Ch. 1 Accounting in Action - Questions

Corporation

A business organized as a separate legal entity under state corporation law, having ownership divided into transferable shares of stock.

Proprietorship

A business owned by one person.

income statement

A(n) _____ presents the revenues and expenses and resulting nt income or net loss for a specific period of time.

statement of cash flows

A(n) _____ summarizes information about the cash inflows (receipts) and outflows (payments) for a specific period of time.

retained earnings statement

A(n) _____ summarizes the changes in retained earnings for a specific period of time.

Cost Principle

An accounting principle that states that companies should record assets at their cost.

1500

As of December 31, 2014, Stoneland Company has assets of $3,500 and stockholders' equity of $2,000. What are the liabilities for Stoneland Company as of December 31, 2014?

Economic Entity

Basic Assumption that states that there should be a particular unit of accountability.

Communication

Categorize the next accounting task as relating to either the identification, recording, or communication aspects of accounting: Analyzing and interpreting information.

Recording

Categorize the next accounting task as relating to either the identification, recording, or communication aspects of accounting: Classifying economic events

Communication

Categorize the next accounting task as relating to either the identification, recording, or communication aspects of accounting: Explaining uses, meaning, and limitations of data.

Recording

Categorize the next accounting task as relating to either the identification, recording, or communication aspects of accounting: Keeping a systematic chronological diary of events.

increased 40,000

During 2014, Gibson Company's assets decreased $50,000 and its liabilities decreased $90,000. Its stockholders' equity therefore: (A: increased or decreased and the amount)

Relevance

Financial info. that is capable of making a difference in decision

Monetary Assumption

Identify which principle or assumption is supporting or has been violated in this situation: Dekalb Company includes in its accounting records only transaction data that can be expressed in terms of money.

Cost Principle

Identify which principle or assumption is supporting or has been violated in this situation: Julia Company owns buildings that are worth substantially more than they originally cost. In an effort to provide more relevant information, Julia reports the buildings at fair value in its accounting reports.

Economic entity assumption

Identify which principle or assumption is supporting or has been violated in this situation: Omar Shariff, president of Omar's Oasis, records his personal living costs as expenses of the Oasis.

300,000

If total assets decreased $80,000 and stockholders' equity increased $120,000 during the year, what is the amount of total liabilities at the end of the year?

decreses

Indicate whether each item increases or decreases stockholders' equity: Advertising expense

decreases

Indicate whether each item increases or decreases stockholders' equity: Dividends

Increases

Indicate whether each item increases or decreases stockholders' equity: Retained Earnings

increases

Indicate whether each item increases or decreases stockholders' equity: Service Revenues

increases

Indicate whether each item increases or decreases stockholders' equity: Stockholders invest cash in the business

Asset

Indicate whether the following item is an asset, liability or part of stockholders' equity: Accounts receivable

Stockholders equity

Indicate whether the following item is an asset, liability or part of stockholders' equity: Common Stock

Asset

Indicate whether the following item is an asset, liability or part of stockholders' equity: Equipment

Asset

Indicate whether the following item is an asset, liability or part of stockholders' equity: Prepaid Insurance

Stockholders Equity

Indicate whether the following item is an asset, liability or part of stockholders' equity: Retained Earnings

Liability

Indicate whether the following item is an asset, liability or part of stockholders' equity: Salaries and wages payable

Asset

Indicate whether the following item is an asset, liability or part of stockholders' equity: Supplies

Liability

Indicate whether the following item is an asset, liability or part of stockholders' equity: Unearned Service Revenue

balance sheet

Indicate whether the following item would appear on the income statement, balance sheet, or retained earnings statement: Supplies

balance sheet

Indicate whether the following item would appear on the income statement, balance sheet, or retained earnings statement: Total Assets

Revenues exceed expenses

Net income will result during a period when:

Expenses exceed revenues

Net loss will result during a period when:

balance sheet only

On the last day of the period, Jim Otto Company buys a $900 machine on credit. This transaction will affect this report/statement:

Assets

Resources a business owns are:

auditing, taxation, and management consulting

Services provided by a public accountant include

Incorrect

State if the accounting method used is correct or incorrect: Julia Company owns buildings that are worth substantially more than they originally cost. In an effort to provide more relevant information, Julia reports the buildings at fair value in its accounting reports.

Common Stock

Term used to describe the total amount paid in by stockholders for the shares they purchase.

Expenses

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

Assets= Liabilitites + Common Stock + Revenues - Expenses - Dividends

The expanded accounting equation .

Managerial Accounting

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

balance sheet

The financial statement that reports assets, liabilities, and stockholders' equity is the

Revenues

The gross increase in stockholders' equity resulting from business activities entered into for the purpose of earning income.

d

Which of the following statements about users of accounting information 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

Stockholders' equity

the ownership claim of shareholders on total assets

Partnership

A business owned by two or more persons associated as partners.

