A) Assets + Liabilities = Shareholders' equity
B) Assets = Liabilities + Shareholders' equity
C) Assets = Liabilities - Shareholders' equity
D) Assets + Shareholders' equity = Liabilities
Answer: B
Diff: 1 Type: MC
L.O.: 1-2
CPA COMPETENCIES: Chapter 1
1.1.1 Evaluates financial reporting needs
1.1.2 Evaluates the appropriateness of the basis of financial reporting
1.1.3 Evaluates reporting processes to support reliable financial reporting
3) The owners' interest in the assets of a corporation is known as:
A) assets
B) shareholders' equity
C) expenses
D) revenues
Answer: B
Diff: 1 Type: MC
L.O.: 1-2
CPA COMPETENCIES: Chapter 1
1.1.1 Evaluates financial reporting needs
1.1.2 Evaluates the appropriateness of the basis of financial reporting
1.1.3 Evaluates reporting processes to support reliable financial reporting
4) If liabilities increase $120,000 during a given period and shareholders' equity decreases $25,000 during the same period, assets must:
A) decrease $145,000
B) increase $145,000
C) increase $95,000
D) decrease $95,000
Answer: C
Diff: 3 Type: MC
L.O.: 1-2
CPA COMPETENCIES: Chapter 1
1.1.1 Evaluates financial reporting needs
1.1.2 Evaluates the appropriateness of the basis of financial reporting
1.1.3 Evaluates reporting processes to support reliable financial reporting
5) Which of the following best describes a liability?
A) Liabilities are a form of share capital.
B) Liabilities are future economic benefits to which a company is entitled.
C) Liabilities are accounts receivable of the company.
D) Liabilities are economic obligations to creditors to be paid at some future date by the company.
Answer: D
Diff: 1 Type: MC
L.O.: 1-2
CPA COMPETENCIES: Chapter 1
1.1.1 Evaluates financial reporting needs
1.1.2 Evaluates the appropriateness of the basis of financial reporting
1.1.3 Evaluates reporting processes to support reliable financial reporting
6) Expenses are:
A) increases in assets resulting from operations
B) increases in retained earnings resulting from operations
C) increases in liabilities resulting from purchasing assets
D) decreases in retained earnings resulting from operations
Answer: D
Diff: 2 Type: MC
L.O.: 1-2
CPA COMPETENCIES: Chapter 1
1.1.1 Evaluates financial reporting needs
1.1.2 Evaluates the appropriateness of the basis of financial reporting
1.1.3 Evaluates reporting processes to support reliable financial reporting
7) On January 1, 2017, total assets for Liftoff Technologies were $125,000; on December 31, 2017, total assets were $145,000. On January 1, 2017, total liabilities were $110,000; on December 31, 2017, total liabilities were $115,000. What are the amount of the change and the direction of the change in Liftoff Technologies shareholders' equity for 2017?
A) decrease of $15,000
B) increase of $15,000
C) increase of $30,000
D) decrease of $30,000
Answer: B
Diff: 2 Type: MC
L.O.: 1-2
CPA COMPETENCIES: Chapter 1
1.1.1 Evaluates financial reporting needs