accounting ch 1
As of December 31, Stoneland Corporation has assets of $4,500 and stockholders' equity of $3,000. How much are the liabilities for Stoneland Corporation as of December 31?
$1,500
Assets will be increased by $40,000 if a company issues common stock for ________ and uses $30,000 of the cash to purchase a truck.
$40,000
If a company issues common stock for $40,000 and uses $30,000 of the cash to purchase a truck, assets will be increased by
$40,000
What is a company's balance in its common stock account if it's assets are valued at $425,000, liabilities are $175,000, and retained earnings are $200,000?
$50,000
_________ has no effect on retained earnigns
A land purchase
A company purchases new manufacturing equipment using a loan from the bank. They plan to repay the loan over the next 10 years. This is an example of
A liability
Steele Industries frequently orders supplies from Russel Distributors, with payment made two weeks after the purchase. Recently, Steele borrowed money from Mullen Enterprises to finance the purchase of a new delivery truck. Steele has a(n) ________ with Russell and a(n) _________ with Mullen.
Accounts payable; note payable
A landscaping company purchases lawn equipment to provide its services. The potential future economic benefit of the equipment allows it to be classified as a(n)
Asset
On March 1, Bradshaw Corporation purchases equipment on credit and pays the related debt on March 31. Which type of accounts are affected on March 31?
Assets and liabilities
When services are performed, and cash is collected
Assets increase
Swinton Music raised funds by issuing common stock for $150,000 and used $100,000 of the cash for expansion. Which of the following is true as a result?
Assets increased by $150,000
On the last day of the period, Alan Cesska Company buys a $900 machine on credit. This transaction will affect the: A) income statement only B) balance sheet only C) income statement and retained earnings statement only D) income statement, retained earnings statement, and balance sheet
B
Performing services on account will have the following effects on the components of the basic accounting equation: A) increase assets and decrease equity B) increase assets and increase equity C) increase assets and increase liabilities D) increase liabilities and increase equity
B
The three types of business entities are A) proprietorships, small businesses, and partnerships B) proprietorships, partnerships, and corporations C) proprietorships, partnerships, and large businesses D) financial, manufacturing, and service companies
B
Which of the following is not a step in the accounting process? A) identification B) economic entity C) recording D) communication
B
Which of the following is not recorded in the accounting records? A) equipment is purchased on account B) an employee is terminated C) a cash investment is made into the business D) the company pays a cash dividend
B
Which of the following statements about basic assumptions is correct? A) basic assumptions are the same as accounting principles B) the economic entity assumption states that there should be a particular unit of accountability C) the monetary unit assumption enables accounting to measure employee morale D) partnerships are not economic entities
B
A financial statement that reports the assets, liabilities, and stockholders' equity at a specific date
Balance sheet
Accounts payable
Balance sheet
Cash
Balance sheet
Common stock
Balance sheet
The amount of cash at the end of the period, in the statement of cash flows, should also be reported on the
Balance sheet
Which of the following financial statements will be affected if a company purchases a $700 machine on credit?
Balance sheet only
On June 1, Martin Medical Supplies paid rent for the month in cash. How did the company record this transaction?
By decreasing cash and increasing expenses
The financial statement that reports assets, liabilities, and stockholders equity is the A) income statement B) retained earnings statements C) balance sheet D) statement of cash flows
C
The historical cost principle states that A) assets should be initially recorded at cost and adjusted when the fair value changes B) activities of an entity are to be kept separate and distinct from its owner C) assets should be recorded as their cost D) only transaction data capable of being expressed in terms of money be included in the accounting records
C
On March 1, Bradshaw Corporation receives cash from a customer who was billed for services provided on April 1. Which of the following is true of the March 1 transaction?
Cash increases and accounts receivable decreases
A company has undergone bankruptcy, and the courts are requiring them to pay their creditors first. Which of these is an example of a creditor?
Community First Bank, which holds a loan for the headquarters building
QRS industries is in the process of liquidation. Which of the following parties' claims will be settled first?
