acg unit 1
T or F: bookkeeping and accounting describe the same process
False
T or F: investors and creditors are internal users of financial information
False
A company buys investment securities for $1 million on January 1, 2022. On December 31, 2022, the market value of the securities has grown to $1.5 million. At what amount should the investment securities be reported on December 31, 2022, according to the historical cost principle? The fair value principle?
$1 million; $1.5 million
The Ryan Express, aprovider of tax services, starts operations on 1/1/22. Now that the company has been in business for more than a year, the controller is assembling financial statements for the year ended 12/31/22. During 2022, the following transactions took place:1. On January 1, 2022, shareholders paid $1,000,000 in cash for common stock.2. Ryan Express earned revenue of $500,000, which increased Accounts Receivable (not cash).3. Ryan Express paid $125,000 in salaries expense.4. Ryan Express paid $75,000 in rent expense.5. Ryan Express bought $25,000 of supplies but did not pay cash, so this increased Accounts Payable.6. Ryan Express paid $10,000 in travel expenses.7. Clients paid Ryan Express cash of $400,000 for transaction #2, which reduced Accounts Receivable.8. Ryan Express paid shareholders a $190,000 cash dividend.Ending cash balance on 12/31/22 is
$1,000,000
harleys insurance company has assets of $5 million and liabilities of $3.5 million. what is the amount of stockholders' equity
$1.5 million
___ is the total amount paid in by stockholders for the shares the purchase
common stock
businesses sometimes have to spend money to make money. which of the following expenditures would be classified as an asset
a new oven for a bakery
which of the following is true of a partnership?
a partnership must hvae more than one owner
Steele Industries frequently orders supplies from Russell 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
safra is preparing a report to show the company's overall montly sales performance. safra is most likely performing which activity
aggregating data from the previous month's sales
a company uses cotton to make cloth. when the cloth is sold, the cots of the cotton will be recognized as
an expense
which characteristic of accounting information highlights significant financial trends and relationships
analysis
which of the following would be considered an economic event that is an accounting transaction
the purchase of new computers
as of december 31, bogglesworth company has assets of $4500 and stockholders' equity of $3000. what are the liabilities for bogglesworth company as of december 31
$1500
The following 2022 financial information pertains to Koosman Konsulting, established on January 1, 2022:1. Started company by selling $250,000 of common stock for cash on January 1, 2022.2. Invested $100,000 cash in an office building and computer systems in 2022.3. Generated and collected revenues of $125,000 cash in 2022 by providing consulting services.4. Paid all $80,000 of expenses in cash in 2022.5. Paid a $10,000 cash dividend in 2022.What was Koosman's cash balance on 12/31/22?
$185000
Baldwin Paints has acquired five plants in different states at the cost of $200 million. The current fair value of the plants is $350 million. Using the historical cost principle, Baldwin Paints will report the plants as assets at
$200000
The following 2022 financial information pertains to Koosman Konsulting, established on January 1, 2022:1. Started company by selling $250,000 of common stock on January 1, 2022.2. Invested $100,000 cash in an office building and computer systems in 2022.3. Generated and collected revenues of $125,000 cash in 2022 by providing consulting services.4. Paid all $80,000 of expenses in cash in 2022.5. Paid a $10,000 cash dividend in 2022.What were Koosman's cash flows for financing activities in 2022?
$240000
The Ryan Express, a provider of tax services, starts operations on 1/1/22. Now that the company has been in business for more than a year, the controller is assembling financial statements for the year ended 12/31/22. During 2022, the following transactions took place:1. On January 1, 2022, shareholders paid $1,000,000 in cash for common stock.2. Ryan Express earned revenue of $500,000, which increased Accounts Receivable (not cash).3. Ryan Express paid $125,000 in salaries expense.4. Ryan Express paid $75,000 in rent expense.5. Ryan Express bought $25,000 of supplies but did not pay cash, so this increased Accounts Payable.6. Ryan Express paid $10,000 in travel expenses.7. Clients paid Ryan Express cash of $400,000 for transaction #2, which reduced Accounts Receivable.8. Ryan Express paid shareholders a $190,000 cash dividend.Net income for 2022 is
$290000
if a company reports assets of $60000 and liabilities of $25000, what is the company's stockholders' equity
$35000
assets will be increased by $40000 if a company issues common stock for ___ and uses $30000 of the cash to purchase a truck
$40000
if a company issues common stock for $40000 and uses $30000 of the cash to purchase a truck, assets will be increased by
$40000
The following 2022 financial information pertains to Koosman Konsulting, established on January 1, 2022:1. Started company by selling $250,000 of common stock on January 1, 2022.2. Invested $100,000 cash in an office building and computer systems in 2022.3. Generated and collected revenues of $125,000 cash in 2022 by providing consulting services.4. Paid all $80,000 of expenses in cash in 2022.5. Paid a $10,000 cash dividend in 2022.What were Koosman's cash flows from operations in 2022?
