Accounting Exercise 1

True or false: All companies use the same number of accounts

False

Investors are motivated to provide resources to businesses because they receive ______. Multiple select question.

a share of the company's earnings an ownership interest in the business

"For the period ended" refers to ______.

a span of time

Which statement reports ending balances for total assets, total liabilities, and total stockholders' equity?

balance sheet

The 10k report includes ______.

financial statements notes to the financial statements management discussion and analysis (MD&A)

Activities dealing with raising money to start a business are ______ activities.

financing

The complete collection of a company's accounts is called the ______.

general ledger

The measurement rules established by the Financial Accounting Standards Board are called _____________ or GAAP.

generally accepted accounting principles

Merchandising businesses include ______.

grocery stores shoe stores

The financial statement that shows all the benefits earned and sacrifices incurred during the accounting period is the ______.

income statement

In accounting terms, the obligations a business owes to its creditors are called

liabilities or liability

A group of people or entities organized to exchange items of value is called a ______.

market

Business resources include ______.

materials money labor

Retained earnings is all past and present income ______.

minus all past and present dividends

The text defines _________ as an increase in assets that results from providing goods and services to customers.

revenue

An event that increases total assets and total claims is an asset ____________ transaction.

source

Net income occurs when revenues are greater than expenses.

true

When a company acquires cash from investors, it issues a certificate (receipt) that describes the rights and responsibilities of the ownership. This receipt is frequently called ____________ stock.

common

Detailed information about the accounting equation is maintained in records commonly called

accounts

Business resources include ______.

money labor materials

A company that has $2,000 in revenue and $1,900 in expenses will report ______.

net income on the income statement

If expenses exceed revenues, the company reports ______ on the income statement.

net loss

X Company purchased land for cash from Y Company. Based on this information alone, the number of reporting entities is ______.

2

Which of the following services is not provided by certified public accountants?

Legal

Which of the following statements are true? Multiple select question. The increase in a business's commitments to stockholders is called retained earnings. Businesses may retain assets generated through operations. A company that has earnings is required to pay dividends to stockholders. Income is an obligation to deliver assets to creditors.

The increase in a business's commitments to stockholders is called retained earnings. Businesses may retain assets generated through operations

Which of the following statements are true? Multiple select question. The business commitments to its owners are shown on the left side of the accounting equation. The right side of the accounting equation shows the sources of assets. The requirements to pay dividends are shown on the right side of the accounting equation. The obligations of the business to creditors are shown on the right side of the accounting equation.

The right side of the accounting equation shows the sources of assets. The obligations of the business to creditors are shown on the right side of the accounting equation.

The acronym CPA stands for _______ _______ accountant.

certified public

Companies must follow generally accepted accounting principles (GAAP) for (financial/managerial) accounting reports, but not for (financial/managerial) accounting reports. (Enter only one word per blank.)

Blank 1: financial or external Blank 2: internal , managerial, or management

The assumption that a business is able to continue its operations into the foreseeable future is the _____ ________ doctrine.

Blank 1: going Blank 2: concern

Earning cash revenue by providing services to customers will cause the amount of cash to ______ and the amount of retained earnings to________ .

Blank 1: increase, go up, or rise Blank 2: increase, go up, or rise

Which items are not presented on the statement of changes in stockholders' equity? Multiple select question. Ending retained earnings Total stockholders' equity Beginning common stock Expense Cash Revenue Net income Dividends

Expense Cash Revenue

Which of the following statements are true? Multiple select question. Past earnings can be used to pay future dividends. The increase in a business's commitments to stockholders is called common stock. A company can pay dividends to stockholders whether or not the company has retained earnings. Paying dividends is an option, not a legal requirement.

Past earnings can be used to pay future dividends. Paying dividends is an option, not a legal requirement.

Which of the following is a financing activity?

Paying a dividend to stockholders

Which of the following is an asset exchange transaction?

Purchasing a building with cash

Which of the following are investing activities?

Purchasing land Selling a building Purchasing a building

The wordings "As of" in the date line of a balance sheet indicates that the information reported on it refers to ______.

the financial condition of the company at a specific point in time

Which of the following statements are true? -The increase in a business's commitments to stockholders is called common stock. -Past earnings can be used to pay future dividends. -Paying dividends is an option, not a legal requirement. -A company can pay dividends to stockholders whether or not the company has retained earnings.

