accounting ch 1

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As of December 31, Stoneland Corporation has assets of $4,500 and stockholders' equity of $3,000. How much are the liabilities for Stoneland Corporation as of December 31?

$1,500

Assets will be increased by $40,000 if a company issues common stock for ________ and uses $30,000 of the cash to purchase a truck.

$40,000

If a company issues common stock for $40,000 and uses $30,000 of the cash to purchase a truck, assets will be increased by

$40,000

What is a company's balance in its common stock account if it's assets are valued at $425,000, liabilities are $175,000, and retained earnings are $200,000?

$50,000

_________ has no effect on retained earnigns

A land purchase

A company purchases new manufacturing equipment using a loan from the bank. They plan to repay the loan over the next 10 years. This is an example of

A liability

Steele Industries frequently orders supplies from Russel Distributors, with payment made two weeks after the purchase. Recently, Steele borrowed money from Mullen Enterprises to finance the purchase of a new delivery truck. Steele has a(n) ________ with Russell and a(n) _________ with Mullen.

Accounts payable; note payable

A landscaping company purchases lawn equipment to provide its services. The potential future economic benefit of the equipment allows it to be classified as a(n)

Asset

On March 1, Bradshaw Corporation purchases equipment on credit and pays the related debt on March 31. Which type of accounts are affected on March 31?

Assets and liabilities

When services are performed, and cash is collected

Assets increase

Swinton Music raised funds by issuing common stock for $150,000 and used $100,000 of the cash for expansion. Which of the following is true as a result?

Assets increased by $150,000

On the last day of the period, Alan Cesska Company buys a $900 machine on credit. This transaction will affect the: A) income statement only B) balance sheet only C) income statement and retained earnings statement only D) income statement, retained earnings statement, and balance sheet

B

Performing services on account will have the following effects on the components of the basic accounting equation: A) increase assets and decrease equity B) increase assets and increase equity C) increase assets and increase liabilities D) increase liabilities and increase equity

B

The three types of business entities are A) proprietorships, small businesses, and partnerships B) proprietorships, partnerships, and corporations C) proprietorships, partnerships, and large businesses D) financial, manufacturing, and service companies

B

Which of the following is not a step in the accounting process? A) identification B) economic entity C) recording D) communication

B

Which of the following is not recorded in the accounting records? A) equipment is purchased on account B) an employee is terminated C) a cash investment is made into the business D) the company pays a cash dividend

B

Which of the following statements about basic assumptions is correct? A) basic assumptions are the same as accounting principles B) the economic entity assumption states that there should be a particular unit of accountability C) the monetary unit assumption enables accounting to measure employee morale D) partnerships are not economic entities

B

A financial statement that reports the assets, liabilities, and stockholders' equity at a specific date

Balance sheet

Accounts payable

Balance sheet

Cash

Balance sheet

Common stock

Balance sheet

The amount of cash at the end of the period, in the statement of cash flows, should also be reported on the

Balance sheet

Which of the following financial statements will be affected if a company purchases a $700 machine on credit?

Balance sheet only

On June 1, Martin Medical Supplies paid rent for the month in cash. How did the company record this transaction?

By decreasing cash and increasing expenses

The financial statement that reports assets, liabilities, and stockholders equity is the A) income statement B) retained earnings statements C) balance sheet D) statement of cash flows

C

The historical cost principle states that A) assets should be initially recorded at cost and adjusted when the fair value changes B) activities of an entity are to be kept separate and distinct from its owner C) assets should be recorded as their cost D) only transaction data capable of being expressed in terms of money be included in the accounting records

C

On March 1, Bradshaw Corporation receives cash from a customer who was billed for services provided on April 1. Which of the following is true of the March 1 transaction?

Cash increases and accounts receivable decreases

A company has undergone bankruptcy, and the courts are requiring them to pay their creditors first. Which of these is an example of a creditor?

Community First Bank, which holds a loan for the headquarters building

QRS industries is in the process of liquidation. Which of the following parties' claims will be settled first?

