Ch. 1 Activities

1. _______ = 20,000 + 45,000 2. 100,000 = 34,000 + _______ 3. 154,000 = _______ + 40,000

A = L + E 1. 65,000 2. 66,000 3. 114,000

Swiss Group reports net income of $40,000 for the year. At the beginning of the year, Swiss Group had $200,000 in assets. By the end of the year, assets had grown to $300,000. What is Swiss Group's return on assets for the current year? Did Swiss Group perform better or worse than its competitors if competitors average an 11% return on assets? numerator / denominator = roa roa = 16%

numerator / denominator net income / average total assets $40,000 / 250,000 = 16% (200,000+300,000 /2 = 250,000)

The following table shows the effects of transactions 1 through 5 on the assets, liabilities, and equity of Mulan's Boutique. Match each transaction with its probable description. 1. Cash -4,000 / Land +4,000 2. Supplies +1,000 / Accounts Payable +1,000 3. Accounts Receivable +1,900 / Revenues +1,900 4. Cash -1,000 / Accounts Payable -1,000 5. Cash +1,900 / Accounts Receivable -1,900

1. The company purchased land for $4,000 2. The company purchased $1,000 of supplies on credit 3. The company billed a client $1,900 for services provided 4. The company paid $1,000 cash toward an account payable 5. The company collected $1,900 cash from an account receivable

Match each of the descriptions with the term or phrase it best reflects. 1. an assessment of whether financial statements follow GAAP. 2. Amount a business earns in excess of all expenses and costs associated with its sales and revenues. 3. A group that sets accounting principles in the U.S. 4. accounting professionals who provide services to many clients principles that determine whether an action is right or wrong

1. audit 2. net income 3. FASB 4. public accountants 5. ethics

Identify the accounting principle or assumption that best reflects each situation. 1. A company reports details behind financial statements that would impact users' decisions 2. financial statements reflect the assumption that the business continues operating 3. A company records the expenses incurred to generate the revenues reported 4. Each business is accounted for separately from its owner or owners 5. Revenue is recorded when products and services are delivered 6. information is based on actual costs incurred in transactions

1. full disclosure principle 2. going-concern assumption 3. expense recognition principle 4. economic (business) entity assumption 5. revenue recognition principle 6. measurement cost principle

Identify the following questions as most likely to be asked by an Internal user or an External user of accounting information. 1. Which inventory items are out of stock? 2. Should we make a five-year loan to that business? 3. What are the costs of our product's ingredients? 4. Should we buy, hold, or sell a company's stock? 5. Should we spend additional money for redesign of our product? 6. Which firm reports the highest sales and income? 7. What are the costs of our service to customers?

1. internal 2. external 3. internal 4. external 5. internal 6. external 7. internal

Identify the following users as either an internal user or an external user. 1. research and development executive 2. human resources executive 3. politician 4. shareholder 5. distribution manager 6. creditor 7. production supervisor 8. purchasing manager

1. internal 2. internal 3. external 4. external 5. internal 6. external 7. internal 8. internal

Determine net income (loss) for each of the following separate situations. Total Assets: beginning of yr: $50,000. end of yr: $80,000 Total Liabilities: beginning of yr: $22,000. end of yr: $35,000 a. Additional common stock of $3,000 was issued, and dividends of $7,000 were paid during the current year. b. Additional common stock of $15,000 was issued, and no dividends were paid during the current year. c. No additional common stock was issued, and dividends of $12,000 were paid during the current year.

Assets = Liabilities + Equity Assets - Liabilities = Equity 50,000 - 22,000 = $28,000 (beginning equity) 80,000- 35,000 = $45,000 (ending equity) Equity (beginning) + stock issuances + net income - cash dividends = ending equity a. $21,000 (28,000 + 3,000 + ? - 7,000 = 45,000) b. $2,000 (28,000 + 15,000 + ? - 0 = 45,000) c. $29,000 ( 28,000 + 0 + ? - 12,000 = 45,000)

On December 1, Jasmin Ernst organized Ernst Consulting. On December 3, the owner contributed $84,000 in assets in exchange for its common stock to launch the business. On December 31, the company's records show the following items and amounts. Cash: 11,360 Accounts Receivable: 14,000 Office Supplies: 3,250 Office Equipment: 18,000 Land: 46,000 Accounts Payable: 8,500 Common Stock: 84,000 Cash Dividends: 2,000 Consulting Revenue: 14,000 Rent Expense: 3,550 Salaries Expense: 7,000 Telephone Expense: 760 Miscellaneous Expenses: 580 Use the above information to prepare a December 31 balance sheet for Ernst Consulting.

