DeAnza College

ACCT 1A

CHAPTER 1

1)The debt created by a business when it makes a purchase on account is referred to as an a.expense payable

b.account receivable

c.asset

d.account payable

2. If total liabilities decreased by $23,602 during a period of time and owner's equity increased by $33,738 during the same period, the amount and direction (increase or decrease) of the period's change in total assets would be a

1. $10,136 decrease
2. $23,602 increase
3. $10,136 increase ( Assets = Liabilities + Owner's Equity = –$23,602 + $33,738 = $10,136 ; Change in assets = +$10,136 )
4. $23,602 decrease

3. Gomez Service Company paid its first installment on a note payable of $2,000. How will this transaction affect the accounting equation?

a.increase in liabilities (Notes Payable) and decrease in assets (Cash)

b.decrease in assets (Cash) and decrease in owner's equity (Note Payable Expense) c.decrease in assets (Cash) and decrease in assets (Notes Receivable)

d.decrease in assets (Cash) and decrease in liabilities (Notes Payable)

4. The asset created by a business when it makes a sale on account is termed a.prepaid expense

b.unearned revenue

c.accounts payable

d.accounts receivable

5. Which of the following is the best description of accounting's role in business? a.Accounting is not responsible for providing any form of information to users. That is the

role of the Information Systems Department.

b.Accounting helps in decreasing the credit risk of the company.

c.Accounting provides stockholders with information regarding the market value of the company's stocks.

d.Accounting provides information to managers to operate the business and to other users to make decisions regarding the economic condition of the company.

6. Donner Company is selling a piece of land adjacent to its business premises. An appraisal reported the market value of the land to be $219,271. The Focus Company initially offered to buy the land for $175,293. The companies settled on a purchase price of

$214,354. On the same day, another piece of land on the same block sold for $228,335. Under the cost concept, at what amount should the land be recorded in the accounting records of Focus Company?

a.$219,271 b.$175,293 c.$228,335 d.$214,354

7. Which of the following is a guideline for behaving ethically?
   1. Identify the consequences of a decision and its effect on others.

1. 2. Consider your obligations and responsibilities to those affected by the decision.

0. 3. Identify your decision based on personal standards of honesty and fairness.
1. I, II, and III

b.I and II

c.I and III

d.II and III

8. The initials GAAP stand for

a.generally accepted accounting principles

b.general accounting procedures c.generally accepted plans

d.generally accepted accounting practices

9. Which of the following is not a business transaction?

a.Erin pays her monthly personal credit card bill.

b.Erin deposits $15,000 in a bank account in the name of Erin's Lawn Service. c.Erin provided services to customers earning fees of $600.