Creditors

As of December 31, 2022, Reed company has assets of $3500 and stockholders equity of $1500. What are the liabilities for Reed company as of December 31, 2022? A) $1500 B) $1000 C) $2500 D) $2000

D

Net income will result during a time period when A) assets exceed liabilities B) assets exceed revenues C) expenses exceed revenues D) revenues exceed expenses

D

Payment of an account payable affects the components of the accounting equation in the following way A) decreases stockholders equity and decreases liabilities B) increases assets and decreases stockholders equity C) decreases assets and increases stockholders equity D) decreases assets and decreases liabilities

D

Which of the following statements about users of accounting info is incorrect? A) management is an internal user B) taxing authorities are external users C) present creditors are external users D) regulatory authorities are internal users

D

A company has total assets valued at $5.7 million, total liabilities of $1.4 million, and retained earnings of $300,000. If the company wants 75% of its assets to be funded by stockholders' equity, it needs to __________ its stockholders' equity

Decrease

George Stevens has purchased 1,000 shares of stock in JKL corporation. JKL recently reported a year-end net income of $1,400,000; JKL retains $1,000,000. George, along with her fellow stockholders, will receive the remainder in the form of

Dividends

Although both dividends and expenses reduce retained earnings, dividends and expenses are recorded separately because

Dividends are not an expense

Although _______ reduce retained earnings, they are not considered ________

Dividends; expenses

Dividends are

Dividends; it decreases stockholders equity

Two people have formed a partnership. One partner of a business creates a $10,000 debt, but the partnership does not have enough assets to cover the debt. In this situation,

Either partner could have to pay the debt out of personal assets

In the retained earnings statement, changes in retained earnings are calculated by taking beginning retained earnings plus net income or minute ness loss and

Minus dividends

The amount by which revenues exceed expenses

Net income

The amount by which expenses exceed revenues

Net loss

Transaction: paid cash to purchase equipment

Not affecting stockholders' equity

__________ will be affected if a company purchases a $700 machine on credit

Only the balance sheet

The _______ of a liability decreases both cash and accounts payable

Payment

A business owner's personal expenses must be separate from expenses of the business to comply with accounting's economic entity assumption.

True

Congress passed the Sarbanes-Oxley Act to reduce unethical behavior and decrease the likelihood of future corporate scandals

True

Internal users include Human Resources managers

True

Managerial accounting activities focus on reports for internal users

True

The accounting process includes the bookkeeping function

True

The historical cost principle dictates that companies record assets at their cost and continue to report them at their cost over the time the assets are held

True

The money unit assumption requires that companies record only transactions that can be measured in money terms

True

The primary accounting standard-setting body in the United States is the Financial Accounting Standards Board (FASB)

True

The three steps in the accounting process are identification, recording, and communication.

True

The information system that identifies, records, and communicates the economic events of an organization to interested users

accounting

The system of collecting and processing transaction data and communicating financial information to decision-makers.

accounting information system

An investment by the stockholders in a business causes an increase in which of the following?

assets and stockholders' equity

If total liabilities decreased by $4,000, then

assets must have decreased by $4,000, or stockholders' equity must have increased by $4,000

Services performed by a public accountant include

auditing, taxation, and management consulting

A part of accounting that involves only the recording of economic events.

bookkeeping

The term used to describe the total amount paid in by stockholders for the shares they purchase

common stock

An assumption that requires that the activities of the entity be kept separate and distinct from the activities of its owner and all other economic entities

economic entity assumption

Numbers and descriptions match what really existed or happened

faithful representation

An area of accounting that uses accounting, auditing, and investigative skills to conduct investigations into theft and fraud.

forensic accounting

Service revenue

income statement

The Sarbanes-Oxley Act determines

internal control standards of U.S. publicly traded companies.

Creditor claims against total assets

liabilities

The field of accounting that provides internal reports to help users make decisions about their companies

managerial accounting

IFRS is considered to be more:

principles-based and less rules-based than GAAP.

