Multiple Choice Answers

Which of the following is NOT an administrative expense?

a. Salespersons’ salaries
b. Office salaries
c. Depreciation of office equipment
d. Office supplies used

Good internal control requires that one employee handle the tasks of ordering supplies, receiving the supplies, and paying the supplier.


Exhibit 2-1
Total Assets
Total Liabilities

Beginning of the year $100,000 $50,000

End of the year $500,000 $350,000
Refer to Exhibit 2-1. What is net income assuming $50,000 of stock was issued, and $25,000 of dividends were paid?

a. $75,000
b. $50,000
c. $70,000
d. $10,000

The basic type of stock issued to owners is called preferred stock.


The payment of a liability __________.

a. Decreases assets and stockholders’ equity
b. Increases assets and decreases liabilities
c. Decreases assets and increase liabilities
d. Decreases assets and decreases liabilities