,000.
C) $230,000.
D) $400,000.
E) $610,000.

F) All of the above
G) D) and E)

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Identifying the proper ethical path is usually easy.

A) True
B) False

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For each of the following transactions, identify the effects as reflected in the accounting equation. Use "+" to indicate an increase and "-" to indicate a decrease. Use "A", "L", and "E" to indicate assets, liabilities, and equity, respectively. Part A has been completed as an example. a.  L. Chester inv ested $ 100,000 in a  corporation +A‾ +  E  ‾\begin{array}{llcc} \text { L. Chester inv ested \$ 100,000 in a } &\\ \text { corporation } &\underline{\quad+\mathrm{ A} \quad}& \text { \underline{\quad + \text { E } \quad}} \end{array} b.  Land was purchased for $ 50,000 .  A down payment of $15,000 cash  was made and a note was signed  for the balance. ‾‾\begin{array}{llcc} \text { Land was purchased for \$ 50,000 . } &\\ \text { A down payment of \( \$ 15,000 \) cash } &\\ \text { was made and a note was signed } &\\ \text { for the balance. } &\underline{\quad\quad\quad\quad}&\underline{\quad\quad\quad\quad}\\\end{array} c. Services were rendered to  customers for cash ‾‾\begin{array}{llcc} \text {Services were rendered to } &\\ \text { customers for cash } &\quad\quad\quad\underline{\quad\quad\quad\quad}&\underline{\quad\quad\quad\quad}\end{array} d.  A building was purchased for  cash.‾‾\begin{array}{llcc} \text { A building was purchased for } &\\ \text { cash.} &\quad\underline{\quad\quad\quad\quad}&\underline{\quad\quad\quad\quad}\\\end{array} e. Supplies were purchased for cash. ‾‾\begin{array}{llcc} \text {Supplies were purchased for cash. } &\underline{\quad\quad\quad\quad}&\underline{\quad\quad\quad\quad}\\\end{array} f.  Paid the office secretary’s salary. ‾‾\begin{array}{llcc} \text { Paid the office secretary's salary. } & \underline{\quad\quad\quad\quad}&\underline{\quad\quad\quad\quad}\\\end{array} g.  The amount owed on the land from Part (b) was paid ‾‾\begin{array}{llcc} \text { The amount owed on the land } &\\ \text {from Part (b) was paid } &\underline{\quad\quad\quad\quad}&\underline{\quad\quad\quad\quad}\\\end{array}

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a. +A +E
b. +A +L
c....

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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:


A) $365,000.
B) $239,000.
C) $189,000.
D) $315,000.
E) $277,000.

F) B) and D)
G) All of the above

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If a company is considering the purchase of a parcel of land that was acquired by the seller for $85,000, is offered for sale at $150,000, is assessed for tax purposes at $95,000, is recognized by the purchaser as easily being worth $140,000, and is purchased 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.

F) A) and B)
G) D) and E)

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From an accounting perspective, an event is a happening that affects the accounting equation, but cannot be measured.

A) True
B) False

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There are three major types of business activities. ________________ activities involve the acquisition and disposal of resources that an organization uses to acquire and sell its products or services.

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An example of a financing activity is:


A) Buying office supplies.
B) Obtaining a long-term loan.
C) Buying office equipment.
D) Selling inventory.
E) Buying land.

F) A) and B)
G) C) and D)

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


A) $108,000.
B) $192,000.
C) $300,000.
D) $492,000.
E) $792,000.

F) A) and B)
G) A) and C)

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


A) Going-concern assumption.
B) Matching principle.
C) Cost principle.
D) Business entity assumption.
E) Consideration assumption.

F) B) and E)
G) All of the above

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A resource that the stockholder receives from the company is called a(n) :


A) Liability.
B) Dividend.
C) Expense.
D) Common stock.
E) Investment.

F) A) and E)
G) C) and D)

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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?


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

F) B) and C)
G) C) and E)

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A balance sheet covers activities over a period of time such as a month or year.

A) True
B) False

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An accounting information system communicates data to help users make better decisions.

A) True
B) False

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Operating activities:


A) Are the means organizations use to pay for resources like land, buildings and equipment.
B) Involve using resources to research, develop, purchase, produce, distribute and market products and services.
C) Involve acquiring and disposing of resources that a business uses to acquire and sell its products or services.
D) Are also called asset management.
E) Are also called strategic management.

F) A) and E)
G) B) and D)

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If a company uses $1,300 of its cash to purchase supplies, the effect on the accounting equation would be:


A) Assets increase $1,300 and liabilities decrease $1,300.
B) One asset increases $1,300 and another asset decreases $1,300, causing no effect.
C) Assets decrease $1,300 and equity decreases $1,300.
D) Assets decrease $1,300 and equity increases $1,300
E) Assets increase $1,300 and liabilities decrease $1,300

F) C) and D)
G) B) and E)

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The income statement reports on operating activities at a point in time.

A) True
B) False

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