The increases in assets or decreases in liabilities resulting from the sale of goods or the performance of services in the normal course of business

revenues

An area of public accounting involving tax advice, tax planning, preparing tax returns, and representing clients before governmental agencies.

taxation

Which of the following results when a company purchases equipment for $1,800 cash?

total assets remain unchanged

The economic events of a business that are recorded by accountants

transactions

Which of the following is not a reason why a single set of high-quality international accounting standards would be beneficial?

GAAP is widely considered to be a superior reporting system

Salaries and wage expenses

Income statement

Harley's insurance company sells insurance policies to customers on account. The company needs to record its revenue for the last month. The company should report service revenues on the

Income statement as gross income in service revenues

A brick company calculated its stockholders' equity for the fiscal year 2017. Its overall revenues were $3.8 million, expenses were $2.4 million, and dividends paid were $500,000. The company experienced a net _________ of_______

Income; $900,000

If a company provides services on account, then stockholders' equity

Increases and assets increase

When stockholders invest cash in the business, it is

Insurance of stock; it increases the stockholders equity

A bank received its employees' time cards on July 10 and payday is July 15. The bank will need to list this transaction in which section in its accounting records on July 10?

Liabilities

A manufacturing company has received its monthly utility bill on January 31, and payment is due on February 14. Where would the utility bill be recorded on January 31 when the month ends and the bill is still unpaid?

Liabilities

Dividends are the distribution of cash or other assets out of earnings to

Stockholders

Electronics Galore has a year-end net income of $2.5 million and plans to distribute $1.9 million in dividends to

Stockholders

When services are performed on account

Stockholders' equity increases

Wencaster Services purchased office supplies from a bulk supply store on credit for July 17. The company received a bill on July 31, and the bill is due and paid on August 31. Where in the accounting equation will this transaction be recorded on July 31 versus August 31?

The July 31 transaction will be recorded as inventory (asset) and in accounts payable (liability), and the August 31 transaction will be recorded in cash (asset) and in accounts payable (liability)

Which of the following would be considered an economic event that is an accounting transaction?

The purchase of new computers

A book designer purchased a new computer monitor for $1,200 cash. As a result of this purchase,

Total assets remained unchanged

When a company performs a service, even if it has not been paid for this service, it still increases

Equity

Transaction: paid employee salaries

Expense

The cost of assets consumed or services used in the process of generating revenue

Expenses

An income statement presents the revenues, expenses, and changes in stockholders equity, and resulting net income or net loss for a specific period of time

False

If a company issue common stock for $40,000 and uses $30,000 of the cash to purchase a truck, assets will be increased by $10,000

False

Managerial accounting provides reports to help investors and creditors evaluate a company

False

The primary accounting standard setting body in the US is the SEC

False

The standards of conduct by which actions are judged as loyal or disloyal are ethics

False

The two most common types of external users are investors and company officers.

False, investors and creditors

Accountants prepare, but do not interpret, financial reports.

False. Accountants analyze and interpret information in reports as part of the communication step.

Bookkeeping encompasses all steps in the accounting process

False. Bookkeeping involves only in the recording step

Relevance means that financial information matches what really happened; the information is factual.

False. Faithful representation means that financial information matches what really happened; the information is factual.

The historical cost principle dictates that companies record assets at their cost. In later periods, however, the fair value asset must be used if it's fair value is higher than its cost.

False. The historical cost principle dictates that companies record assets as their cost. Under the historical cost principle, the company must also use cost in later periods.

A field of accounting that provides economic and financial information for investors, creditors, and other external users

Financial accounting

Financial information that is capable of making a difference in a decision

Relevance

Ockham farms laid $1200 cash for farming equipment from a supplier. As a result of this transaction, total assets

Remain unchanged

Transaction: received cash for services performed

Revenue

If a company is profitable for an accounting period

Revenues exceeded expenses

Rent revenue is

Revenues; it increases stockholders equity

When an investor purchases an interest in a corporation, the company records

Shares of common stock


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