Accounting Ch. 1 Assignments

At December 31, Aloe, Inc.'s assets equal $8,000 and stockholders' equity equals $5,000. Liabilities must equal $_______.

$3,000

Over Armour, Inc., sold 5 shirts to its customers for a price of $10 per shirt that cost $6 per shirt. Total Revenues equal $___ and the expense equals $___.

$50; $30

Place these items in the order in which they appear on the statement of cash flows. - Cash Flows Provided by (used in) Investing Activities - Cash Flows Provided by (used in) Financial Activities - Cash Flows Provided by (used in) Operating Activities

1 - Cash Flows Provided by (used in) Operating Activities 2 - Cash Flows Provided by (used in) Investing Activities 3 - Cash Flows Provided by (used in) Financial Activities

________ to the financial statements helps users understand how financial statement amounts were derived and includes other information that may affect the users' decisions. (Enter one word per blank)

Notes

Accounts ______ is a liability account and represents amounts owed to suppliers.

Payable

Which of the following are found on a balance sheet? (Select all that apply) a. Dividends b. Revenues c. Cash d. Notes Payable e. Retained Earnings f. Expenses g. Accounts Receivable

c. Cash d. Notes Payable e. Retained Earnings g. Accounts Receivable

Profits earned by a company that are paid to stockholders are called _______. (Enter only one word per blank)

dividends

Events that do not involve exchanges between the company and someone else but affect assets, liabilities and/or stockholders' equity are called ______events. (Enter one word per blank.)

internal

Public Accountant

is contracted by a variety of different companies for advice and other services

Private Accountant

is hired by a business as an employee and provides accounting services for that particular business

Entries are first recorded in the general ______ and then summarized in the ledger. (Enter one word per blank.)

journal

The Equipment account is increased with an entry on the _____ side of Equipment T-account. (Enter one word per blank.)

left

When a company borrows from a bank by signing a formal agreement, an asset titled Cash is increased and a ______ titled _______ is increased.

liability; Note Payable

When a company pays its supplier for amounts owed, its Cash and Accounts _____ accounts are decreased. (Enter only one word per blank.)

payable

Statement of Cash Flows

reports the operating, investing, and financing activities that caused increases and decreases in cash during the period

profita that have accumulated in the company over time are ________ earnings (enter one word per blank)

retained

Accounts Payable is increased with an entry on the ____ side of the T-account. (Entry one word per blank.)

right

The Common Stock account is increased with an entry in the ______ side of the T-account

right

Accounts _________ is an asset on the balance sheet that reports the amounts owed by customers for sales or services provided on credit. (Enter one word per blank)

Receivable

Statement of retained earnings

Reports the accumulation of profits kept by the business during the current accounting period with that of prior periods

Income Statement

Reports the financial performance of the business during the current accounting period

Balance Sheet

Reports the financial position of the business at a point in time

Ace Electronics bought equipment for $4,000. Normally the equipment would have cost $4,500, but the supplier gave Ace a special discount. Ace's balance sheet should report equipment of _________. a. $4,500 b. $4,000 c. $500 d. nothing, because the equipment would be reported on the income statement, not the balance sheet

b. $4,000

All transactions _____. (Select all that apply.) a must affect both assets and stockholders' equity b. affect assets. liabilities, and/or stockholders' equity c. have at least two effect on the accounting equation d. must affect assets e. must affect both assets and liabilities

a must affect both assets and stockholders' equity b. affect assets. liabilities, and/or stockholders' equity

Ace Electronics had the following increases in the cash account during the month: $20,000 from owners for stock; $5,000 from sales to customers; and $15,000 borrowed from River Bank. Ace's revenue for the month was _____. a. $5,000 b. 40,000 c. 25,000 d. 35,000 e. 20,000 f. 15,000

a. $5,000

Alpha sold $2,000 of merchandise to Beta on credit. Beta promised to pay for it next month. Alpha will report a $2,000 _______. a. Account Receivable b. net loss c. increase in Cash, since Beta is sure to pay next month

a. Account Receivable

Which of the following are possible effects on the accounting equation when recording a transaction that increases an asset by $100? (Select all that apply.) a. An asset decreases by $100 b. A stockholders' equity account decreases by $100 c. A liability account increases by $100 d.A stockholders' equity account increases by $100 e. A liability account decreases by $100

a. An asset decreases by $100 c. A liability account increases by $100 d.A stockholders' equity account increases by $100

