BUSAD Chapter 1 Exercise

Byrde Company purchased a truck. The seller asked for $11,200, but Byrde paid only $10,200 after negotiation. The owner of Byrde Company believes he got a great deal and the truck is really worth $15,200. What amount does Byrde record on its financial statements for the truck?

$10,200

Identify the accounting principle or assumption that best reflects each situation. Situation 1. Record expenses incurred to generate the revenue reported. 2. Each business is accounted for separately from its owner or owners. 3. Revenue is recorded when products and services are delivered. 4. Information is based on actual costs incurred in transactions. 5. Financial statement details that would impact decisions are often disclosed in the footnotes. 6. A business is accounted for separately from other business entities and its owner.

1. Expense recognition (matching) principle 2. Business Entity Assumption 3. Revenue Recognition Assumption 4. Measurement (cost) principle 5. Full disclosure principle 6. Business Entity Assumption

Part B. Identify the following users as either an Internal user or an External user. Identify the following users as either an Internal user or an External user. 1. SEC regulator 2. Ingredient supplier 3. Shareholder 4. Creditor 5. Production supervisor 6. Research and development executive 7. Customer 8. Human resources executive

1. External User 2. External User 3. External User 4. External User 5. Internal User 6. Internal User 7. External User 8. Internal User

Determine whether each of the following accounting duties mainly involves financial accounting, managerial accounting, or tax accounting. Accounting Duties 1. Reviewing financial statements for criminal investigations 2. Enforcing tax laws 3. Estate planning 4. Analyzing external financial reports 5. Consulting with treasurer on cash flows 6. Internal auditing 7. Planning transactions to minimize taxes 8. External auditing

1. Financial Accounting 2. Tax Accounting 3. Tax Accounting 4. Financial Accounting 5. Managerial Accounting 6. Managerial Accounting 7. Tax Accounting 8. Financial Accounting

Match each of the descriptions with the term or phrase it best reflects. Description 1. A collection of accounting rules and concepts set by the FASB. 2. Principles that determine whether an action is right or wrong. 3. A group that sets accounting principles in the United States. 4. A government agency that enforces proper use of GAAP. 5. Accounting professionals who provide services to many clients.

1. GAAP 2. Ethics 3. FASB 4. SEC 5. Public Accountants

Match each of the descriptions with the term or phrase it best reflects. Description 1. Procedures set up to protect company property and equipment, ensure reliable accounting, promote efficiency, and encourage adherence to policies. 2. A more effective way to stop fraud than detection. 3. Examines whether financial statements are prepared using GAAP. 4. Beliefs that distinguish right from wrong. 5. Three factors push a person to commit fraud: opportunity, pressure, and rationalization.

1. Internal Controls 2. Prevention 3. Audit 4. Ethics 5. Fraud Triangle

Part A. Identify the following questions as most likely to be asked by an Internal user or an External user of accounting information. Identify the following questions as most likely to be asked by an Internal user or an External user of accounting information. 1. How well has our new salesperson performed? 2. What are the costs of our service to customers? 3. How did the nonprofit organization use our donations? 4. What are the costs of our product's ingredients? 5. Which inventory items are out of stock? 6. Which companies are under IRS investigation for tax fraud? 7. Which companies are at risk of strike by its labor union?

1. Internal User 2. Internal User 3. External User 4. Internal User 5. Internal User 6. External User 7. External User

Select the aspect of accounting associated with the following activities. 1. Maintaining a log of sales transactions. 2. Registering cash sales of products sold. 3. Measuring the costs of a product. 4. Inputting an employee sales commission. 5. Preparing financial statements. 6. Presenting financial information. 7. Observing transactions and events. 8. Reporting the profitability of a product line.

1. Recording 2. Recording 3. Recording 4. Recording 5. Communicating 6. Communicating 7. Identifying 8. Communicating

Snell Company performs services for a client in May and bills the client $1,200. In June, Snell receives a partial payment of $400 cash. In July, the remaining $800 cash is received. Determine the monthly revenue recorded in May, June, and July applying revenue recognition principle.

May: $1,200 June: $0 July: $0

Determine whether each description best refers to a sole proprietorship, partnership, corporation, or limited liability company (LLC). Description a. Micah and Nancy own Financial Services, which pays a business income tax. Micah and Nancy do not have personal responsibility for the debts of Financial Services. b. Riley and Kay own Speedy Packages, a courier service. Both are personally liable for the debts of the business. c. Lannister owns Wealth Management. The business is a separate legal entity and pays an additional business income tax. d. Vera is the sole owner of Tech Solutions. The business is a separate legal entity and does not pay an additional business income tax. e. Ownership of Zander Company is divided into 1,000 shares of stock. The company pays a business income tax. f. Russell is the sole owner of Wilson Sports. The business is not a separate legal entity from Russell and the business ends with his death. g. Trent Company is owned by Trent Malone, who is personally liable for the company's debts. h. Harvey and Louis own NYC Law. Harvey and Louis are jointly liable for partnership debts.

a. Corporation b. Partnership c. Corporation d. Limited Liability Company (LLC) e. Corporation f. Sole proprietorship g. Sole proprietorship h. Partnership