ACG Ch 1 Concept Overview Questions

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

Identify which items belong on the balance sheet.

Cash, accounts receivable, and common stock

Select each item listed below as being an identifying, recording, or a communicating activity: Interpreting information from financial reports.

Communicating

Select each item listed below as being an identifying, recording, or a communicating activity: Preparing financial statements for creditors.

Communicating

Identify which items belong on the statement of retained earnings.

Dividends, beginning retained earnings, ending retained earnings

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

Events

Identify the correct principle for each of the following activities using the drop-down list. A company records the expenses

Expense recognition principle

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

External transactions

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

Select each item listed below as being an identifying, recording, or a communicating activity: Entering a list of sales invoices, including the prices and quantities, for the company's recordkeeper.

Identifying

The four basic financial statements are:

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

Tyler invests $2,000 cash in exchange for common stock, to begin a new company, Tyler's Tayloring. This transaction will:

Increase equity by $2,000.

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

Internal transactions

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

Measurement principle

Select each item listed below as being an identifying, recording, or a communicating activity: Preparing and entering a list of checks issued.

Recording

Select each item listed below as being an identifying, recording, or a communicating activity: Using a cash register to enter sales.

Recording

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 received.

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.