Dividend

A distribution by a corporation to its stockholders.

balance sheet

A(n) _____ reports the assets, liabilities, and stockholders' equity at a specific date.

600,000

At the beginning of the year, Gonzales Company had total assets of $870,000 and total liabilities of $500,000. Answer the following questions. If total assets increased $150,000 during the year and total liabilities decreased $80,000, what is the amount of stockholders' equity at the end of the year?

900,000

At the beginning of the year, Gonzales Company had total assets of $870,000 and total liabilities of $500,000. Answer the following questions. During the year, total liabilities increased $100,000 and stockholders' equity decreased $70,000. What is the amount of total assets at the end of the year?

Recording

Categorize the next accounting task as relating to either the identification, recording, or communication aspects of accounting: Measuring events in dollars and cents.

Communicating

Categorize the next accounting task as relating to either the identification, recording, or communication aspects of accounting: Preparing accounting reports.

Communicating

Categorize the next accounting task as relating to either the identification, recording, or communication aspects of accounting: Reporting information in a standard format.

Identification

Categorize the next accounting task as relating to either the identification, recording, or communication aspects of accounting: Selecting economic activities relevant to the company

Recording

Categorize the next accounting task as relating to either the identification, recording, or communication aspects of accounting: Summarizing economic events.

Expense

Classify the following item as dividends, revenue, or expense: Advertising expense

Dividends

Classify the following item as dividends, revenue, or expense: Dividends

Expense

Classify the following item as dividends, revenue, or expense: Insurance Expense

Revenue

Classify the following item as dividends, revenue, or expense: Rent revenue

Expense

Classify the following item as dividends, revenue, or expense: Salaries and wages expense

Revenue

Classify the following item as dividends, revenue, or expense: Service revenue

Expense

Classify the following item as dividends, revenue, or expense: Utilities expense

Generally accepted accounting principles

Common standards that indicate how to report economic events. GAAP

Liabilities

Creditor claims on total assets

Liability

Indicate whether the following item is an asset, liability or part of stockholders' equity: Notes payable

Stockholders equity

Indicate whether the following item is an asset, liability or part of stockholders' equity: Owner's investment

Income Statement

Indicate whether the following item would appear on the income statement, balance sheet, or retained earnings statement: Advertising expense

Balance sheet

Indicate whether the following item would appear on the income statement, balance sheet, or retained earnings statement: Cash

Balance Sheet

Indicate whether the following item would appear on the income statement, balance sheet, or retained earnings statement: Common stock

Retained Earnings

Indicate whether the following item would appear on the income statement, balance sheet, or retained earnings statement: Dividends

Balance sheet

Indicate whether the following item would appear on the income statement, balance sheet, or retained earnings statement: Equipment

Income Statement

Indicate whether the following item would appear on the income statement, balance sheet, or retained earnings statement: Net Income/Net loss (as the result)

Retained Earnings

Indicate whether the following item would appear on the income statement, balance sheet, or retained earnings statement: Net Income/Net loss (not as the result)

Balance Sheet

Indicate whether the following item would appear on the income statement, balance sheet, or retained earnings statement: Notes payable

Income Statement

Indicate whether the following item would appear on the income statement, balance sheet, or retained earnings statement: Service revenue

balance sheet

Indicate whether the following item would appear on the income statement, balance sheet, or retained earnings statement: Stockholders' Equity

decreases assets and decreases liabilities

Payment of an account payable affects the components of the accounting equation in the following way: (A: decrease or increase and the accounts)

increase assets and increase stockholders equity

Performing services on account will have the following effects on the components of the basic accounting equation:

Correct

State if the accounting method used is correct or incorrect: Dekalb Company includes in its accounting records only transaction data that can be expressed in terms of money.

Incorrect

State if the accounting method used is correct or incorrect: Omar Shariff, president of Omar's Oasis, records his personal living costs as expenses of the Oasis.

Cost Principle

States that assets should be recorded at their cost.

Proprietorships, Partnerships, and corporations

The three types of business entities

b

Which of the following events 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.

Verification

Which of the following is NOT a step in the accounting process? °Identification °Recording °Verification °Communication

c

Which of the following statements is false? a. A statement of cash flows summarizes information about the cash inflows (receipts) and outflows (payments) for a specific period of time. b. A balance sheet reports the assets, liabilities, and stockholders' equity at a specific date. c. An income statement presents the revenues, expenses, changes in stockholders' equity, and resulting net income or net loss for a specific period of time. d. A retained earnings statement summarizes the changes in retained earnings for a specific period of time.