Creditors
As of December 31, 2022, Reed company has assets of $3500 and stockholders equity of $1500. What are the liabilities for Reed company as of December 31, 2022? A) $1500 B) $1000 C) $2500 D) $2000
D
Net income will result during a time period when A) assets exceed liabilities B) assets exceed revenues C) expenses exceed revenues D) revenues exceed expenses
D
Payment of an account payable affects the components of the accounting equation in the following way A) decreases stockholders equity and decreases liabilities B) increases assets and decreases stockholders equity C) decreases assets and increases stockholders equity D) decreases assets and decreases liabilities
D
Which of the following statements about users of accounting info is incorrect? A) management is an internal user B) taxing authorities are external users C) present creditors are external users D) regulatory authorities are internal users
D
A company has total assets valued at $5.7 million, total liabilities of $1.4 million, and retained earnings of $300,000. If the company wants 75% of its assets to be funded by stockholders' equity, it needs to __________ its stockholders' equity
Decrease
George Stevens has purchased 1,000 shares of stock in JKL corporation. JKL recently reported a year-end net income of $1,400,000; JKL retains $1,000,000. George, along with her fellow stockholders, will receive the remainder in the form of
Dividends
Although both dividends and expenses reduce retained earnings, dividends and expenses are recorded separately because
Dividends are not an expense
Although _______ reduce retained earnings, they are not considered ________
Dividends; expenses
Dividends are
Dividends; it decreases stockholders equity
Two people have formed a partnership. One partner of a business creates a $10,000 debt, but the partnership does not have enough assets to cover the debt. In this situation,
Either partner could have to pay the debt out of personal assets
In the retained earnings statement, changes in retained earnings are calculated by taking beginning retained earnings plus net income or minute ness loss and
Minus dividends
The amount by which revenues exceed expenses
Net income
The amount by which expenses exceed revenues
Net loss
Transaction: paid cash to purchase equipment
Not affecting stockholders' equity
__________ will be affected if a company purchases a $700 machine on credit
Only the balance sheet
The _______ of a liability decreases both cash and accounts payable
Payment
A business owner's personal expenses must be separate from expenses of the business to comply with accounting's economic entity assumption.
True
Congress passed the Sarbanes-Oxley Act to reduce unethical behavior and decrease the likelihood of future corporate scandals
True
Internal users include Human Resources managers
True
Managerial accounting activities focus on reports for internal users
True
The accounting process includes the bookkeeping function
True
The historical cost principle dictates that companies record assets at their cost and continue to report them at their cost over the time the assets are held
True
The money unit assumption requires that companies record only transactions that can be measured in money terms
True
The primary accounting standard-setting body in the United States is the Financial Accounting Standards Board (FASB)
True
The three steps in the accounting process are identification, recording, and communication.
True
The information system that identifies, records, and communicates the economic events of an organization to interested users
accounting
The system of collecting and processing transaction data and communicating financial information to decision-makers.
accounting information system
An investment by the stockholders in a business causes an increase in which of the following?
assets and stockholders' equity
If total liabilities decreased by $4,000, then
assets must have decreased by $4,000, or stockholders' equity must have increased by $4,000
Services performed by a public accountant include
auditing, taxation, and management consulting
A part of accounting that involves only the recording of economic events.
bookkeeping
The term used to describe the total amount paid in by stockholders for the shares they purchase
common stock
An assumption that requires that the activities of the entity be kept separate and distinct from the activities of its owner and all other economic entities
economic entity assumption
Numbers and descriptions match what really existed or happened
faithful representation
An area of accounting that uses accounting, auditing, and investigative skills to conduct investigations into theft and fraud.
forensic accounting
Service revenue
income statement
The Sarbanes-Oxley Act determines
internal control standards of U.S. publicly traded companies.
Creditor claims against total assets
liabilities
The field of accounting that provides internal reports to help users make decisions about their companies
managerial accounting
IFRS is considered to be more:
principles-based and less rules-based than GAAP.