Show the order in which these asset accounts would appear on a company's balance sheet. a. Cash b. Supplies c. Equipment

a. Cash b. Supplies c. Equipment

Which of the following would be included in the operating activity section of the statement of cash flows? (select all that apply) a. Cash paid to employees b. Cash paid to suppliers c. Cash received from customers d. Cash paid to purchase a new office building e. Cash paid to purchase land

a. Cash paid to employees b. Cash paid to suppliers c. Cash received from customers

List the components of a classified balance sheet in the proper order in accordance with GAAP. List from top to bottom. a. Current assets b. Non-current liabilities c. Current liabilities d. Non-current assets e. Stockholders' equity

a. Current assets d. Non-current assets c. Current liabilities b. Non-current liabilities e. Stockholders' equity

______ to a corporation's stockholders' equity accounts cause its total stockholders' equity to ______. a. Debits; decrease b. Debits; increase c. Credits; decrease

a. Debits; decrease

The first step in starting a business is to obtain cash from owners and/or creditors. Is this activity an investing activity or a financing activity? a. Financing b. Investing

a. Financing

How do financing activities differ from investing activities? (Check all that apply.) a. Financing activities may involve an exchange of cash for a company's own stock; investing activities do not. b. Financing activities involve an exchange of cash for non-current assets; investing activities do not. c. Financing activities involve an exchange of cash for current assets; investing activities do not. d. Financing activities may involve an exchange of cash for debt; investing activities do not.

a. Financing activities may involve an exchange of cash for a company's own stock; investing activities do not. d. Financing activities may involve an exchange of cash for debt; investing activities do not.

Which of the following are the main groups of external users of financial statements. (Select all that apply) a. Government b. Investors c. Managers d. Creditors

a. Government b. Investors d. Creditors

Cash Flows from (used in) _______ Activities on the statement of cash flows reports the cash activity from the buying and selling of productive resources such as land, buildings, and equipment. (One word per blank)

Investing

LLC's stands for Limited _______ Company. (Enter one word per blank)

Liability

True or false: Revenue always equals cash collections during the accounting period.

False Revenues are recorded when the goods or services are provided even if the cash is not collected until a later accounting period.

___________ are earned by selling goods or services to customers and is the first line items reported on the income statement. (enter on word per blank)

Revenues

When faced with an ethical dilemma, you should follow a 3-step process that includes _______. a. Identifying and evaluating the alternative courses of action b. Choosing the alternative that is most profitable c. Choosing the alternative that is most ethical d. Identifying who will be affected by the situation e. Contacting the SEC

a. Identifying and evaluating the alternative courses of action c. Choosing the alternative that is most ethical d. Identifying who will be affected by the situation

Which of these line items appears on a balance sheet? (Check all that apply.) a. Liabilities b. Expenses c. Assets d. Revenues e. Stockholders' Equity

a. Liabilities c. Assets e. Stockholders' Equity

Who has primary responsibility for preparing and making sure that a company's financial statements follow GAAP? a. Management b. The Secretaries and Exchange Commission (SEC) c. The stockholders d. The Public Company Accounting Oversight Board (PACOB) e. Independent auditors (CPAs)

a. Management

Which of these is a non-current liability? a. Mortgage Payable due in 20 years b. Note Payable due in 3 months c. Accounts Payable

a. Mortgage Payable due in 20 years

List these liability accounts in the order in which they would appear on a company's balance sheet. a. Note payable (due in 5 months) b. Not payable (due in 5 years) c. Mortgage payable (due in 25 years)

a. Note payable (due in 5 months) b. Not payable (due in 5 years) c. Mortgage payable (due in 25 years)

