. Which of the following best describes an asset? A. Anything of value owned by the business B. Always equal to a liability C. Listed on the right-hand side of a balance sheet D. Something that a business owes 2. Which of the following best describes a liability? A. Anything of value owned by the business B. Something that a business owes C. Listed on the left-hand side of a balance sheet D. Always equal to an asset 3. Which of the following best describes owner’s equity? A. Equal to the business’ liabilities less the business’ assets B. The owner’s interest or worth in the business C. What the owner owes the business D. What the business owes 4. All of the following describe a balance sheet except which one? A. The balance sheet reflects the results of multiple transactions. B. The balance sheet contains assets, liabilities, and owner’s equity sections. C. The balance sheet is a picture of a business in financial terms. D. The balance sheet contains only assets and liabilities sections.
Questions 5–10: For the Blue Top Taxi Company, owned by Tom Cotton, classify each of the following account descriptions in questions 5–10 by choosing the one best answer. EXAMPLE: Has $630 in cash Asset C. Both B. Liability D. Neither 5. Owes First National Bank $350 (Accounts Payable) A. Asset C. Both B. Liability D. Neither 6. Owns taxi (automobile) worth $1,315 A. Asset C. Both B. Liability D. Neither 7. Supplies (on hand) worth $20 A. Asset C. Both B. Liability D. Neither 8. Owes Sam’s Garage $50 (Accounts Payable) A. Asset C. Both B. Liability D. Neither 9. Owns equipment worth $35 A. Asset C. Both B. Liability D. Neither 10. Owes Ace Auto Company $500 (Accounts Payable) A. Asset C. Both B. Liability D. Neither Questions
11–13: Using the seven account descriptions above for the Blue Top Taxi Company, determine this company’s owner’s equity. (Don’t forget to include in your calculation the $630 in cash from the EXAMPLE.) 630-350+1315+20-50+35-500= 1100
Then answer questions 11–13. 11. What is the amount of assets for Blue Top Taxi Company? A. $900 C. $2,000 B. $1,100 D. $2,900 12. What is the amount of liabilities for Blue Top Taxi Company? A. $900 C. $2,000 B. $1,100 D. $2,900 13. What is the amount of owner’s equity for Tom Cotton in the Blue Top Taxi Company? A. $900 C. $2,000 B. $1,100 D. $2,900
14. Which of the following shows how the heading of the balance sheet should appear? A. Blue Top Taxi Company C. Blue Top Taxi Company Balance Sheet June 1, 20— May 31, 20— Balance Sheet B. Tom Cotton, Owner D. Blue Top Taxi Company Balance Sheet Balance Sheet June 1, 20— June 1, 20— 15. The left-hand side of the balance sheet should include entries for A. both the assets and the liabilities. B. only the assets. C. both the assets and the owner’s equity. D. only the owner’s equity. 16. The right-hand side of the balance sheet should include entries for A. only the liabilities. C. both the assets and liabilities. B. both the liabilities and the owner’s equity. D. only the owner’s equity. 17. Which of the following shows how the descriptive entry under owner’s equity should appear? A. Tom Cotton, Owner C. Tom Cotton, Capital B. Blue Top Taxi Company D. Ace Auto Company 18. A single ruled line should be drawn on the column line above the amount for all of the following except which one? A. Total Assets B. Total Liabilities C. Total Liabilities and Owner’s Equity D. Owner’s Equity 19. A double-ruled line should be drawn under the amount for A. only total assets. B. both total assets and total liabilities and owner’s equity. C. both total assets and total liabilities. D. only total liabilities and owner’s equity. 20. The owner’s equity section of the balance sheet for the Blue Top Taxi Company shows that A. the Blue Top Taxi Company owes more than it owns. B. Tom Cotton has an interest in the company. C. First National Bank is an owner of the company. D. Tom Cotton owes Sam’s Garage