Past earnings can be used to pay future dividends. Paying dividends is an option, not a legal requirement.

Which financial statement(s) reports the effects of transactions on common stock and retained earnings?

Statement of Changes in Stockholders' Equity

Which of the following is an asset source transaction?

Statement of Changes in Stockholders' Equity

Which of the following is not a resource normally used by businesses (conversion agents) to satisfy customer demand?

Taxation resources

Stakeholders who use accounting information include ______.

the federal government newspaper reporters creditors investors

Jane Smith started a company by investing $50,000 of her personal money in the company called Jane's Candies. Immediately after Jane's investment, the company borrowed $20,000 from the State Bank. The number of reporting entities described in this scenario is ______.

three

An event that causes assets and liabilities to decrease is an asset _________ transaction

use

Which of the following stakeholders would most likely use managerial accounting information?

A restaurant manager

Which of the following is a not-for-profit organization?

Alabama Public Schools

Which of the following is not a business asset?

An obligation to repay debt

Which of the following is not a business asset? Multiple choice question.

An obligation to repay debt

Which of the following statements about assets are true? (Select all that apply.) Multiple select question. Assets are resources used in the process of generating revenue. A business may acquire assets from three sources including creditors, investors, and its operations. Assets may be used only for the purpose of repaying debt.

Assets are resources used in the process of generating revenue. A business may acquire assets from three sources including creditors, investors, and its operations.

Which of the following is an investing activity?

Selling equipment used in manufacturing process

Which of the following questions are correct? Multiple select question. The going concern doctrine assumes a business will continue operations into the foreseeable future. Many procedures and practices used by accountants are based on a going concern assumption. If a company's going concern status becomes uncertain, accountants are required to notify the SEC.

The going concern doctrine assumes a business will continue operations into the foreseeable future. Many procedures and practices used by accountants are based on a going concern assumption.

Which of the following statements are true?

The increase in a business's commitments to stockholders is called retained earnings. Businesses may retain assets generated through operations.

Businesses commonly acquire assets from ______.

earning revenue issuing common stock borrowing from creditors

An economic occurrence that changes an enterprise's assets, liabilities, or stockholder's equity is an accounting______-

event

As inducements to provide financial resources, ______ obtain an ownership interest in a business and share in the profits of a business, while ______ obtain a return of the money loaned and the collection of interest.

investors; creditors

Retained earnings is all past and present income ______. Multiple choice question.

minus all past and present dividends

Acquiring cash by issuing common stock will have no effect on ______. Multiple select question. retained earnings cash liabilities common stock

retained earnings liabilities

Resource providers use accounting information to identify companies with high earnings potential because those companies are better able to ______.

share profits pay higher salaries make interest payments

The right side of the accounting equation for a corporation may be viewed as ______.

sources of assets claims of creditors and owners obligations and commitments of the business

Cash inflows and outflows are reported on the ______.

statement of cash flows

A home builder used $80,000 of materials and $70,000 of labor to build a house that was sold for $160,000. Profit equals ______.

$10,000

Green Company has $10,000 of assets. Fifty percent of the assets were acquired from the issue of common stock and thirty percent were acquired from earnings. Based on this information, the dollar value of liabilities must be ______.

$2,000 | Liabilities had to be 20% because the right side of the accounting equation represents 100% of total assets. (100% - 50% - 30% = 20%). Liabilities = $10,000 total assets x 20% = $2,000.

David Harbert recently started a business. During the first few days of operation, Mr. Harbert transferred cash from his personal account into a business account for a company he named Harbert Enterprises. Mr. Harbert's brother, George, invested cash in Harbert Enterprises for which he received a 25% ownership interest in the company. Harbert Enterprises borrowed cash from First Federal Bank. Harbert Enterprises paid cash to purchase a building from City Properties, Inc. How many reporting entities are mentioned in this scenario?

