The cost principle requires that when assets are acquired, they be recorded at a-appraisal value. B. Historical cost. C. Market price. D. Exchange price paid. 2. The economic entity assumption requires that the activities a. Of deferent entitles can be combined if all the entitles are corporations. B. Must be reported to the Securities and Exchange Commission. C. Of a sole proprietorship cannot be distinguished from the personal economic events of its owners. D. Of an entity be kept separate from the activities of its owner.
Owner’s equity is best depicted by the following: Assets = Liabilities. A. B. Liableness + Assets. Residual equity + Assets. C. D. Assets – Liabilities. 4. The basic accounting equation cannot be restated as Assets – Liabilities = Owner’s Equity. Assets – Owner’s Equity = Liabilities. Owner’s Equity + Liabilities = Assets. Assets + Liabilities = Owner’s Equity. If total liableness increased by SSL 5,000 and owners equity Increased by $5,000 5. During a period of time, then total assets must change by what amount and direction during that same period? A.
$20,000 decrease $20,000 increase $25,000 increase $30,000 Increase .
If total liableness decreased by $1 5,000 and owner’s equity Increased by $5,000 during that same period? A. $20,000 increase $10,000 decrease c. $10,000 increase $15,000 decrease 7. As of June 30, 2009, Dallas Company has assets of $100,000 and owners equity of $5,000. What are the liableness for Dallas Company as of June 30, 2009? A. $85,000 $90,000 $95,000 $100,000 8. If total liabilities increased by $4,000, then assets must have decreased by $4,000. C. Assets must have increased by $4,000, or owner’s equity must have decreased by $4,000. D. Assets and owner’s equity each increased by $2,000. 9.
Collection of a $500 Accounts Receivable increases an asset $500; decreases an asset 0.
B. Increases an asset $500; decreases a liability $500. C. Decreases a liability $500; increases owner’s equity $500. D. Decreases an asset $500; decreases a liability $500. 10. Sara’s Service Shop started the year with total assets of $100,000 and total liabilities of $80,000. During the year, the business recorded $210,000 in revenues, $110,000 in expenses, and owner drawings of $20,000. Owner’s equity at the end of the year was a. $120,000. $100,000. C. $80,000. $90,000. 1 1 . At October 1, Smithson Enterprises reported owner’s equity of $35,000.
During October, no additional investments were made and the company earned net income of $4,000. If owner’s equity at October 31 totals $32,000, what amount of owner drawings were made during the month? A. $0 $1,000 $3,000 $7,000 EXERCISE 1 Baroness Hospital was started on May 1 by N Barron. A summary of May transactions is presented below. 1. Invested $10,000 cash to start the hospital. 2. Purchased medical equipment for $5,000 cash. 3. Paid $400 cash for May rent. 4. Paid $500 cash for supplies. 5. Incurred $250 of advertising expenses in the Beacon News on account. 6. Received 5,100 in cash from patients for medical services. . Withdrew $1,000 cash for personal use. 8. Paid part-time employee salaries $2,000. 9. Paid utility bills $140. 10. Provided medical service on account to patients $750. 1 1 . Collected cash of $120 for medical services billed in transaction (10). Required: a. Show the effect of each transaction on the accounting equation. Prepare the financial statements of Barron Company at May 31 . EXERCISE 2 II. Taylor started a programming office operating as a sole proprietorship. The following transactions took place during January 2011 : purchased $600 of office supplies on credit. 3.
Jan 5, purchased equipment for $12,000, paying $3,000 in cash and the remainder on credit. 4. Jan 8, services billed to customers amount to $6,000. 5. Jan 12, paid $1,050 in cash for the current month’s rent. 6. Jan 18, paid $300 cash on account for office supplies purchased in Jan 3. 7. Jan 21, received a bill for $900 for advertising for the current month. 8. Jan 27, paid $3,300 cash for salaries. 9. Jan 30, Taylor withdrew $1,800 from the business for personal use. 10. Jan 31, received $4,500 cash from a customers in payment for services billed in Jan 8. Required: Show the effect of the above transactions on the accounting equation.