Financial Accounting Fall 2021- Chapter 1

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

$13,700

Boaz Company had the 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.

4.5%

From the following statements, identify the correct definition of a liability.

A company's obligation to provide assets, products or services to others.

In every financial statement, there exists single and double underlines. Choose the statement below that describes what these are for and when to use them.

A single-ruled line denotes an addition or subtraction and double underlines indicate the final totals.

Ethics are defined as:

Accepted standards of good and bad behavior. Beliefs that distinguish right from wrong.

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 statements below define a liability?

An amount owed to a creditor. The company obligations to provide assets, products or services to others. A creditor's claims against the assets of a business.

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

An amount owned. Resources with expected future benefits. An amount owed to the owners.

Identify the correct definition of an asset:

An asset is a resource that a business owns or controls

Identify the expanded accounting equation from the options below.

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

Select the account that would be decreased if Hillary's Hair Salon decides to pay $40 cash dividends to its shareholders.

Cash

Select the account that would be decreased if Hillary's Hair Salon pays $40 in dividends.

Cash

Identify the main sections on a statement of cash flows.

Cash flows from operating activities Cash flows from financing activities Cash flows from investing activities

Given the following lists of accounts, choose the one that contains only assets.

Cash, Building, Supplies, Accounts Receivable

Statement of Cash Flows

Choice, Identifies the cash inflows and outflows over a period of time Identifies the cash inflows and outflows over a period of time

Which statements below define equity?

Claims of the owner(s) on the assets of the business. Equity is equal to assets minus liabilities.

Given the accounts below, choose all that affect equity.

Common Stock Dividends Expenses Revenues

Which list of accounts below, identifies only accounts that would appear on a balance sheet.

Common Stock, Equipment, Accounts Payable

Which of the following show a correct date line for a Balance Sheet:

December 31, 20xx

Expenses

Decrease equity and are the cost of providing products and services to customers.

Dividends

Decrease equity and are the outflows of assets from the company to the shareholders.

Given the following list of accounts, identify which are classified as assets.

Equipment, Accounts Receivable, Cash, Supplies, Land

From the following statements, identify the correct definition of equity.

Equity refers to the claims of the owners on the assets of a business.

Johna's Plant Nursery Company pays the salaries of its two employees. How will this transaction affect the accounting equation?

Equity will be decreased. Salaries expense will be increased.

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

Expenses Revenues Common Stock Dividends

Which of the following statements describes the effect of expenses on equity?

Expenses cause equity to decrease.

The definition of expenses includes which of the following statements?

Expenses decrease equity. Expenses are the costs of providing products and services to customers.

Which of the following statements represent(s) how expenses affect equity?

Higher expenses result in lower total equity. If expenses increase, then total equity decreases.

Jack Pickle decided to start a small business as a corporation. His initial investment was $4,000 cash in exchange for common stock. Demonstrate how to record this transaction in the accounting equation.

Increase Cash by $4,000; Increase Common Stock by $4,000.

Common stock

Increase equity and are assets owners contribute to the business.

Another name for the expense recognition principle is:

Matching Principle

Given the statements below, choose the most accurate definition of dividends.

Outflows of cash or other assets paid to the owners of a corporation

An income statement reports a company's net income or net loss during a period. Which of the following accounts would appear on an income statement?

Rent Expense Rent Revenue Wages Expense Service Revenue

Balance Sheet

Reports the balance of assets, liabilities and equity at a point in time

Statement of Retained Earnings

Reports the changes in equity during a period of time

A corporation's equity has two main parts. Identify these two parts.

Retained earnings Contributed capital

Which of the following statements are true regarding the effect of revenues on the equity of a business?

Revenues that increase equity have many forms, such as consulting services and commissions from services. Revenues cause equity to increase.

Given the following lists of accounts, choose the one that contains only liabilities.

Taxes Payable, Accounts Payable, Wages Payable

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.

The heading of every financial statement contains several line items. Identify the correct items from the list below.

The date or time period the financial statement covers The company name. The title of the statement

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

The equation applies to all transactions and events. The relation of assets, liabilities and equity is reflected in the equation. 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 states that Assets = Liabilities + Equity.

The correct definition of an income statement includes which of the following?

The statement describes a business's revenues and expenses over a period of time.

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

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

Which of the following statements best represents the reason for 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.

True or False: The date line of a balance sheet lists one specific day and not a period of time. True false question. True

True

True or false: Dividends are resources paid to the owners of a corporation.

True

True or false: Dividends are resources paid to the stockholders.

True

Given the following list of accounts, identify which are classified as liabilities.

Wages Payable, Taxes Payable, Notes Payable, Accounts Payable

A customer of Landen Consulting Company makes a $400 payment of cash on a bill for services provided last month. Record the receipt of cash in the accounting equation of Landen Consulting by:

decreasing Accounts Receivable, $400. increasing Cash, $400.

Jackson Company purchased office equipment costing $3,000 for his business and paid immediately. Record this transaction in the accounting equation by:

decreasing Cash; increasing Equipment

The statement of retained earnings explains changes in equity from net income (or loss) and from any ______ over a period of time.

dividends

The details behind the financial statement are often disclosed in the

footnotes to the statements

The principle that states that a company should report the details behind the financial statements which would impact users' decisions is called the

full disclosure principle

The revenue recognition principle states that revenue is recognized when:

goods or services are provided to customers

The _____ is the first financial statement to be prepared.

income statement

Revenues

increase equity from sales of products and services to customers

If a customer makes a partial payment of $100 on a service which has already been billed, you would record this transaction into the accounting equation by:

increasing Cash and decreasing Accounts Receivable.

Sally Smith decided to start a sea shell business organized as a corporation. Her initial investment in the business consisted of $10,000 in cash in exchange for common stock. Record this transaction in the accounting equation of the new business by:

increasing Cash; increasing Common Stock

On 8/1, supplies costing $500 were purchased on credit. Record this transaction in the accounting equation by:

increasing Supplies, and increasing Accounts Payable

The principle which says that revenue is recognized when goods or services are provided to customers at an amount expected to be received from the customer is known as the

revenue recognition principle

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

Income Statement

Reports the revenues and expenses incurred by a business for a period of time

Which of the following statements is correct regarding revenues?

Revenues cause equity to increase.

The principle which states that a company should record expenses it incurred in the same period as the revenue it generated is known as the

expense recognition principle

On May 1, Mary's Morsels Company provided catering services at a wedding. The bride is billed $4,000 and will pay the following month. Record this transaction on May 1 in the accounting equation of Mary's Morsels by:

increasing Accounts Receivable and increasing Revenue

On February 1, Russell's Consulting Services Company provided $1,000 of services to the local college. On February 1, Russell's collected $700, and the college will pay the balance next month. Record this transaction in the accounting equation on February 1 for Russell's Consulting Service by:

increasing both Cash and Accounts Receivable; and increasing Revenues

The three sections of the statement of cash flows includes all of the following:

investing financing operating