$45000
What is a company's balance in its Common Stock account if its assets are valued at $425,000, liabilities are $175,000, and retained earnings are $200,000?
$50000
If a company buys actively traded investment securities for $5 million on January 1, 2022, and the value of these securities held by the company has grown to $6 million on December 31, 2022, the value of the securities reported on the company's balance sheet at December 31, 2022, is
$6 million
Highspire Architects, Inc. has assets other than investment securities that cost $60 million. The current market value of the assets is $85 million. Using the historical cost principle, the assets will be recorded and reported at
$60 million
The following 2022 financial information pertains to Koosman Konsulting, established on January 1, 2022:1. Started company by selling $250,000 of common stock on January 1, 2022.2. Invested $100,000 cash in an office building and computer systems in 2022.3. Generated and collected revenues of $125,000 cash in 2022 by providing consulting services.4. Paid all $80,000 of expenses in cash in 2022.5. Paid a $10,000 cash dividend in 2022.What were Koosman's total expenses reported on the income statement for 2022?
$80000
if a company reports assets of $125000 and liabilities of $40000, what is the company's stockholders' equity
$85000
accounting standards, which U.S. public companies follow, are set by the
FASB
Ginni founded Waggstooth Manor Doggie Day Care and, after a year in business, formed a partnership with her husband, Warren. Their friend Phoebe is a shareholder with Networth Bank. In terms of personal liability, who is at greater risk? Why?
Ginni and Warren, because both partners have unlimited personal liability, regardless of who owns a larger percentage of the company.
As a part of your company's open information policy, you keep an updated spreadsheet listing the types of requests the company has had for accounting information. What types of categories would you include in this report?
Internal user requests would be divided by department (production, human resources, etc.), and external user requests would be divided by type of organization (investor, creditor, government, etc.).
Wencaster Services purchased office supplies from a bulk supply store on credit on 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).
T or F: accounting data is prepared for two broad groups of users, internal users and external users
True
an accountant has a financial document with sales data for the past year. he wants to create a report for the CEO of the company. which type of report could he create
a graph with the total sales for each product category
___ has no effect on retained earnings
a land purchase
a landscaping company purchases lawn equipment to prove its services. the potential future economic benefit of the equipment allows it to be classified as a(n)
asset
___ are resources a business owns
assets
on march 1, bradshaw corporation purchases equipment on credit and pays the related debt on march 31. which types of accounts are affected on march 31
assets and liabilities
an investment by the stockholders in a business causes an increase in which of the following
assets and stockholders equity
when services are performed, and cash is collected
assets increase
swinton music raised funds by issuing common stock for $150000 and used $100000 of the cash for expansion. which of the following is true as a result
assets increased by $150000
if total liabilities decreased by $4000
assets must have decreased by $4000, or stockholders' equity must have increased by $4000
if expenses are paid in cash
assets will decrease
according to the fair value principle, assets and liabilities should be reported
at the fair market value
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 statement will be affected if a company purchases a $700 machine on credit?
balance sheet only
accounting information should be a faithful representation in order to
be an accurate depiction of what really happened
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
at the end of the month, patricia presents three financial statements. which step in the accounting process is patricia most concerned with at this time
communication
the process used by the two standard-setting bodies (FASB and IASB) to reduce the differences between U.S. GAAP and IFRS is called
convergence
Mary wants to start a home healthcare practice. She is concerned about her legal liability, as home healthcare clients are usually very ill, and her aides will be administering medication. Which form of business should Mary choose
corporation
QRS industries is in the process of liquidation. which of the following parties' claims will be settled first
creditors
an accounting information users' needs depend on the kinds of ____ to be made
decisions
a company has total assets valued at $5.7 million, total liabilities of $1.4 million, and retained earnings of $300000. if the company wants 75% of its assets to be funded by stockholders' equity, it needs to _____ its stockholders' equity
decrease
If assets have decreased by $4,000, and stockholders' equity has increased by $4,000, then total liabilities must have
decreased by $8000
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 his fellow stockholders, will receive the remainder in the form of
dividends
___ are distributions of cash or other assets to stockholders
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
Sally Harkins owns a bookstore and often takes cash out of the cash drawer to pay her apartment rent. Which of the following principles is Sally violating?
