18) The statement of retained emines informs users about how much of the earnings were kept and reinvested in the company. 19 If the total debits equal the total credits on the trial balance, the individual account balances will be error free. 20) The T-account is a summary device that is shaped like a capital T with debits posted on the right side of the vertical line and credits posted on the left side of the vertical line. MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 21) _are professional accountants who serve the general public, not one particular company. A) Certified public accountants B) Audit accountants C) Certified financial accountants D) Controllers 22) Which of the following organizations is responsible for the creation and governance of accounting standards in the United States? A) Securities and Exchange Commission B) Financial Accounting Standards Board C) Institute of Management Accountants D) American Institute of Certified Public Accountants 2 23) GAAP refer to guidelines for accounting information in the United States. The acronym GAAP in this statement refers to A) Global Accommodation Accounting Principles B) Generally Accredited Accounting Policies Generally Accepted Accounting Principles D) Globally Accepted and Accurate Policies 24 24) Which of the following is a major reason why corporate ownership is popular in the United States? A) A corporation is usually managed by the owners. B) Stockholders have limited liability for the debts of the corporation The life of a corporation is limited by the death of the owner. D) Most corporations are small-or medium-sized. 25) The account title used for recording the payment of rent in advance for an office building is A) Prepaid Rent B) Rent Expense Rent Revenue D) Rent Payable 26) Which of the following is a characteristic of a corporation? A) Lenders of a corporation do not have the right to claim the corporation's assets to satisfy their obligations. B) Each stockholder has the authority to commit the corporation to a binding contract through his/her actions. C) A corporation is owned by stockholders. D) All shares of a corporation must be held by a single individual 2 27) Regarding the separation of corporate ownership and management, which of the following is a true statement? A) None of the stockholders have the ability to manage the business of the corporation B) The corporate officers elect the board of directors. C) The corporation runs better with day-to-day input from stockholders. D) Stockholders own the business, but a board of directors appoints corporate officers to manage the business 28) Posting a transaction means A) calculating the balance in an account B) preparing a summary of account balances transferring data from the journal to the ledger D) finding the account number in the chart of accounts 29) Dividends is a(n) A) equity; credit account that has a normal B) equity: debit balance. C) liability, debit D) liability: credit 30) Corporations pay their own income tax on corporate income. Stockholders pay personal income tax on the dividends received from corporations. This is an example of A) double taxation B) continuous life C) a limited liability company D) no mutual agency 31) represents a debt owed for renting a building currently. A) Rent Expense B) Rent Payable Prepaid Rent D) Rent Revenue 32) David has decided to open an auto-detailing business. He will pick up an automobile from the client, take it to his parents' garage, detail it, and return it to the client. If he does all of the work himself and takes no legal steps to form a special organization, which type of business organization, in effect, has he chosen? A) A partnership B) A sole proprietorship C) A limited liability company D) A corporation 33) Which of the following is the correct formula to calculate the debt ratio? A) Debt ratio = Total liabilities Total assets B) Debt ratio = Total liabilities / Total assets Debt ratio Total liabilities - Total assets D ) Debt ratio = Total liabilities. Total assets 34) The Accounts Receivable account of Rosewood, Inc. has the following postings Accounts Receivable 21,000 2,000 2,000 Calculate the ending balance of the account A) $2,000 credit B) $23,000 debit C) $21,000 debit D) $25,000 debit 35) The Accounts Payable account of Golden, Inc. has the following postings: Accounts Payable 18,000 29,000 5,000 12,000 Calculate the ending balance of the account. A) $18,000 debit B) $18,000 credit $5,000 debit D) $12,000 credit 36) The ability of a company to repay its liabilities can be determined from its A) bankers B) debt ratio joumal D) creditors 37) Which of the following is a source document that provides the evidence and data for accounting transactions? A) Joumal B) Sales invoice C) Trial balance D) Ledger 38) Marsh Supply Services paid $350 cash to a materials supplier, the amount owed from the previous month. Which of the following accounts decreases? A) Office Supplies B) Retained Earnings Accounts Payable D) Accounts Receivable 39) Ace, Inc. had the following transactions during June: Performed services for $5,000 on accounts received cash on account, $7,000; paid $600 for repair expense; paid $2,000 to a supplier that it owed from the previous month. What is the combined effect on Cash of the June transactions? A) $7,000 increase B) $2,600 decrease $4,400 increase D) $4,400 decrease 40) Mitchell Florists & Co. reported assets of $1,000 and equity of $450. What is its debt ratio? (Round your percentage answer to two decimal places.) A) 45.00% B) 55.00% 100.00% D) 60.00% 41) Accord Corporation purchased land for $100,000 by making a cash payment of $30,000 and promising to pay the remaining amount in a later accounting period. What is the net effect of this transaction on Accord's accounting equation? A) assets increase by $100,000 and liabilities decrease by $70,000 B) assets and equity increase by $70,000 C) assets increase by $100,000 and liabilities decrease by $30,000 D) assets and liabilities increase by $70,000 42) Star Homes Corporation just recorded a transaction in its books. If this transaction increased the total liabilities by $12,000, then A) assets must decrease by $12,000 B) assets must increase, or equity must decrease by $12,000 C) both assets and equity must each decrease by $6,000 D) either assets or equity must decrease by $12,000