Select the investing activities from the list below. (Check all that apply.) a. Purchasing equipment b. Issuing a note payable c. Issuing stock d. Purchasing a company logo e. Purchasing land

a. Purchasing equipment d. Purchasing a company logo e. Purchasing land

place the single-step income statement items in the proper order from top to bottom. a. Revenues b. Expenses c. Net Income

a. Revenues b. Expenses c. Net Income

The heading of the balance sheet might include which of the following? (Check all that apply) a. The name of the business b. For the Year Ended June 30, 2018 c. The title "Balance Sheet" d. For the Year Ended December 31, 2018 e. At December 31, 2018

a. The name of the business c. The title "Balance Sheet" e. At December 31, 2018

A company made a $1,000 payment on its $100,000, 20-year mortgage. The decrease in liabilities would be recorded with a ______ to Notes Payable. a. debit b. Credits increase, not decrease, Notes Payable.

a. debit

The order in which assets are reported on the balance sheet is based on when the asset is _________. a. expected to be used or turned into cash b. expected to be sold and collected c. purchased d. paid for and consumed

a. expected to be used or turned into cash

A financial statement heading state that it was prepared: "For the Year Ended December 31, 2018." What types of financial statements could this be? (Select all that apply) a. income statement b. statement of cash flows c. balance sheet d. statement of retained earnings

a. income statement b. statement of cash flows d. statement of retained earnings

The line item Net Income appears on the _______. (Check all that apply) a. income statement b. statement of retained earnings c. balance sheet

a. income statement b. statement of retained earnings

A transaction may be recorded with an increase in a liability and a(n) _______. a. increase in an asset b. increase in another liability c. increase in a stockholders' equity account d. decrease in an asset

a. increase in an asset

The US Financial Accounting Standards Board is working with the International Accounting Standards Board to _________. (Check all that apply) a. make financial statements more comparable b. make sure that next year's meeting is hosted by an IFRS country c. eliminate differences in financial reporting among countries d. preserve the unique identity of each country's financial reporting rules

a. make financial statements more comparable c. eliminate differences in financial reporting among countries

In April, Pizza Aroma hired a new employee at a rate of $10,000 per month to start work at the beginning of May. In April, Pizza Aroma should record _____. a. nothing, because an exchange of promises is not a transaction b. a $1,000 increase to Prepaid wages and a $1,000 decrease to Cash c. a $1,000 increase to Wage expense and a $1,000 decrease to Cash

a. nothing, because an exchange of promises is not a transaction

Financial statements can be prepared ________. (Check all that apply) a. on a fiscal year basis b. on a quarterly basis c. on a monthly basis d. only when the government allows e. only at the end of a calendar year

a. on a fiscal year basis b. on a quarterly basis c. on a monthly basis

On the balance sheet, Equipment is reported at its _____. a. original cost b. higher current value

a. original cost

The purpose of an independent auditor's report is to _______. (Check all that apply) a. provide assurance that the financial statements comply with Generally Accepted Accounting Principles (GAAP) b. provide assurance that the financial statements represent what they claim to represent c. report whether the company is a good investment

a. provide assurance that the financial statements comply with Generally Accepted Accounting Principles (GAAP) b. provide assurance that the financial statements represent what they claim to represent

IFRS are ________. a. the International Financial Reporting Standards b. the principles that govern the Code of Professional Conduct c. required for all financial statements prepared in the United States d. another term for US GAAP

a. the International Financial Reporting Standards

Lox, Stock and Bagel, Inc., issued $100,000 of coomon stock. It recorded the transaction by increasing Cash and decreasing Common Stock. As a result of this entry, _______. a. the accounting equation will be out of balance b. the accounting equation will balance, but the transaction was recorded n the wrong accounts c. the accounting equation will balance

a. the accounting equation will be out of balance

The amount of cash reported on the balance sheet is ______ the ending cash balance reported on the statement of cash flows. a. the same as b. less than c. greater than

a. the same as

Morris Lest, Inc. purchase machinery for $10,000 cash. The effect of this transaction is to cause ______. a. total assets to remain the same b. total stockholders' equity to decrease c. total liabilities to decrease d. total stockholders' equity to increase e. total assets to increase f. total liabilities to increase

a. total assets to remain the same

The creditors' claim to a company's resources is represented by ____. a. total liabilities b. common stock c. total stockholders' equity d. retained earnings

a. total liabilities

A company purchased a $100,000 building in exchange for a 20-year not payable. The company recorded a $100,000 increase in the Building account and a $100,000 decrease in Cash. As a result of this error, _____. (Check all that apply.) a. total liabilities are too low b. total assets are correct c. total liabilities are correct d. total assets are too high e. total liabilities are too high f. total assets are too low

