8:35 - Version A 8:35 - Version B
1. D 1
.
C
2. B 2. A
3. F 3
.
A
4. C 4
.
G
5. B 5. F
9:40 - Version A 9:40 - Version B
1. C 1
.
D
2. E 2. D
3. D 3
.
A
4. D 4
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B
5. C 5. C
NOTE THAT COPIES OF VERSION A ARE INCLUDED BELOW WITH EXPLANATIONS OF
THE ANSWERS. (Quiz Version B has the same questions as Version A but both the questions and
answers are in a different order).
ACC231 - Fall 2010
Quiz 1 Key
ACC231-Fall 2010 - Quiz #1 (TEAM QUIZ) - 8:35 (Version A)
Multiple Choice (each question is worth 2 points)
Identify the choice that BEST completes the statement or answers the question.
____ 1. Elmer Fudd Company issued common stock of $500 for cash. What would be the effect on the
accounting equation?
ASSETS LIABILITIES OWNERS' EQUITY
a. Increase $500 Decrease $500 No Effect
b. Increase $500 Increase $500 No Effect
c. Increase $500 No Effect Decrease $500
d. Increase $500 No Effect Increase $500
e. Decrease $500 Decrease $500 No Effect
f. Decrease $500 Increase $500 No Effect
g. Decrease $500 No Effect Decrease $500
h. Decrease $500 No Effect Increase $500
ANS: D
Cash (an asset) is increasing by $500 and Common Stock (an equity account) is increasing by $500.
Note that the accounting equation remains in balance as the increase in assets is equal to the total
change in Liabilities plus equity.
____ 2. Transactions are entered into the General Journal:
a. with the largest transaction occurring during the Accounting Period always entered first
b. in date order
c. with the smallest transaction occurring during the Accounting Period always entered first
d. transactions are not entered in the General Journal
e. none of the answers are correct
ANS: B
Transactions are entered in the General Journal as they occur – which is in date order.
____ 3. Under what form of organization would you keep accounting records for the business
separate from the owners’ personal transactions?
a. Sole Proprietorship
b. Partnership
c. Corporation
d. Sole Proprietorship or Partnership
e. Sole Proprietorship or Corporation
f. All of the three forms keep separate accounting records
ANS: F
All three forms of organization must keep separate accounting records.
(TURN OVER)
____ 4. The Porky Pig Company had $156,000 of assets at December 31, 2010 and equity of
$45,000. What were Porky Pig Company’s total liabilities at December 31, 2010?
a. $45,000
b. $201,000
c. $111,000
d. $156,000
e. Not able to determine
ANS: C
Assets = Liabilities + Equity
$156,000 = Liabilities + $45,000
Liabilities = $156,000 - $45,000
Liabilities = $111,000
____ 5. On September 1, 2009, the Wascally Wabbit Corporation purchased equipment of
$10,000 by borrowing money from the bank. What is the correct journal entry?
Account Name Debit Credit
A. Equipment 10,000
Due to Owners 10,000
B. Equipment 10,000
Bank Loan 10,000
C. Due to Owners 10,000
Equipment 10,000
D. Bank Loan 10,000
Equipment 10,000
ANS: B
Equipment increases (an asset) by $10,000 and debt (the bank loan which is a liability) increases by
$10,000. Equipment is an asset account with a normal balance of a debit. Thus, this account is
increased with a debit. Bank Loan is a liability with a normal balance of a credit. Thus, this account
is increased with a credit.
ACC231-Fall 2010 - Quiz #1 (TEAM QUIZ) - 9:40 (Version A)
Multiple Choice (each question is worth 2 points)
Identify the choice that BEST completes the statement or answers the question.
____ 1. Porky Pig Company repaid the bank $10,000 for the Note Payable to Bank. What would be the
effect on the accounting equation?
Account Name Debit Credit
A. Cash 10,000
Note Payable 10,000
B. Common Stock 10,000
Note Payable 10,000
C. Note Payable 10,000
Cash 10,000
D. Note Payable 10,000
Common Stock 10,000
ANS: C
Cash (an asset) decreases by $10,000 and Note Payable (a Liability) decreases by $10,000. Cash has
a normal balance of a DEBIT; thus, to decrease the account, we need to credit the account. Note
Payable has a normal balance of a CREDIT; thus, to decrease the account, we need to debit the
account.
____ 2. If you wanted to open a company with only you as the owner, what form(s) of organization
could you use?
a. Sole Proprietorship
b. Partnership
c. Corporation
d. Sole Proprietorship or Partnership
e. Sole Proprietorship or Corporation
f. Any of the three forms would be acceptable
ANS: E
A Sole proprietorship has one and only one owner. A corporation has one or more owners. A
partnership has two or more owners – thus, if you want to be the only owner, you could not have a
partnership.
(TURN OVER)
____ 3. Which of the following statements is true?
a. After certain types of transactions, it is okay for the company to have more assets than
liabilities plus equity.
b. In an accounting system, if Total assets are not equal to total Liabilities plus Equity, then
the Balance Sheet will simply be relabeled as the UnBalance Sheet Report.
c. All entries made in an accounting system – must affect both the Asset side and the
Liabilities + Equity side of the accounting equation for the accounting system to stay in
balance.
d. None of the statements are true
ANS: D
____ 4. You analyze a transaction and determine that it causes an increase in an asset; the other
side of the transaction may be
a. A decrease in owners' equity
b. An increase in another asset
c. A decrease in a liability
d. An increase in a liability
ANS: D
If Assets increase, then the other side of the accounting equation is either an asset decrease, a
liability increase or an equity increase.
____ 5. The Elmer Fudd Company had $108,000 of assets at December 31, 2010 and liabilities of
$50,000. What was Porky Pig Company’s total equity at December 31, 2010?
a. $50,000
b. $158,000
c. $58,000
d. $108,000
e. Not able to determine
ANS: C
Assets = Liabilities + Equity
$108,000 = $50,000 + Equity
Equity = $108,000 - $50,000
Equity = $58,000
Note that the question should have asked what "Elmer Fudd Comany's" total equity was at
December 31, 2010 (this was a typo). Therefore, TAs grading the quiz also accepted "Not Able to
Determine" as a correct answer.
