Accounting 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 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%

Identify the importance of accounting by selecting the statements that is correct below

Accounting information helps users make business and financial decisions.

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.

Given the list of accounts below, identify which of them would appear on a balance sheet.

Cash Equipment Supplies Retained earnings, 12/31 Accounts Payable

Identify the main sections on a statement of cash flows.

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

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

Common Stock, Equipment, Accounts Payable

Smith Company purchased $100 of supplies for her business and paid immediately. She would record this transaction in the accounting equation by which of the following?

Decrease Cash; increase Supplies.

From the following statements, select the one that describes the effect of dividends on equity.

Dividends cause equity to decrease.

All of the following are part of the FASB conceptual framework:

Elements Recognition and measurement Qualitative characteristics Objectives

True or false: Return on assets is computed as Net Income divided by Total Assets.

False

Statement of Cash Flows

Identifies the cash inflows and outflows over a period of time

Users of accounting information can be divided into two main groups. These groups include:

Internal and external

Identify the broad opportunity areas of accounting.

Managerial Financial Taxation

An employee that is having trouble paying his personal bills might exhibit the following fraud factor:

Pressure

All of the following are part of the FASB conceptual framework:

Qualitative characteristics Recognition and measurement Elements Objectives

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 Revenue Wages Expense Rent 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

Income Statement

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

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

Resources controlled by the business An amount owned Resources with expected future benefits

Identify which of the following lists of accounts would belong on the statement of retained earnings.

Retained earnings and Dividends

Define what the income statement reports by completing the following sentence: The income statement describes a company's_________(assets/revenues) and ___________(expenses/liabilities) along with the resulting net income or loss over a period of time due to earnings related activities.

Revenues Expenses

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.

Which of the following statements explains how the accounting equation applies to businesses?

The relation of assets, liabilities and equity is reflected in the equation. The equation applies to all transactions. 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 a balance sheet includes which of the following statements?

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. The statement reports assets, liabilities and equity at a point in time.

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.

Identify which of the following statements is correct as to why accounting is important.

We live in an information age whereby accounting information impacts everyone.

The FASB conceptual framework consists of all of the following except:

concepts

Dividends cause a(n) (increase/decrease)__________in equity and are recorded directly in the (retained earnings/dividends/equity)___________account.

decrease dividends

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

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

Jackson's Catering Company provided cookies worth $3,000 to the local college. The college paid immediately. Record this transaction in Jackson's accounting equation by:

increasing Cash; increasing Revenues

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

increasing Supplies, and increasing Accounts Payable

Russell's Consulting Services Company provided $1,000 of services to the local college and immediately collected $700, but the college wants to pay the rest next month. Record this transaction in the accounting equation for Russell's Consulting Service by:

increasing both Cash and Accounts Receivable; and increasing Revenues

Russell's Consulting Services Company provided $1,000 of services to the local college and immediately collected $700, but the college wants to pay the rest next month. Record this transaction in the accounting equation for Russell's Consulting Service by:

increasing both Cash and Accounts Receivable; and increasing Revenues.

The Accounts Payable account is a(n) ______ account.

liability

When supplies are purchased on credit it means that:

the Accounts Payable account will be increased. the business will pay for the supplies at a later time. a liability has been incurred.

Generally accepted accounting principles (GAAP) wants information to have:

faithful representation relevance