ACG2022 assignment 1

The system that maintains records of a company's operations and then communicates that information to decision makers is referred to as--

Blank 1: accounting

Nike co-founder and chairman Phil Knight's personal residence is not treated as an asset of Nike, Inc. Which assumption is used in making this judgment?

Economic entity assumption

Franklin Corporation has the following account balances at the end of the year. What is stockholders' equity? Accounts Payable$17,000Accounts Receivable$23,000Cash$35,000Equipment, net$41,000Notes Payable$29,000Salaries Payable$8,000Supplies$3,000

$48000 ==Assets = Accounts Receivable ($23,000) + Cash ($35,000) + Equipment, net ($41,000) + Supplies ($3,000) = $102,000. liabilities = Accounts Payable ($17,000) + Notes Payable ($29,000) + Salaries Payable ($8,000) = $54,000. A102,000-L54,000= equity

Catalina Corporation begins the year with a $195,000 balance in Retained Earnings and a $320,000 balance in Common Stock. During the year, the company generated net income of $46,000, issued additional common stock for $28,000, and paid a dividend of $5,000. What is total stockholders' equity at the end of the year?

$584,000 ==$195,000 +$320,000+$46,000+$28,000-5000=

Match the term to the definition.

1.A consensus among different measurers. Verifiability 2.Users must understand the information within the context of the decision they are making. Understandability 3.The ability of users to see similarities and differences between two different business activities. Comparability 4.Information being available to users early enough to allow them to use it in the decision process. Timelinesss

Match the term and the definition.

1.Provides justification for measuring many assets based on their original costs instead of current liquidation values. Going concern assumption 2.A unit or scale of measurement can be used to measure financial statement elements. Monetary unit assumption 3.The economic life of an enterprise can be divided into artificial time periods for financial reporting. Periodicity assumption 4.All economic events with a particular economic entity can be identified. Economic entity assumption

Ethics is best described as:

A code or moral system that provides criteria for evaluating right and wrong behavior.

Which of the following is true of public accounting?

A public accountant usually gets to work with multiple clients.

The balance in the cash account appears in which two financial statements?

Balance Sheet and Statement of Cash Flows ==The balance of cash in the Balance Sheet equals the ending cash balance reported in the Statement of Cash Flows.

What are the primary components of stockholders' equity?

Common Stock and Retained Earnings

Part of the inventory of memory chips of a semiconductor company is obsolete because of the launch of more advanced products. However, the company's management still carries this inventory at historical prices in its balance sheet. Which primary qualitative characteristic is being violated here?

Completeness =Completeness means including all information necessary for faithful representation of the business activity the firm is reporting.

Which of the following is a feature of the corporate form of business ownership?

Double taxation =Double taxation is, in fact, a disadvantage of the corporate form of business ownership.

Net income appears in which two financial statements?

Income Statement and Statement of Stockholders' Equity ==Net income from the Income Statement is reported in the Statement of Stockholders' Equity as part of the calculation of retained earnings.

The organization responsible for creating a single set of global accounting standards is the:

International Accounting Standards Board ==The goal of the International Accounting Standards Board (IASB) is to create a single set of global accounting standards. The standards being developed and promoted by the IASB are called International Financial Reporting Standards (IFRS).

The FASB has explicitly stated the specific objectives of financial accounting. Which of the following is not one of those objectives?

It is useful to company management in making decisions. ==Recall that financial accounting refers to accounting information that is provided to external users.

What was the objective of the 1933 Securities Act?

It set forth accounting and disclosure requirements for initial offerings of securities. (stocks and bonds).

You are reading a particular section of a bank's annual report. This section provides the bank's views about the impact of an upcoming regulation on the banking industry as a whole and the bank in particular. Which section of the annual report are you reading?

Management's discussion and analysis ==The management's discussion and analysis (MD&A) section typically includes management's views on significant events, trends, and uncertainties pertaining to the company's operations and resources.

Which of the following best explains a company's stock price performance?

Net income ==No single piece of company information better explains a company's stock price performance than does financial accounting net income.

Which of the following characteristics is highly related to the establishment of accounting standards?

Neutrality

Balance Sheet

Presents the financial position of a company at a point in time.

Indicate whether each of the following transactions is classified as a financing, investing, or operating activity:

Purchase equipment investing activity Pay salaries to employees Operating activity Pay dividends to shareholders Financing activity Sell goods to customers Operating activity Receive loan from the bank by signing a note Financing activity

Which government agency has the authority to set accounting and reporting standards in the United States?

