Exam 1

What is the basic accounting equation?

A = L + SE

Listed here are some items found in the financial statements of Finzelberg. Indicate in which financial statement(s) each item would appear. (a) Service revenue. (b) Equipment. (c ) Advertising expense. (d) Accounts receivable. (e) Common Stock. (f) interest payable.

a) Income Statement b) Balance Sheet c) Income Statement d) Balance Sheet e) Balance Sheet f) Balance Sheet

How are each of the following financial statements interrelated? (a) Retained earnings statement and income statement. (b) Retained earnings statement and balance statement. (c) Balance statement and statement of cash flows.

a) Net income from the income statement is reported as an increase to retained earnings on the retained earnings statement. b) The ending amount on the retained earnings statement is reported as the retained earnings amount on the balance sheet. c) The ending amount on the statement of cash flows is reported as the cash amount on the balance sheet

Which of these items are liabilites of White Glove Cleaning Service? (a) Cash. (b) Accounts payable. (c ) Dividends. (d) Accounts receivable. (e) Supplies. (f) Equipment. (g) Salaries and wages payable. (h) Service revenue. (i) Rent expense.

accounts payable, salaries and wages payable

The accounting equation is Assets = Liabilities + Stockholders' Equity. Appendix A, at the end of this textbook, reproduces Apple's financial statements. Replacing words in the equation with dollar amounts, what is Apple's accounting equation at September 27, 2014? Assets $231,839 Total Assets $231,839 Liabilities $120,292 Stockholders' Equity $111,547 Total Liabilities and SE $231,839

$231,839 = $120,292 + $111,547

What do these classes of ratios measure? (a) liquidity. (b) profitability. (c ) solvency.

(a) Liquidity ratios measure the short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash. (b) Profitability ratios measure the income or operating success of a company for a given period of time. (c) Solvency ratios measure the company's ability to survive over a long period of time.

Name ratios useful in assessing: (a) liquidity. (b) solvency. (c ) profitability.

(a) Working capital and current ratio. (b) Debt to assets and free cash flow. (c) Earnings per share.

Use the basic accounting equation to answer these questions. (a) The liabilities of Lantz Company are $90,000 and the stockholders' equity is $230,000. What is the amount of Jantz Company's total assets? (b) The total assets of Salley Company are $170,000 and its stockholders' equity is $80,000. What is the amount of its total liabilities? (c ) The total ssets of Brandon Co. are $800,000 and its liabilites are equal to one-fourth of its total assets. What is the amount of Brandon's stockholders' equity?

a) 320,000 b) 90,000 c) 600,000

Match each of the following types of evaluation with one of the listed users of accounting information. 1. Trying to determine whether the company complied with tax laws. 2. Trying to determine whether the company can pay its obligations. 3. Trying to determine whether an advertising proposal will be cost-effective. 4. Trying to determine whether the company's NI will result in s stock price increase. 5. Trying to determine whether the company should employ debt or equity financing. (a) Investors in common stock. (b) Marketing managers. (c ) Creditors. (d) Chief Financial Officer. (e) Internal Revenue Service.

a) 4 b) 3 c) 2 d) 5 e) 1

Eskimo Pie Corporation markets a broad range of frozen treats, including its famous Eskiom Pie ice cream bars. The following items were taken from a recent income statement and balance sheet. In each case, identify whether the item would appear on the balance sheet (BS) or income statement (IS). (a) Income tax expense. (b) Inventory. (c ) Accounts payable. (d) Retained earnings. (e) Equipment. (f) Sales revenue. (g) Cost of goods sold. (h) Common stock. (i) Accounts receivable. (j) Interest expense.

a) IS b) BS c) BS d) BS e) BS f) IS g) IS h) BS i) BS j) IS

Match each of the following forms of business organization with a set of characteristics: sole proprietorship (SP), partnership (P), corporation (C) (a) Shared control, tax advantages, increased skills and resources. (b) Simple to set up and maintains control with owner. (c ) Easier to transfer ownership and raise funds, no personal liability.

a) P b) SP c) C