ACCT 211 Chapter 1 & 2

The FASB conceptual framework consists of all of the following except:

concepts

True or false: Return on assets is computed as Net Income divided by Total Assets.

False

Given the list of accounts below, identify which of them would appear on a balance sheet.

Supplies Cash Retained earnings, 12/31 Accounts Payable Equipment

A process of analyzing data to identify meaningful relations and trends is called data

analytics

Generally accepted accounting principles (GAAP) wants information to have:

faithful representation relevance

According to the fraud triangle, the three factors that must exist for a person to commit fraud include

opportunity rationalization pressure or incentive

Which of the following statements correctly explains how to prepare a trial balance?

List each account title and its amount from the ledger. Verify that the total debit balances equals the total credit balances. Compute the total of debit balances and the total of credit balances.

The _____ is the first financial statement to be prepared.

income statement

Identify which of the following lists of accounts would belong on the statement of retained earnings.

Retained earnings and Dividends

Dividends are resources paid to the stockholders.

True

Jacob's Chocolates had beginning retained earnings of $4,000; net income of $10,000; and dividends of $300, calculate the ending balance in the retained earnings account.

$13,700 Reason: $4,000 beginning balance + $10,000 net income - $300 dividends.

Sheldon Company had beginning retained earnings of $1,000, net income of $5,000, and dividends of $250. The ending balance in the retained earnings account is

$5,750 Reason: $1,000 beginning balance + $5,000 net income - $250 dividends = $5,750.

Boaz Company had beginning of year assets of $100 million and end of year assets of $120 million. Boaz's net income is $5 million. Calculate Boaz Company's return on assets. Round your answer to 1 decimal place.

4.5% Reason: $5 million/[($100 million + $120 million/)2] = 4.5%

Review each of the following statements to determine which is correct regarding the importance of assessing a company's risk of paying debt.

A company's required debt payments may be greater than its ability to generate money to make those payments. A company that finances their assets by borrowing will need to make enough money to pay off the debt. If a company has a lot of debt, they may not be able to afford to take on new debt.

In defining a reporting period, which of the following statements is (are) correct?

A reporting period can be one month, one quarter or one year. A one-year reporting period is known as the fiscal year. A reporting period is determined by the business.

Identify what accounting is by selecting the correct statement.

Accounting is a system that identifies, records and communicates financial information.

Which statement is correct regarding entering transactions into the accounting equation?

After recording a transaction, the total of the right side of the accounting equation must equal the total of the left side of the accounting equation. Reason: If one account is credited, then at least one other account is debited.

When recording transactions into the accounting equation, which of the following statements are correct?

After recording the transaction, total assets will always equal total liabilities plus equity. The accounting equation must always remain in balance.

Which of the statement(s) below define(s) an asset?

An amount owned Resources controlled by the business Resources with expected future benefits

Identify the correct definition of an asset:

An asset is a resource that a business owns or controls

An employee that is having trouble paying his personal bills might exhibit the following fraud factor:

Pressure

J. Jackson invested $1,000 in his business in exchange for common stock. Show how to use T-accounts to record this transaction by selecting the correct answer below.

Debit Cash; credit Common stock Reason: Cash is coming into the business so it should be debited. The credit will be to the Common stock account.

All of the following are part of the FASB conceptual framework: (Select all that apply).

Elements Qualitative characteristics Recognition and measurement Objectives

Given the accounts below, choose all of the ones that affect equity.

Expenses Revenues Dividends Common Stock

Which set of accounts below would have a normal debit balance?

Expenses; Dividends; Cash

Which of the following financial statements report(s) the financial position of a business over a period of time?

Statement of retained earnings Statement of cash flows Income statement

Which of the following statements below lists the rules of entering transactions into the accounting equation?

The accounting equation must always remain in balance so that assets always equal the sum of liabilities and equity.

What are Generally Accepted Accounting Principles?

The concepts and rules that govern financial accounting practice.

Which of the following statements explain(s) how the accounting equation applies to businesses?

The relation of assets, liabilities and equity is reflected in the equation. The equation states that Assets = Liabilities + Equity. The equation reflects that the total of what a business owns at any point in time will equal the total of what it owes creditors and owners. The equation applies to all transactions and events.

The correct definition of a balance sheet includes which of the following statements?

The statement reports the financial position of a company at a point in time. The statement reports assets, liabilities and equity at a point in time. The statement reports the equality of the accounting equation at any point in time.

Which of the following statements best represents the accounting equation?

The total of everything owned by a business must always equal the total of what the business owes to creditors and owners.

Identify which of the following formulas correctly defines how to calculate the debt ratio.

Total liabilities/Total assets

A graphical presentation of data to help in understanding their significance is called

data visualization

The statement of retained earnings explains changes in equity from net income (or loss) and from any ______ over a period of time. (Select the accounts below which will correctly complete this question.)

dividends

An external user of accounting information

does not directly run the organization

A(n) _____ user of accounting information does not directly run the organization.

external

Transferring entries from the journal to the ledger is called

posting