Question 1

Which of the following accounts would NOT appear on the balance sheet for Wilson Towing Service as of June 30, 2023?

Accepted Answer

Rent Expense

Question 2

Given the following information for Wilson Towing Service: Service Revenue $15,000, Rent Expense $900, Salaries Expense $2,000, and Equipment $25,850, what is the net income for the month ended June 30, 2023?

Accepted Answer

$12,100

Question 3

Which equation correctly represents the basic accounting equation?

Accepted Answer

$Assets = Liabilities + Owner's\ Equity$

Question 4

Shawn Steele paid $15,000 for a RE/MAX Ltd. real estate franchise. How should this transaction be classified?

Accepted Answer

Business transaction to be accounted for by the business

Question 5

If Jon Conlin withdrew $3,000 cash from his business, what is the effect on the accounting equation?

Accepted Answer

Decrease in assets and decrease in owner's equity

Question 6

Which of the following is considered a liability for Wilson Towing Service?

Accepted Answer

Note Payable

Question 7

Steele used $250,000 on a personal mortgage for his residence. How should this transaction be classified?

Accepted Answer

Personal transaction not to be accounted for by the business

Question 8

Which of the following transactions would increase both assets and liabilities?

Accepted Answer

Purchasing office supplies on account

Question 9

Jon Conlin paid $1,000 cash for business stationery. What is the effect on the accounting equation?

Accepted Answer

Decrease in assets; increase in expenses; decrease in owner's equity

Question 10

If Wilson Towing Service had total assets of $40,000 and total liabilities of $10,000 at June 30, 2023, what is the owner's equity?

Accepted Answer

$Owner's\ Equity = Assets - Liabilities = 40,000 - 10,000 = 30,000$

Question 11

Which of the following would NOT be reported in the financial records of Shawn Steele, Realtor?

Accepted Answer

Personal mortgage on his residence

Question 12

Jon Conlin purchased office furniture on account for $7,000, promising to pay within 6 months. What is the immediate effect on the accounting equation?

Accepted Answer

Increase in assets and increase in liabilities

Question 13

Which of the following best describes the purpose of the income statement?

Accepted Answer

To report revenues and expenses and calculate net income for a period

Question 14

If a business paid $2,500 cash for Royal Bank stock, which it had owned for several years, how should this transaction be classified?

Accepted Answer

Personal transaction not to be accounted for by the business

Question 15

Which of the following is a plausible effect of paying $900 for rent expense in cash?

Accepted Answer

Decrease in assets and decrease in owner's equity

Question 16

A business received $10,000 for an audit and submitted the bill for services. The client is expected to pay within 2 weeks. How should this transaction be recorded?

Accepted Answer

Increase in accounts receivable and increase in owner's equity

Question 17

Which of the following is the correct formula for calculating net income?

Accepted Answer

$Net\ Income = Revenues - Expenses$

Question 18

If Wilson Towing Service had service revenue of $15,000, rent expense of $900, and salaries expense of $2,000, and the owner withdrew $3,500, what is the ending owner's equity if beginning owner's equity was $8,000?

Accepted Answer

$Ending\ Owner's\ Equity = Beginning\ Owner's\ Equity + Net\ Income - Withdrawals = 8,000 + (15,000 - 900 - 2,000) - 3,500 = 16,600$

Question 19

Which of the following is NOT a feature of the proprietorship form of business?

Accepted Answer

Limited liability for the owner

Question 20

If a business purchased office supplies worth $500 on account, what is the effect on the accounting equation?

Accepted Answer

Increase in assets and increase in liabilities

Financial Accounting: Practice Problems and Applications

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