acg unit 1

T or F: bookkeeping and accounting describe the same process

False

T or F: investors and creditors are internal users of financial information

False

A company buys investment securities for $1 million on January 1, 2022. On December 31, 2022, the market value of the securities has grown to $1.5 million. At what amount should the investment securities be reported on December 31, 2022, according to the historical cost principle? The fair value principle?

$1 million; $1.5 million

The Ryan Express, aprovider of tax services, starts operations on 1/1/22. Now that the company has been in business for more than a year, the controller is assembling financial statements for the year ended 12/31/22. During 2022, the following transactions took place:1. On January 1, 2022, shareholders paid $1,000,000 in cash for common stock.2. Ryan Express earned revenue of $500,000, which increased Accounts Receivable (not cash).3. Ryan Express paid $125,000 in salaries expense.4. Ryan Express paid $75,000 in rent expense.5. Ryan Express bought $25,000 of supplies but did not pay cash, so this increased Accounts Payable.6. Ryan Express paid $10,000 in travel expenses.7. Clients paid Ryan Express cash of $400,000 for transaction #2, which reduced Accounts Receivable.8. Ryan Express paid shareholders a $190,000 cash dividend.Ending cash balance on 12/31/22 is

$1,000,000

harleys insurance company has assets of $5 million and liabilities of $3.5 million. what is the amount of stockholders' equity

$1.5 million

___ is the total amount paid in by stockholders for the shares the purchase

common stock

businesses sometimes have to spend money to make money. which of the following expenditures would be classified as an asset

a new oven for a bakery

which of the following is true of a partnership?

a partnership must hvae more than one owner

Steele Industries frequently orders supplies from Russell Distributors, with payment made two weeks after the purchase. Recently, Steele borrowed money from Mullen Enterprises to finance the purchase of a new delivery truck. Steele has a(n) ________ with Russell and a(n) ________ with Mullen.

accounts payable; note payable

safra is preparing a report to show the company's overall montly sales performance. safra is most likely performing which activity

aggregating data from the previous month's sales

a company uses cotton to make cloth. when the cloth is sold, the cots of the cotton will be recognized as

an expense

which characteristic of accounting information highlights significant financial trends and relationships

analysis

which of the following would be considered an economic event that is an accounting transaction

the purchase of new computers

as of december 31, bogglesworth company has assets of $4500 and stockholders' equity of $3000. what are the liabilities for bogglesworth company as of december 31

$1500

The following 2022 financial information pertains to Koosman Konsulting, established on January 1, 2022:1. Started company by selling $250,000 of common stock for cash on January 1, 2022.2. Invested $100,000 cash in an office building and computer systems in 2022.3. Generated and collected revenues of $125,000 cash in 2022 by providing consulting services.4. Paid all $80,000 of expenses in cash in 2022.5. Paid a $10,000 cash dividend in 2022.What was Koosman's cash balance on 12/31/22?

$185000

Baldwin Paints has acquired five plants in different states at the cost of $200 million. The current fair value of the plants is $350 million. Using the historical cost principle, Baldwin Paints will report the plants as assets at

$200000

The following 2022 financial information pertains to Koosman Konsulting, established on January 1, 2022:1. Started company by selling $250,000 of common stock on January 1, 2022.2. Invested $100,000 cash in an office building and computer systems in 2022.3. Generated and collected revenues of $125,000 cash in 2022 by providing consulting services.4. Paid all $80,000 of expenses in cash in 2022.5. Paid a $10,000 cash dividend in 2022.What were Koosman's cash flows for financing activities in 2022?

$240000

The Ryan Express, a provider of tax services, starts operations on 1/1/22. Now that the company has been in business for more than a year, the controller is assembling financial statements for the year ended 12/31/22. During 2022, the following transactions took place:1. On January 1, 2022, shareholders paid $1,000,000 in cash for common stock.2. Ryan Express earned revenue of $500,000, which increased Accounts Receivable (not cash).3. Ryan Express paid $125,000 in salaries expense.4. Ryan Express paid $75,000 in rent expense.5. Ryan Express bought $25,000 of supplies but did not pay cash, so this increased Accounts Payable.6. Ryan Express paid $10,000 in travel expenses.7. Clients paid Ryan Express cash of $400,000 for transaction #2, which reduced Accounts Receivable.8. Ryan Express paid shareholders a $190,000 cash dividend.Net income for 2022 is

$290000

if a company reports assets of $60000 and liabilities of $25000, what is the company's stockholders' equity

$35000

assets will be increased by $40000 if a company issues common stock for ___ and uses $30000 of the cash to purchase a truck

$40000

if a company issues common stock for $40000 and uses $30000 of the cash to purchase a truck, assets will be increased by

$40000

The following 2022 financial information pertains to Koosman Konsulting, established on January 1, 2022:1. Started company by selling $250,000 of common stock on January 1, 2022.2. Invested $100,000 cash in an office building and computer systems in 2022.3. Generated and collected revenues of $125,000 cash in 2022 by providing consulting services.4. Paid all $80,000 of expenses in cash in 2022.5. Paid a $10,000 cash dividend in 2022.What were Koosman's cash flows from operations in 2022?