a. total liabilities are too low f. total assets are too low

Financial information is enhanced when it is _______. (Check all that apply) a. verifiable b. on cash-basis c. comparable d. future-oriented e. timely f. understandable

a. verifiable c. comparable e. timely f. understandable

Which of the following are possible effects on the accounting equation when recording a transaction that increases a liability by $100? (Select all that apply.) a. A stockholders' equity account increases by $100 b. A stockholders' equity account decreased by $100 c. Another asset increases by $100 d. An asset decreases by $100

b. A stockholders' equity account decreased by $100 c. Another asset increases by $100

Which of the following accounts are liabilities? (Check all that apply) a. Accounts Receivable b. Accounts Payable c. Common Stock d. Cash e. Note Payable f. Taxes Payable g. Wages Payable

b. Accounts Payable e. Note Payable f. Taxes Payable g. Wages Payable

What does a business typically receive when it issues stock to owners? a. Stock certificate b. Cash c. Promissory note d. Equipment

b. Cash

Company X issued $10,000 of common stock to its owners for cash. It recorded he transaction by increasing assets and increasing liabilities. Which of the following statements are correct? (Check all that apply.) a. Assets will be too low b. Liabilities will be too high c. Assets will be to high d. Stockholders' equity will be too high e. Liabilities will be too low f. Stockholders' equity will be too low

b. Liabilities will be too high f. Stockholders' equity will be too low

Two sources of equity financing which increase stockholders' equity are _____. (Check all that apply.) a. Note Payable b. Retained Earnings c. Common Stock d. Accounts Payable e. Equipment

b. Retained Earnings c. Common Stock

True or false: Creditors would like a company that owns them money to have a large positive cash flow operating activities. a. False b. True

b. True Cash Flows from operating activities can be used to repay loans.

True or false: The Sarbanes-Oxley Act (SOX) is a set of laws established to strengthen corporate reporting. a. False b. True

b. True In response to corporate frauds such as Enron and WorldCam, SOX was established to strengthen the corporation's internal controls and corporate reporting.

True or false: The American Institute of Certified Public Accountants requires all its members to adhere to a Code of Professional Conduct. a. False b. True

b. True The AICPA expects its members to be ethical and to make ethical decisions in accordance with its Code of Professional Conduct.

The posting of the journal entry to record the purchase of land for $30,000 cash will include which of the following? (Select all that apply.) a. a debit to the Cash T-account b. a debit to the Land T-account c. a credit to the Cash T-account d. a credit to the Land T-account

b. a debit to the Land T-account c. a credit to the Cash T-account

The ending retained earnings appears on the _________. (Check all that apply) a. statement of cash flows b. balance sheet c. income statement d. statement of retained earnings

b. balance sheet d. statement of retained earnings

Dept financing is financing obtained from ______ whereas equity financing is financing obtained from ______. a. customer; creditors b. creditors; stockholders c. stockholders; creditors d. stockholders; customers

b. creditors; stockholders

Which line items appear on the statement of retained earnings? (Check all that apply.) a. Revenue b. ending balance of Retained Earnings c. Net Income d. Expenses e. Accounts Payable f. Cash

b. ending balance of Retained Earnings c. Net Income d. Expenses

The main goal of both US GAAP and IFRS is to _______. a. prevent all fraud and ensure the amounts reported are precise to the penny b. ensure that companies produce useful information for capital providers c. reduce the number of required financial statements d. ensure that companies become more profitable

b. ensure that companies produce useful information for capital providers

The management of Acme, Inc. prepared a statement for Acme's EXTERNAL users that listed the company's assets, liabilities, and stockholders' equity as of the last day of the year. This statement must be a(n) _____. a. application for a loan b. financial statement c. federal income tax return d. managerial accounting report

b. financial statement

If a company reports a NEGATIVE dollar amount under Cash Flows used by Investing Activities on its statement of cash flows. a possible explanation is that ______. a. it is a having difficulties b. it has purchased a significant amount of equipment c. its expenses are greater than its revenues d. the market vue of its stock has gone down e. it has paid a large cash dividend to its stockholders

b. it has purchased a significant amount of equipment

Financial statements ______. (Select all that apply.) a. must have a calendar year end of December 31 b. may be prepared more than once a year c. may have a fiscal year end other than December 31 d. are prepared just once a year

b. may be prepared more than once a year c. may have a fiscal year end other than December 31