economic entity assumption
two people have formed a partnership. one partner of a business creates a $10000 debt, but the partnership doesn't have enough assets to cover the debt. in this situation
either partner could have to pay the debt out of personal assets
when a company performs a service, even if it has not been paid for this service, it still increases
equity
___ are the cost of assets consumed in the process of generating revenue
expenses
if a company issues common stock for $40000 and uses $30000 of the cash to purchase a truck, assets will be increased by $10000
false
McGillicuddy's Brewery wants to attract additional investors. The company releases statements outlining the company's past performance, including profit and loss history. This is an example of ________ accounting information.
financial
if a sole proprietor wants to raise money for capital expansion and limit personal liability for business debts, the sole proprietor would be advised to
form a corporation
according to the ____ principle, a company can purchase an asset for $1000 and, despite an increase in value over time, can continue to report the asset for $1000
historical cost
the question "can the company afford to hire new employees this year?" would most likely be asked by a
human resources director
which activity is the starting point of the accounting process?
identification
if a company provides services on account, then stockholders' equity
increases and an assset increases
the two groups who are the primary users of accounting information are
internal and external
managers who use accounting information to plan, organize, and run a business are
internal users
You are choosing between two investments, Flexon Industries and Tektron, Inc. Flexon Industries is a steady performer, perpetually growing earnings between 5% and 8% per year and projecting the same rate of growth for the next year. Tektron, Inc. is lately a top performer, growing earnings from 10% to 12% per year over the past three years and projecting the same rate of growth for the next year. However, the SEC is investigating Tektron, Inc. for potential questionable accounting practices for the past three years. As a potential investor, what would you do?
invest in flexon industries
if a company is known to have problems producing financial statements that comply with GAAP, then
investors should be very cautious about investing in this company
if a colleague asks you, as an accountant, why accounting is considered a financial information system, what explanation might you offer?
it identifies economic events, records business activity to maintain a history, and communicates financial information in reports for analysis
NoKnotsense Hair Salon was incorporated this year and is now an LLC. According to the economic entity assumption, the salon owner is now required to
keep the salon's economic records separate from his or her own
___ are existing debts and obligations
liabilities
a manufacturing company has received its monthly utility bill on january 31, and payment is due on february 14. where would the utility be recorded on january 31 when the month ends and the bill is still unpaid
liabilities
the following are forms of business organizations except
limited liability partnership
the question "how much of our annual budget should we spend to advertise our new product line?" would most likely be asked by a
marketing manager
in the retained earnings statement, changes in retained earnings are caluclated by taking beginning retained earnings plus net income or minus net loss and
minus dividends
the characteristic that most distinguishes a partnership from a proprietorship is
multiple owners
If the CEO of a company does not understand a portion of the financial statements prepared by the accounting department, the CEO should
not sign off on the financial statements until the issue is explained adequately
a ___ is a common form of organizations for service-type businesses
partnership
the ____ of a liability decreases both cash and accounts payable
payment
Businesses may be liable for mistakes by their owners or employees. Which forms of business organization do not provide protection for the owners' personal assets from the debts of the business? Choose the most correct statement.
proprietorships and partnerships
the chief financial officer is reviewing the end-of-year financial statements. he would most likely review which of the following as part of the communication activity in the accounting process
ratios and percentage changes in sales by year
during the month, patricia records the company's economic events in chronological order. which step in the accounting process is patricia most concerned with at this time
recording
Oakham Farms paid $1,200 cash for farming equipment from a supplier. As a result of this transaction, total assets
remain unchanged
___ are the gross increases in stockholders' equity resulting from business activities entered into for the purpose of earning income
revenues
if a company is profitable for an accounting period
revenues exceeded expenses
when an investor purchases an interest in a corporation, the company records
shares of common stock
electronics galore has a year-end net income of $2.5 million and plants to distribute $1.9 millino in dividends to
stockholders
assets and stockholders' equity increase when
stockholders make investments in the business
___ is equal to total assets minus total liabilities
stockholders' equity
when services are performed on account,
stockholders' equity increases
based on the economic entity assumption, it is assumed that
the activities of ford motor company can be distinguished from those of general motors
stockholders' equity is not affected when
the company pays a portion of an accounts payable
SlickOil Company released its latest financial reports, which indicate that the company is financially healthy and growing rapidly. This report conflicts with the company's reduced oil production over the past six months due to a major accident at one of its oil rigs. During this period, oil prices remained stable, and the company had to spend a large sum on oil cleanup. What is most likely to occur?
the company's stock price is likely to decline
Which of the following results when a company purchases equipment for $1,800 cash?
total assets remain unchanged
which of the following questions would a creditor most likely ask
will the company be able to pay its debts when they come due