$45000

What is a company's balance in its Common Stock account if its assets are valued at $425,000, liabilities are $175,000, and retained earnings are $200,000?

$50000

If a company buys actively traded investment securities for $5 million on January 1, 2022, and the value of these securities held by the company has grown to $6 million on December 31, 2022, the value of the securities reported on the company's balance sheet at December 31, 2022, is

$6 million

Highspire Architects, Inc. has assets other than investment securities that cost $60 million. The current market value of the assets is $85 million. Using the historical cost principle, the assets will be recorded and reported at

$60 million

The following 2022 financial information pertains to Koosman Konsulting, established on January 1, 2022:1. Started company by selling $250,000 of common stock on January 1, 2022.2. Invested $100,000 cash in an office building and computer systems in 2022.3. Generated and collected revenues of $125,000 cash in 2022 by providing consulting services.4. Paid all $80,000 of expenses in cash in 2022.5. Paid a $10,000 cash dividend in 2022.What were Koosman's total expenses reported on the income statement for 2022?

$80000

if a company reports assets of $125000 and liabilities of $40000, what is the company's stockholders' equity

$85000

accounting standards, which U.S. public companies follow, are set by the

FASB

Ginni founded Waggstooth Manor Doggie Day Care and, after a year in business, formed a partnership with her husband, Warren. Their friend Phoebe is a shareholder with Networth Bank. In terms of personal liability, who is at greater risk? Why?

Ginni and Warren, because both partners have unlimited personal liability, regardless of who owns a larger percentage of the company.

As a part of your company's open information policy, you keep an updated spreadsheet listing the types of requests the company has had for accounting information. What types of categories would you include in this report?

Internal user requests would be divided by department (production, human resources, etc.), and external user requests would be divided by type of organization (investor, creditor, government, etc.).

Wencaster Services purchased office supplies from a bulk supply store on credit on July 17. The company received a bill on July 31, and the bill is due and paid on August 31. Where in the accounting equation will this transaction be recorded on July 31 versus August 31?

The July 31 transaction will be recorded as Inventory (asset) and in Accounts Payable (liability), and the August 31 transaction will be recorded in Cash (asset) and in Accounts Payable (liability).

T or F: accounting data is prepared for two broad groups of users, internal users and external users

True

an accountant has a financial document with sales data for the past year. he wants to create a report for the CEO of the company. which type of report could he create

a graph with the total sales for each product category

___ has no effect on retained earnings

a land purchase

a landscaping company purchases lawn equipment to prove its services. the potential future economic benefit of the equipment allows it to be classified as a(n)

asset

___ are resources a business owns

assets

on march 1, bradshaw corporation purchases equipment on credit and pays the related debt on march 31. which types of accounts are affected on march 31

assets and liabilities

an investment by the stockholders in a business causes an increase in which of the following

assets and stockholders equity

when services are performed, and cash is collected

assets increase

swinton music raised funds by issuing common stock for $150000 and used $100000 of the cash for expansion. which of the following is true as a result

assets increased by $150000

if total liabilities decreased by $4000

assets must have decreased by $4000, or stockholders' equity must have increased by $4000

if expenses are paid in cash

assets will decrease

according to the fair value principle, assets and liabilities should be reported

at the fair market value

the amount of cash at the end of the period, in the statement of cash flows, should also be reported on the

balance sheet

which of the following financial statement will be affected if a company purchases a $700 machine on credit?

balance sheet only

accounting information should be a faithful representation in order to

be an accurate depiction of what really happened

On June 1, Martin Medical Supplies paid rent for the month in cash. How did the company record this transaction?

by decreasing cash and increasing expenses

at the end of the month, patricia presents three financial statements. which step in the accounting process is patricia most concerned with at this time

communication

the process used by the two standard-setting bodies (FASB and IASB) to reduce the differences between U.S. GAAP and IFRS is called

convergence

Mary wants to start a home healthcare practice. She is concerned about her legal liability, as home healthcare clients are usually very ill, and her aides will be administering medication. Which form of business should Mary choose

corporation

QRS industries is in the process of liquidation. which of the following parties' claims will be settled first

creditors

an accounting information users' needs depend on the kinds of ____ to be made

decisions

a company has total assets valued at $5.7 million, total liabilities of $1.4 million, and retained earnings of $300000. if the company wants 75% of its assets to be funded by stockholders' equity, it needs to _____ its stockholders' equity

decrease

If assets have decreased by $4,000, and stockholders' equity has increased by $4,000, then total liabilities must have

decreased by $8000

George Stevens has purchased 1,000 shares of stock in JKL Corporation. JKL recently reported a year-end net income of $1,400,000; JKL retains $1,000,000. George, along with his fellow stockholders, will receive the remainder in the form of

dividends

___ are distributions of cash or other assets to stockholders

dividends

although both dividends and expenses reduce retained earnings, dividends, and expenses are recorded separately because

dividends are not an expense

although _____ reduce retained earnings, they are not considered _____

dividends; expenses

Sally Harkins owns a bookstore and often takes cash out of the cash drawer to pay her apartment rent. Which of the following principles is Sally violating?

