Chapter 1 ACCT 1100

$45,000 Assets = Liabilities + Owner's Equity Owner's Equity (Year 1) = $940,000 - $300,000 = $640,000 Owner's Equity (Year 2) = $995,000 - $270,000 = $725,000 Increase in Owner's Equity = Owner's Equity (Year 2) - Owner's Equity (Year 1) = $725,000 - $640,000 = $85,000 Net income during Year 2 = Increase in Owner's Equity - Additional investment + Withdrawals = $85,000 - $73,000 + $33,000 = $45,000

Abbie Marson is the sole owner and operator of Great Plains Company. As of the end of its accounting period, December 31, Year 1, Great Plains Company has assets of $940,000 and liabilities of $300,000. During Year 2, Marson invested an additional $73,000 and withdrew $33,000 from the business. What is the amount of net income during Year 2, assuming that as of December 31, Year 2, assets were $995,000, and liabilities were $270,000?

Cash budget

All of the following are general-purpose financial statements except

financed by the owner and/or creditors

Assets are

$35,000

Equipment with an estimated market value of $30,000 is offered for sale at $45,000. The equipment is acquired for $15,000 in cash and a note payable of $20,000 due in 30 days. The amount used in the buyer's accounting records to record this acquisition is

a corporation, a partnership & a proprietorship

For accounting purposes, the business entity should be considered separate from its owners if the entity is

liabilities increase; owner's equity decreases

How does receiving a bill to be paid next month for services received affect the accounting equation?

assets increase; liabilities increase

How does the purchase of equipment by signing a note affect the accounting equation?

$159,000 decrease Assets = Liabilities + Owner's Equity -$88,000 = Liabilities + $71,000 Liabilities = -$159,000

If total assets decreased by $88,000 during a period of time and owner's equity increased by $71,000 during the same period, then the amount and direction (increase or decrease) of the period's change in total liabilities is

Proprietorship

Most businesses in the United States are

$115,000

On May 20, White Repair Service extended an offer of $108,000 for land that had been priced for sale at $140,000. On May 30, White Repair Service accepted the seller's counteroffer of $115,000. On June 20, the land was assessed at a value of $95,000 for property tax purposes. On July 4, White Repair Service was offered $150,000 for the land by a national retail chain. At what value should the land be recorded in White Repair Service's records?

accounts receivable

The asset created by a business when it makes a sale on account is termed

income statement

The financial statement that presents a summary of the revenues and expenses of a business for a specific period of time, such as a month or year, is called a(n)

owner's investments, owner's withdrawals, earning of revenues, and incurrence of expenses

Transactions affecting owner's equity include

is an information system that provides reports to users regarding economic activities and condition of a business

Which of the following best describes accounting?

employees and managers

Which of the following groups are considered to be internal users of accounting information?

IRS

Which of the following is not a certification for accountants?

to personally guarantee loans of the business

Which of the following is not a role of accounting in business?

Accounting provides information to managers to operate the business and to other users to make decisions regarding the economic condition of the company.

Which of the following is the best description of accounting's role in business?