5

The accounting records of Direct Marketing Company (DMC) indicate that the company has $500 of cash; $3,500 of land; $1,000 of liabilities; $600 of common stock; and $2,400 of retained earnings. Based on this information, the percent of assets provided by earnings is ______.

60%, Total assets amount to $4,000 ($500 cash + $3,500 Land). Retained earnings = 60% ($2,400/$4,000) of total assets.

Which of the following is an asset source transaction?

Issuing common stock for cash

Which items are presented on the statement of changes in stockholders' equity?

Net income Total stockholders' equity Dividends Beginning common stock Ending retained earnings

What are the primary categories reported on the statement of cash flows?

Operating Investing Financing

Which of the following mean the same thing as the term investors?

Owners Stockholders

Accounting information is used by ______.

all business and organizations

The 10k report is prepared ______.

annually

Which financial statement is most similar to the accounting equation?

balance sheet

Recognizing cash expenses will cause ______.

both the left and right sides of the accounting equation to decrease

Borrowing money from creditors will cause ______.

both the left and right sides of the accounting equation to increase

A general ledger is a(n) ______. Multiple choice question. increase in assets caused by operating a business decrease in assets caused by operating a business complete list of a company's accounts wealth transfer from a business to its owners

complete list of a company's accounts

In a business liquidation, ______. Multiple select question. creditors and owners share equally in all distributions of assets creditors may be unable to collect the full amount of the liabilities liabilities are paid after owners receive a return of their investment liabilities are paid in full before funds are distributed to owners

creditors may be unable to collect the full amount of the liabilities liabilities are paid in full before funds are distributed to owners

An asset use event causes a(n) ______.

decrease in an asset account and a decrease in a liability or stockholders' equity account

When a company pays cash to purchase land, the amount of cash ______.

decreases and the amount of land increases

When a company pays cash to purchase land, the amount of cash ______. Multiple choice question. and land both decrease decreases and the amount of land increases increases and the amount of land decreases and land both increase

decreases and the amount of land increases

An event that causes one asset account to decrease and another asset account to increase is called an asset __________ transaction.

exchange

The financial statement that shows all the revenues earned and expenses incurred during the accounting period is the ______.

income statement

he Statement of Changes in Stockholder's Equity captures information related to the company's ______.

owners

When it is liquidated, a business has assets of $500 cash, $800 of liabilities and $400 common stock and ($700) deficit in retained earnings. Based on this information, ______. Multiple select question. owners will receive zero owners will receive $400 creditors will receive $500 creditors will receive $800

owners will receive zero creditors will receive $500

A business that consumes $3,000 of resources to make a product that is sold for $4,000 has earnings or of $1,000.

profit or income

The accounting records of Woo Company show $2,400 of retained earnings. Based on this information alone, ______.

the amount of cash dividends the company is able to pay cannot be determined

An accounting event is an economic occurrence that changes assets, liabilities or ______.

stockholder's equity

When a business borrows cash from a creditor, ______.

both assets and liabilities increase

Monster Media's (MM) accounting records indicate that the company has $500 of cash; $2,500 of land; $1,600 of common stock; and $1,400 of retained earnings. Based on this information, the maximum cash dividend the company can pay is ______.

$500

When a company borrows money from creditors that must be repaid with interest both the cash and the ________ _________ accounts increase.

Blank 1: notes or note Blank 2: payable or payables

Which items are presented on the statement of changes in stockholders' equity?

Income Statement Statement of Changes in Stockholders' Equity Statement of Cash Flows

Borrowing money from creditors will cause the amount of cash ______.

and the amount of liabilities to increase

Recognizing cash expenses will cause the amount of cash ______.

and the amount of retained earnings to decrease

The resources a business uses to conduct its operations are called

assets

Compared to financial accounting information, managerial accounting information, ______

provides more detail about the everyday operations of a business contains more estimates

Acquiring cash by issuing common stock will cause the amount of ______. Multiple select question. cash to increase cash to decrease stockholders' equity to increase stockholders' equity to decrease

cash to increase stockholders' equity to increase

Businesses have a(n) __________ function, which means that it has a duty to protect and use its assets for the benefit of the owner.

stewardship

An economic occurrence that changes an enterprise's assets, liabilities, or stockholder's equity is an accounting________

event