Balance Sheet December 31 Assets Cash - $11,360 Office supplies - 3,250 Office equipment - 18,000 Land - 46,000 Accounts receivable.- 14,000 Total assets - $92,610 Liabilities Accounts payable - 8,500 Total liabilities - $8,500 Equity Common stock - 84,000 Retained earnings - 110 Total equity - 84,110 Total liabilities and equity - $92,610

On December 1, Jasmin Ernst organized Ernst Consulting. On December 3, the owner contributed $84,000 in assets in exchange for its common stock to launch the business. On December 31, the company's records show the following items and amounts. Cash: 11,360 Accounts Receivable: 14,000 Office Supplies: 3,250 Office Equipment: 18,000 Land: 46,000 Accounts Payable: 8,500 Common Stock: 84,000 Cash Dividends: 2,000 Consulting Revenue: 14,000 Rent Expense: 3,550 Salaries Expense: 7,000 Telephone Expense: 760 Miscellaneous Expenses: 580 Using the above information prepare a December income statement for the business.

Ernst Consulting Income Statement For Month Ended December 31 Revenues Consulting revenue: $14,000 Total revenues: $14,000 Expenses Rent expense: 3,550 Salary expense: 7,000 Telephone expense: 760 Miscellaneous expenses: 580 Total expenses: 11,890 Net income: $2,110 (Net Income = Total Revenues - Total Expenses)

On December 1, Jasmin Ernst organized Ernst Consulting. On December 3, the owner contributed $84,000 in assets in exchange for its common stock to launch the business. On December 31, the company's records show the following items and amounts. Cash: 11,360 Accounts Receivable: 14,000 Office Supplies: 3,250 Office Equipment: 18,000 Land: 46,000 Accounts Payable: 8,500 Common Stock: 84,000 Cash Dividends: 2,000 Consulting Revenue: 14,000 Rent Expense: 3,550 Salaries Expense: 7,000 Telephone Expense: 760 Miscellaneous Expenses: 580 Using the above information prepare a December statement of retained earnings for Ernst Consulting. (Hint: Retained Earnings on December 1 was $0.)

Statement of Retained Earnings For Month Ended Dec. 31 Retained earnings, Dec. 1 - $0 Add: Net Income - 2,110 Less: Dividends - 2,000 Retained earnings, Dec. 31 - $110

Complete the table using additions and subtractions to show the dollar effects of the transactions on individual items of the accounting equation. a. Owner invested $60,000 cash in the company along with $15,000 of equipment in exchange for its common stock. b. The company paid $1,500 cash for rent of office space for the month. c. The company purchased $10,000 of additional equipment on credit (payment due within 30 days). d .The company completed work for a client and immediately collected $2,500 cash. e. The company completed work for a client and sent a bill for $8,000 to be received within 30 days. f. The company purchased additional equipment for $6,000 cash. g. The company paid an assistant $3,000 cash as wages for the month. h. The company collected $5,000 cash as a partial payment for the amount owed by the client in transaction e. i. The company paid $10,000 cash to settle the liability created in transaction c. j. The company paid $1,000 cash in dividends to the owner (sole shareholder).

a. Cash +60,000 / Equipment +15,000 / Common Stock +75,000 b. Cash (1,500) / Expenses +1,500 c. Equipment +10,000 / Accounts Payable +10,000 d. Cash +2,500 / Revenues +2,500 e. Accounts Receivable +8,000 / Revenues +8,000 f. Cash (6,000) / Equipment +6,000 g. Cash (3,000) / Expenses +3,000 h. Cash +5,000 / Accounts Receivable (5,000) i. Cash (10,000) / Accounts Payable (10,000) j. Cash (1,000) / Dividends +1,000

Determine whether each description best refers to a sole proprietorship, partnership, corporation, or limited liability company (LLC). 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. IBC Services does not have separate legal existence apart from the one person who owns it. d. Trent Company is owned by Trent Malone, who is personally liable for the company's debts e. Ownership of Zander Company is divided into 1,000 shares of stock. The company pays a business income tax. f. Physio Products does not pay a business income tax and has one owner. The owner has unlimited liability for business debt. g. AJ Company pays a business income tax and has two owners. h. Jeffy Auto is a separate legal entity from its owner, but it does not pay a business income tax

a. corporation b. partnership c. sole proprietorship d. sole proprietorship e. corporation f. sole proprietorship g. partnership h. limited liability company (LLC)