Businesses typically buy goods or services from others _____. a. for cash b. on account c. in exchange for services

b. on account

A private corporation becomes a public company ______. a. to be able to sell goods and services to the government b. to raise capital by selling new issues of stock to investors c. by selling its stocks to the SEC

b. to raise capital by selling new issues of stock to investors

A company purchase a $100,000 building in exchange for a 20-year not payable. The company recorded a $100,000 increase in the Building account, but did not record the note payable. As a result of this error, ______ (Check all that apply.) a. total liabilities are correct b. total liabilities are too low c. total assets are too low d. total assets are too high e. total assets are correct f. total liabilities are too high

b. total liabilities are too low e. total assets are correct

A positive cash flow under Cash from Financing Activities is a result of which of the following? (Select all that apply) a. Cash paid to suppliers b. Cash paid to distribute profits to owners c. Cash received on loan from bank d. Cash received from customers e. Cash received from owners for company stock

c. Cash received on loan from bank e. Cash received from owners for company stock

Who has first claim to a business's assets should the company go out of business? a. Stockholders b. Customers c. Creditors d. Management

c. Creditors

All transactions ______. (Select all the apply.) a. must affect both assets and liabilities b. must affect assets c. affect assets, liabilities, and/or stockholders' equity d. have at least two effects on the accounting equation e. must affect both assets and stockholders' equity

c. affect assets, liabilities, and/or stockholders' equity d. have at least two effects on the accounting equation

Acme Enterprises borrowed $20,000 from Last Bank on a 5-year note payable. Acme's journal entry to record this transaction will include a ______ of $20,000. (Select all that apply.) a. credit to Account Payable b. debit to Notes Payable c. credit to Notes Payable d. debit to Cash e. credit to Cash

c. credit to Notes Payable d. debit to Cash

Most investors hope to get _______ from their investments in a company's stock in addition to a higher price for the stock. a. repayment b. interest c. dividends d. free product samples

c. dividends

Paying a cash dividend to stockholders is a(n) ________. a. expense b. investing activity c. financial activity d. operating activity

c. financial activity

The underlying rules of accounting in the US are called ________. a. general accounting acts and policies (GAAP) b. internal revenue code (IRC) c. generally accepted accounting principles (GAAP) d. financial accounting standards board

c. generally accepted accounting principles (GAAP)

The unit-of-measure assumption states that ______. a. a business's financial reports include only the activities of the business b. assets should be recorded at cost c. results of business activities should be reported in an appropriate monetary unit d. assets equals liability plus stockholders' equity

c. results of business activities should be reported in an appropriate monetary unit

The separate entity assumption assumes ____. a. assets are reported in a separate financial statement from liabilities b. assets equal liabilities plus stockholders' equity c. the financial reports of a business include only the results of that business's activities d. revenues and expenses are reported in separate sections of a company's income statement

c. the financial reports of a business include only the results of that business's activities

Common Stock has a normal _____ balance.

credit

When recording a transaction, the debits must always equal the _______. (Add only one word per blank.)

credits

A company owns an economic resource that will provide it with future benefits. This economic resource is ______. a. retained earnings b. a liability c. net income d. an asset e. revenue f. an expense

d. an asset

Expenses appear on the _______. a. balance sheet b. statement of cash flows c. statement of retained earnings d. income statement

d. income statement

A company might report negative Cash Flows used by Financing Activities when _______. a. it has purchased a significant amount of equipment b. the market value of its stock has gone down c. it has borrowed a large amount of money during the year d. it has paid a large cash dividend to its stockholders e. its expenses are greater than its revenue

d. it has paid a large cash dividend to its stockholders

The SEC _________. (Checks all that apply) a. has created a code of ethics for all companies to follow b. writes accounting rules for companies around the world c. writes IFRS d. oversees financial reporting by US public companies e. oversees the US stock exchanges

d. oversees financial reporting by US public companies e. oversees the US stock exchanges