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How is Net Income calculated?
a) Revenues – Expenses – Cash Dividends
b) Revenues – Expenses
c) Revenues + Expenses + Cash Dividends
d) Revenues – Expenses + Cash Dividends

b) Revenues – Expenses

What is the primary difference between Current Liabilities and Long-Term Liabilities?
a) Current Liabilities are due within 1 year; Long-Term Liabilities are due after 1 year.
b) Current Liabilities involve interest payments, Long-Term Liabilities do not.
c) Current Liabilities relate to assets, Long-Term Liabilities do not.
d) Current Liabilities are related to cash, while Long-Term Liabilities involve inventory.

a) Current Liabilities are due within 1 year; Long-Term Liabilities are due after 1 year.

Which of the following is NOT included in accrued liabilities?
a) Wages payable
b) Taxes payable
c) Prepaid expenses
d) Interest payable

c) Prepaid expenses

What is a contra asset account?
a) An account that increases total liabilities
b) An account that reduces total assets
c) An account that increases stockholders' equity
d) An account that decreases total liabilities

b) An account that reduces total assets

Which of the following is a disadvantage of corporations?
a) Limited liability for owners
b) Ability to raise capital easily
c) Double taxation
d) Separate legal entity

c) Double taxation

At what value is the purchase of land recorded?
a) List Price
b) Fair Value Price
c) Purchase Price
d) None of the above

c) Purchase Price

Where do the dollar amounts on the Trial Balance come from?
a) Journal entries
b) Ending balances in ledger accounts
c) Beginning balances in ledger accounts
d) Adjusted balances after the statement of cash flows

b) Ending balances in ledger accounts

If you record a debit but not a corresponding credit, what happens?
a) The financial statement will be unaffected.
b) The trial balance will not balance.
c) Total liabilities will increase.
d) Net income will increase.

b) The trial balance will not balance.

If you purchase supplies on account, how does it affect the accounting equation?
a) Decreases assets and liabilities
b) Increases assets and liabilities
c) Increases assets and decreases liabilities
d) Decreases liabilities and increases equity

b) Increases assets and liabilities

What is included in the misappropriation of assets?
a) Misstating financial statements
b) Theft of cash or inventory
c) Errors in accounting processes
d) Falsifying liability accounts

b) Theft of cash or inventory

Which of the following accounts are included in the Quick Ratio?
a) Cash, Accounts Receivable, and Inventory
b) Cash, Marketable Securities, and Prepaid Expenses
c) Cash, Marketable Securities, and Accounts Receivable
d) Cash, Accounts Payable, and Retained Earnings

c) Cash, Marketable Securities, and Accounts Receivable

Which inventory costing method provides the most realistic measure of net income?
a) FIFO
b) LIFO
c) Average Cost
d) Specific Identification

b) LIFO

How do expenses affect Stockholders' Equity?
a) Expenses increase equity.
b) Expenses decrease equity.
c) Expenses have no effect on equity.
d) Expenses decrease assets but increase equity.

b) Expenses decrease equity.

What effect does paying dividends have on cash and expenses?
a) Decreases cash and increases expenses
b) Decreases cash but does not affect expenses
c) Does not affect cash or expenses
d) Increases cash but decreases expenses

b) Decreases cash but does not affect expenses

Is Treasury Stock reported in the Stockholders’ Equity section of the balance sheet?
a) Yes, as a reduction to equity.
b) No, it is a liability.
c) Yes, as an addition to equity.
d) No, it is recorded as an asset.

a) Yes, as a reduction to equity.

Are acquisitions of long-term assets reported as investing activities on the statement of cash flows?
a) Yes, always.
b) No, they are operating activities.
c) Only if financed by debt.
d) Only if the company has no liabilities.

a) Yes, always.

How does depreciation affect an asset's original cost?
a) Depreciation reduces the original cost.
b) Depreciation does not affect the original cost.
c) Depreciation increases the original cost over time.
d) Depreciation affects the asset’s fair value, not its cost.

b) Depreciation does not affect the original cost.