Securities and Exchange Commission =="Authority" and "responsibility" are separate concepts. responsibility is for fasb

The statement of cash flows:

Shows the net change in cash over a period of time. ==The statement of cash flows is a financial statement that measures activities involving cash receipts and cash payments over an interval of time.

From the list that follows, identify a company where a private accountant could possibly work.

Target

Which of the following is an important indicator of a company management's ability to respond to business situations and the possibility of bankruptcy?

Total liabilities ==A company's debt level is an important indicator of management's ability to respond to business situations and the possibility of bankruptcy.

Which of the following is not one of the four primary financial statements?

Trial Balance

Different graders will arrive at the same exam score for multiple-choice tests, but they are more likely to differ in scoring essay exams. In this context, which characteristic does a multiple-choice test possess?

Verifiability ==Multiple-choice tests are highly verifiable

Which of the following questions is most likely to be asked by a creditor?

Will the company be capable of repaying its debt when it is due?

Expenses are best defined as:

costs of providing products and services

Financial accounting primarily deals with the methods accountants use to provide information to an organization's internal users.

false

The value of a company to its owners equals total resources of the company.

false

Based on the concept of _____, big companies probably do not record all their assets as assets.

materiality ==Materiality reflects the impact of financial accounting information on the decisions of investors and creditors.

The act passed in 2002 that provides for the regulation of auditors and the types of services they furnish to clients is known as the Sarbanes-Oxley Act.

true Formally, the Sarbanes-Oxley Act (SOX) provides regulation of auditors and the types of services they furnish to clients, increases accountability of corporate executives, addresses conflicts of interest for securities analysis, and provides for stiff criminal penalties for violators.

If stockholders' equity is $50,000 and liabilities are $78,000, then assets must equal:

$128,000 is the asset =$78,000+ $50,000=

Use the following amounts to calculate net income: Assets, $165,000; Dividends, $9,000; Expenses, $61,000; Liabilities, $74,000; Revenues, $82,000.

$21,000 == 82,000-61,000=

Which of the following is an alternate form of the accounting equation?

Assets − Liabilities = Stockholders' Equity

Total stockholders' equity appears in which two financial statements?

Balance Sheet and Statement of Stockholders' Equity ==Stockholders' equity is calculated in the Statement of Stockholders' Equity, and is subsequently reported in the Balance Sheet.

Which of the following questions is most likely to be asked by an investor?

Will the company's stock increase in value?

Investors and creditors rely heavily on managerial accounting information in making investment and lending decisions.

false ==Investors and creditors rely heavily on financial accounting information when making investment and lending decisions.

The balance of retained earnings represents the amount of earnings paid out in the form of dividends to stockholders.

false ==The balance of retained earnings represents the amount of "earnings retained" (not paid out in the form of dividends) over the life of the company.

The two characteristics that ensure the relevance of accounting information are completeness and neutrality.

false ==To be a "faithful representation" of business activities, accounting information should be complete, neutral, and free from error.

With a finance degree, you can apply for almost any position available to accounting majors.

false ==With an accounting degree, you can apply for almost any position available to finance majors. However, it doesn't work the other way: Finance majors often lack the accounting background necessary to apply for accounting positions.

Dividends represent expenses of operating the company.

false reason Dividends are not necessary to run the business to produce revenues.

Ron owns five percent of a corporation's common stock. The concept of limited liability would imply that Ron is personally responsible for only five percent of the financial obligations of the corporation.

false reason; Limited liability means the stockholders are not held personally responsible for the financial obligations of the corporation.

If mistakes or fraudulent reporting behavior are discovered, auditors require the company to correct all significant information before issuing financial statements.

true

If you are able to predict the change in financial accounting's measure of profitability, you can predict the change in stock prices, too.

true

The income statement records activity over an interval of time.

true

The organization primarily responsible for establishing accounting and reporting standards in the United States is the Financial Accounting Standards Board (FASB).

true

The main functions of financial accounting are to measure business activities and to communicate those measurements to investors and creditors.

true ==Financial accounting serves two main functions: (1) it measures business activities, and (2) it communicates those measurements to investors and creditors.

According to the cost constraint, financial accounting information is provided when the benefits of providing the information exceed the costs.

true ==The cost constraint indicates that financial accounting information is provided only when the benefits of doing so exceed the costs.

Understandability is a user-specific quality.

true ==Understandability is a user-specific quality because users differ in their ability to comprehend any set of information.