economic entity assumption

two people have formed a partnership. one partner of a business creates a $10000 debt, but the partnership doesn't have enough assets to cover the debt. in this situation

either partner could have to pay the debt out of personal assets

when a company performs a service, even if it has not been paid for this service, it still increases

equity

___ are the cost of assets consumed in the process of generating revenue

expenses

if a company issues common stock for $40000 and uses $30000 of the cash to purchase a truck, assets will be increased by $10000

false

McGillicuddy's Brewery wants to attract additional investors. The company releases statements outlining the company's past performance, including profit and loss history. This is an example of ________ accounting information.

financial

if a sole proprietor wants to raise money for capital expansion and limit personal liability for business debts, the sole proprietor would be advised to

form a corporation

according to the ____ principle, a company can purchase an asset for $1000 and, despite an increase in value over time, can continue to report the asset for $1000

historical cost

the question "can the company afford to hire new employees this year?" would most likely be asked by a

human resources director

which activity is the starting point of the accounting process?

identification

if a company provides services on account, then stockholders' equity

increases and an assset increases

the two groups who are the primary users of accounting information are

internal and external

managers who use accounting information to plan, organize, and run a business are

internal users

You are choosing between two investments, Flexon Industries and Tektron, Inc. Flexon Industries is a steady performer, perpetually growing earnings between 5% and 8% per year and projecting the same rate of growth for the next year. Tektron, Inc. is lately a top performer, growing earnings from 10% to 12% per year over the past three years and projecting the same rate of growth for the next year. However, the SEC is investigating Tektron, Inc. for potential questionable accounting practices for the past three years. As a potential investor, what would you do?

invest in flexon industries

if a company is known to have problems producing financial statements that comply with GAAP, then

investors should be very cautious about investing in this company

if a colleague asks you, as an accountant, why accounting is considered a financial information system, what explanation might you offer?

it identifies economic events, records business activity to maintain a history, and communicates financial information in reports for analysis

NoKnotsense Hair Salon was incorporated this year and is now an LLC. According to the economic entity assumption, the salon owner is now required to

keep the salon's economic records separate from his or her own

___ are existing debts and obligations

liabilities

a manufacturing company has received its monthly utility bill on january 31, and payment is due on february 14. where would the utility be recorded on january 31 when the month ends and the bill is still unpaid

liabilities

the following are forms of business organizations except

limited liability partnership

the question "how much of our annual budget should we spend to advertise our new product line?" would most likely be asked by a

marketing manager

in the retained earnings statement, changes in retained earnings are caluclated by taking beginning retained earnings plus net income or minus net loss and

minus dividends

the characteristic that most distinguishes a partnership from a proprietorship is

multiple owners

If the CEO of a company does not understand a portion of the financial statements prepared by the accounting department, the CEO should

not sign off on the financial statements until the issue is explained adequately

a ___ is a common form of organizations for service-type businesses

partnership

the ____ of a liability decreases both cash and accounts payable

payment

Businesses may be liable for mistakes by their owners or employees. Which forms of business organization do not provide protection for the owners' personal assets from the debts of the business? Choose the most correct statement.

proprietorships and partnerships

the chief financial officer is reviewing the end-of-year financial statements. he would most likely review which of the following as part of the communication activity in the accounting process

ratios and percentage changes in sales by year

during the month, patricia records the company's economic events in chronological order. which step in the accounting process is patricia most concerned with at this time

recording

Oakham Farms paid $1,200 cash for farming equipment from a supplier. As a result of this transaction, total assets

remain unchanged

___ are the gross increases in stockholders' equity resulting from business activities entered into for the purpose of earning income

revenues

if a company is profitable for an accounting period

revenues exceeded expenses

when an investor purchases an interest in a corporation, the company records

shares of common stock

electronics galore has a year-end net income of $2.5 million and plants to distribute $1.9 millino in dividends to

stockholders

assets and stockholders' equity increase when

stockholders make investments in the business

___ is equal to total assets minus total liabilities

stockholders' equity

when services are performed on account,

stockholders' equity increases

based on the economic entity assumption, it is assumed that

the activities of ford motor company can be distinguished from those of general motors

stockholders' equity is not affected when

the company pays a portion of an accounts payable

SlickOil Company released its latest financial reports, which indicate that the company is financially healthy and growing rapidly. This report conflicts with the company's reduced oil production over the past six months due to a major accident at one of its oil rigs. During this period, oil prices remained stable, and the company had to spend a large sum on oil cleanup. What is most likely to occur?

the company's stock price is likely to decline

Which of the following results when a company purchases equipment for $1,800 cash?

total assets remain unchanged

which of the following questions would a creditor most likely ask

will the company be able to pay its debts when they come due