Chapter 1 Interactive Presentation

During its first year of operations, Mario Lupo formed Lupo Company as a corporation and personally invested $15,000 in the business in exchange for common stock. Lupo Company also paid dividends of $2,000. The company earned $35,000 of revenues and incurred $23,000 of expenses. At the end of the year, the company's equity totaled:

$25,000

If equity is $30,000 and liabilities are $19,000, then assets must equal:

$49,000

Match the term and the definition. An information and measurement system that identifies, records, and communicated relevant reliable, and comparable information about an organization's business activities.

Accounting

Identify the correct assumption for each of the following activities using the drop-down list. A business is accounted for separately from other businesses entities and its owner.

Business entity assumption

Why is accounting important?

Businesses, regulatory agencies, and the general public use accounting information.

Accounting certifications includes:

CPA

Identify which items belong on the statement of cash flows.

Cash flows from investing, operating and financing activities

Identify which items belong on the balance sheet.

Cash, accounts receivable, and common stock

Identify the type of activity by choosing the best answer for each question.Select each item listed below as being an identifying, recording, or a communicating activity. Interpreting information from financial reports.

Communicating

Identify the type of activity by choosing the best answer for each question.Select each item listed below as being an identifying, recording, or a communicating activity. Preparing financial statements for creditors.

Communicating

Analyze the following transaction and select the best answer.The business pays $2,000 in cash to the landlord for office space rent.

Equity reduces by $2,000

Classify the following business activities using the drop-down list. Happenings that affect the accounting equation.

Events

Select the correct term for the following types of users: Board of Directors

External Information User

Select the correct term for the following types of users: Customers

External Information User

Select the correct term for the following types of users: Labor Union

External Information User

Select the correct term for the following types of users: Suppliers

External Information User

Classify the following business activities using the drop-down list. Exchanges of value between two entities.

External transactions

The organization that is primarily responsible for developing GAAP for use by all U.S. companies is the:

FASB

Classify the following business activities using the drop-down list. Resources contributed by creditors.

Financing

Classify the following business activities using the drop-down list. Resources contributed by the owner along with any income the owner leaves in the organization.

Financing

The four basic financial statements are:

Income Statement, Statement of retained earnings, Balance sheet, and Statement of cash flows.

Select the correct term for the following types of users: Payroll Clerk

Internal Information User

Classify the following business activities using the drop-down list. Exchanges within an entity.

Internal transactions

Classify the following business activities using the drop-down list. Acquiring resources (assets) that and organization plans to use acquire and sell its products or services.

Investing

Identify the correct principle for each of the following activities using the drop-down list. Accounting information is based on actual cost

Measurement principle

Classify the following business activities using the drop-down list. Sales and revenues.

Operating

Identify the type of activity by choosing the best answer for each question.Select each item listed below as being an identifying, recording, or a communicating activity. Preparing and entering a list of checks issued.

Recording

Identify the type of activity by choosing the best answer for each question.Select each item listed below as being an identifying, recording, or a communicating activity. Using a cash register to enter sales.

Recording

Match the term and the definition. The recording of transactions and events only, either manually, or electronically.

Recordkeeping

Identify the correct principle for each of the following activities using the drop-down list. Revenue is recognized when goods are provided to the customer at the amount expected to be recieved.

Revenue recognition principle

Identify which items belong on the income statement.

Revenue, expenses and net income

On January 31, Jean Consulting Company receives a bill for that month's utilities in the amount of $500. Jean sets it aside because she does not plan to pay the bill until its due date of February 15. What effect, if any, does this event have on the company's accounting equation as of January 31?

The business must record this event, which would increase liabilities and decrease equity on January 31.

Identify the correct assumption for each of the following activities using the drop-down list. The life of the company can be divided into specific time periods.

Time period assumption

The investment that would most likely have the lowest expected return is an investment in:

U.S. Treasury bonds

Upon her promotion to manager at the regional public accounting firm that has employed her for the past five years, Gail Mahaffey moves to the firm's Chicago office. After welcoming her to the office on her first day, the partner managing the Chicago office shares some great news. The firm just learned of its successful bid to audit Morrison's reports. Morrison's business has been expanding and the company is expected to become an important client of the firm. The partner then congratulates Gail; he has decided to assign her to head up the team that will audit Morrison. Thrilled by the exciting news, Gail leaves the office, eager to meet the rest of the team. As she walks to the meeting room, she considers the fact that she inherited a share of Morrison's stock last year under the terms of her grandfather's will. She recalls that the stock is currently trading at $15 per share. Assuming that Gail wants to make an ethical decision in this situation, she will:

decline the assignment; even though she only owns a single share of stock, that direct investment in the stock of Morrison would cast doubt on decisions that she makes during the audit.

The majority of accounting opportunities are in _____ accounting.

private

Identify the correct principle for each of the following activities using the drop-down list. A company records the expenses incurred to generate the revenue reported.

Expense recognition principle

Select the correct term for the following types of users: Marketing Manager

Internal Information User

Classify the following business activities using the drop-down list. Disposing of resources (assets) than an organization uses to acquire and sell its products or services

Investing

_____ includes opportunities in general accounting, cost accounting and internal auditing.

Managerial accounting

Rosalind Company reported revenues of $111,500, expenses of $92,545, and net income of $18,955 for the year. Assets totaled $200,000 at the beginning of the year and $246,000 at the end of the year. The company's return on assets for the year (round the percent to one decimal) is:

8.5%

Identify which items belong on the statement of retained earnings.

Dividends, beginning retained earnings, ending retained earnings

The Sarbanes-Oxley Act requires the following?

Documentation and verification of internal controls.

Identify the correct principle for each of the following activities using the drop-down list. A company reports the details behind financial statements that would impact user's decisions.

Full-disclosure principle

Identify the correct assumption for each of the following activities using the drop-down list. Presumes that the business will continue operating in the future.

Going-concern assumption

The organization that is responsible for issuing International Financial Reporting Standards is the:

IASB

Which of the following is a proper reflection of the sequence of steps when deciding on the preferred course of action in making an ethical decision?

Identify ethical concerns; Analyze options; Make ethical decision.

Identify the type of activity by choosing the best answer for each question.Select each item listed below as being an identifying, recording, or a communicating activity. Entering a list of the sales invoices, including the prices and quantities, for the company's recordkeeper.

Identifying

Identify the correct assumption for each of the following activities using the drop-down list. Transactions and events are expressed in units of money.

Monetary unit assumption

Return on assets measures a company's ability to generate an adequate return on its investment in:

assets

The return on assets for your small business was 11.2% last year and 12.6% this year. Your return on assets:

improved