The increases in assets or decreases in liabilities resulting from the sale of goods or the performance of services in the normal course of business
revenues
An area of public accounting involving tax advice, tax planning, preparing tax returns, and representing clients before governmental agencies.
taxation
Which of the following results when a company purchases equipment for $1,800 cash?
total assets remain unchanged
The economic events of a business that are recorded by accountants
transactions
Which of the following is not a reason why a single set of high-quality international accounting standards would be beneficial?
GAAP is widely considered to be a superior reporting system
Salaries and wage expenses
Income statement
Harley's insurance company sells insurance policies to customers on account. The company needs to record its revenue for the last month. The company should report service revenues on the
Income statement as gross income in service revenues
A brick company calculated its stockholders' equity for the fiscal year 2017. Its overall revenues were $3.8 million, expenses were $2.4 million, and dividends paid were $500,000. The company experienced a net _________ of_______
Income; $900,000
If a company provides services on account, then stockholders' equity
Increases and assets increase
When stockholders invest cash in the business, it is
Insurance of stock; it increases the stockholders equity
A bank received its employees' time cards on July 10 and payday is July 15. The bank will need to list this transaction in which section in its accounting records on July 10?
Liabilities
A manufacturing company has received its monthly utility bill on January 31, and payment is due on February 14. Where would the utility bill be recorded on January 31 when the month ends and the bill is still unpaid?
Liabilities
Dividends are the distribution of cash or other assets out of earnings to
Stockholders
Electronics Galore has a year-end net income of $2.5 million and plans to distribute $1.9 million in dividends to
Stockholders
When services are performed on account
Stockholders' equity increases
Wencaster Services purchased office supplies from a bulk supply store on credit for July 17. The company received a bill on July 31, and the bill is due and paid on August 31. Where in the accounting equation will this transaction be recorded on July 31 versus August 31?
The July 31 transaction will be recorded as inventory (asset) and in accounts payable (liability), and the August 31 transaction will be recorded in cash (asset) and in accounts payable (liability)
Which of the following would be considered an economic event that is an accounting transaction?
The purchase of new computers
A book designer purchased a new computer monitor for $1,200 cash. As a result of this purchase,
Total assets remained unchanged
When a company performs a service, even if it has not been paid for this service, it still increases
Equity
Transaction: paid employee salaries
Expense
The cost of assets consumed or services used in the process of generating revenue
Expenses
An income statement presents the revenues, expenses, and changes in stockholders equity, and resulting net income or net loss for a specific period of time
False
If a company issue common stock for $40,000 and uses $30,000 of the cash to purchase a truck, assets will be increased by $10,000
False
Managerial accounting provides reports to help investors and creditors evaluate a company
False
The primary accounting standard setting body in the US is the SEC
False
The standards of conduct by which actions are judged as loyal or disloyal are ethics
False
The two most common types of external users are investors and company officers.
False, investors and creditors
Accountants prepare, but do not interpret, financial reports.
False. Accountants analyze and interpret information in reports as part of the communication step.
Bookkeeping encompasses all steps in the accounting process
False. Bookkeeping involves only in the recording step
Relevance means that financial information matches what really happened; the information is factual.
False. Faithful representation means that financial information matches what really happened; the information is factual.
The historical cost principle dictates that companies record assets at their cost. In later periods, however, the fair value asset must be used if it's fair value is higher than its cost.
False. The historical cost principle dictates that companies record assets as their cost. Under the historical cost principle, the company must also use cost in later periods.
A field of accounting that provides economic and financial information for investors, creditors, and other external users
Financial accounting
Financial information that is capable of making a difference in a decision
Relevance
Ockham farms laid $1200 cash for farming equipment from a supplier. As a result of this transaction, total assets
Remain unchanged
Transaction: received cash for services performed
Revenue
If a company is profitable for an accounting period
Revenues exceeded expenses
Rent revenue is
Revenues; it increases stockholders equity
When an investor purchases an interest in a corporation, the company records
Shares of common stock
