Sample MC for Midterm
THE ACCOUNTING EQUATION
1. A company's total liabilities decreased by $105,000 and its stockholders' equity decreased
$35,000 during a period of time. By what amount and in what direction must the company's
total assets have changed during that same period?
a. $140,000 increase
b. $70,000 decrease
c. $140,000 decrease
d. $70,000 decrease
2. Jimmy's Repair Shop started the year with total assets of $300,000 and total liabilities of
$240,000. During the year, the business recorded $630,000 in revenues, $330,000 in
expenses, and dividends of $60,000. The net income reported by Jimmy's Repair
Shop for the year was
a. $240,000.
b. $300,000.
c. $180,000.
d. $570,000.
FINANCIAL STATEMENTS
3. An income statement
a. summarizes the changes in retained earnings for a specific period of time.
b. reports the changes in assets, liabilities, and stockholders' equity over a period of time.
c. reports the assets, liabilities, and stockholders' equity at a specific date.
d. presents the revenues and expenses for a specific period of time.
4. Which of the following financial statements is divided into major categories of operating,
investing, and financing activities?
a. The income statement
b. The balance sheet
c. The retained earnings statement
d. The statement of cash flows