EXERCISE 2.1Test 1. Multiple Choice. Encircle ihe correct answer from the given choices1.The difference between assets and liabilities isTotal assetsb.8.Total SabilitiesO EquityCash2. The issuance of a note by an entity for services received should be recorded asa. A notes payable.b. A prepaid expense.An accounts receivable.d.C.An unearned income.3. Which of the following is an intangible asset?a. Copyrightsb. PatentsTrademarksd All of the above4. The expectation of a future payment from a customer for goods sold isA notes receivable.b. A prepaid expense.An accounts receivable.d. All of the above.a.C.5. This account records long-term debt of the business entity for which it has pledged certain assets as security.a.Accounts payableb. Bonds payableC. Mortgage payabled. Notes payable6. Which of the following is correct?LiabilitiesP1,250P2,800P1,150P6,540CapitalP6,600P11,000P8,200P1,120Assetsa. P7,850b. P8,200P9,550d. P5,420C.7. Another way of stating the accounting equation isAssets + Liabilities = Owner's EquityAssets - Liabilities Owner's EquityAssets = Owner's Equity - LiabilitiesOwner's Equity + Assets = Liabilities8. Which of the following is an asset of the firm?C.d.An overdrawn balance on the firm's bank account.b. Computer equipment owned by the firm.c. Money owed by the firm to one of its suppliers in respect of goods purchesed on creditd. The capital of the firm.a.9. The following can be found in an income statement excepta. Assetsb. Expensesc Incomed. Profit or loss10. Which of the following is not subject to depreciation?a Buildingb. EquipmentLandC.d. Machinery11. Which of the following is a liebility of a finm?a. A building owned by the firm.b. Cash in the firm's safe.C. Money which the fim has borrowed and has not yet repaidd. Money owed to the firm by its debtors. Decrease in economic benefits during the acpounting period in the form of outflows or depletions ofassets or incurrences of liabilities that result in decrease in equity.b. Decrease in owner's equity.c. Increase in owner's equity.d. Inflows of assets from delivering or producing goods or rendering services.12. Expenses can be defined as13. Inventories are assels which area Held for sale in the ordinary course of business.D. In the form of materials or supplies to be consumed in the production process or in the rendering ofservicesc In the process of production for such sele.d. All of the above.14. Obligations which are expected to be liquidated through the use of existing current assets or the creation or oinercurrent liabilities are celleda. Current assets.b. Current liebilities.C. Long-term liabilities.d. Uneamed revenue.15. Which of the following is a form of revenue?a. A cash purchase invoiceb. A check paying a mortgageC. A check paying utilitiesd. A credit purchase invoiceCredit sales to charge customers16. The accounting equationis used to determine the amount of income eamed during the periodb. is used to determine the emount of liabilities owedShows the claims on the entity's asseis by both the creditors and ownerd. Shows the claims on the owner's equity by the creditors8.C.17. A current asset which includes coins, currencies, and bank deposits is calleda Accounts receivableb. CashCash equivalentsc.d. Notes receivsble18. All of the following affect the owner's equity account excepta. Additional investmentb. Original investmentC Payment of a liabilityd Withdrawal by the owner19. The components. of the balence sheet equation area Assets, income, and owner's equity.b. Assets, liabilities, and owner's equily.c. Income, expenses, and profit.d. Investments, withdrawals, and profit.20. Which of the following transactions does not include an increase to expenses?a Bought medical supplies for cashb. Bought office supplies on account.C. Paid the week's salaries.d. Received and paid the phone bill.e Received cash for services performed.

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