Financial Accounting Ch. 1

The equity of Alliance Company is $100,000 and the total liabilities are $10,000. The total assets are​ ________.

$110,000

Following is a list of account balances of Tanner Lawn Services as of December​ 31, after the first year of operations. Accounts Receivable - ​$7200 Accounts Payable - 6800 Salaries Expense - 7500 Repairs Expense - 1700 Truck - ​12,000 Equipment - ​13,000 Notes Payable - ​27,100 Cash - ​23,300 Supplies Expense - 1600 Service Revenue - ​39,000 Gasoline Expense - 8800 Salaries Payable - ​2,200 Calculate the net income.

$19,400

Baxtor Corporation provides consulting services. Selected transactions of Baxtor Corporation are described as​ follows: a) Received $10,700 cash and issued common stock to Joe Jones. ​b) Paid $2,200 cash for computer equipment for office use. ​c) Borrowed $11,100 from a local bank and deposited the money in the checking account. ​d) Paid $1,400 rent for the month. ​e) Paid $200 cash for office supplies to be used next year. ​f) Completed a consulting project for a local business and received $5,100 cash. Calculate the net income.

$3,700

Precision Camera Services started the year with total assets of $90,000 and total liabilities of $50,000. The revenues and the expenses for the year amounted to $100,000 and $50,000​, respectively. During the​ year, the company did not issue any common​ stock, but it distributed dividends of $55,000. What is the amount of​ stockholders' equity at the end of the​ year?

$35,000

The net income of Hollywood Talent Services is​ $22,000. The beginning and ending​ stockholders' equity balances were​ $34,000 and​ $50,000, respectively. The company issued no common stock. Calculate the amount of dividends.

$6,000

Jones Supply Services paid​ $350 cash, the amount owed from the previous​ month, to a materials supplier. Which account​ decreases?

Accounts Payable

What is the correct accounting​ equation?

Assets​ = Liabilities​ + Equity

Mars Electronic Company receives cash from a​ stockholder, John​ Tilden, and issues common stock to him. The two accounts involved in this transaction are​ ________.

Cash and Common Stock

Montgomery Equipment Rental Company received​ $1,000 cash from a​ customer; the amount was owed to the business from the previous month. What is the effect of this transaction on the accounting​ equation?

Cash increases and Accounts Receivable decreases.

Smith Company earns​ $50,000 of revenue and collects this amount in cash. What is the effect on the accounting​ equation?

Cash increases by​ $50,000 and Service Revenue increases by​ $50,000.

​ ________ are professional accountants who serve the general​ public, not one particular company.

Certified public accountants

​________ compile financial​ statements, interact with​ auditors, and oversee regulatory reporting.

Controllers

​________ typically work in a manufacturing business and help analyze accounting data.

Cost accountants

Selected information for Advanced Spa Services and Dalton Spa Services​ follows: Advanced Spa Services: Total Assets - $130,000 Total​ Stockholders' Equity - $77,000 Total Revenues - $84,000 Net Income - $12,000 Dalton Spa Services: Total Assets - $180,000 Total​ Stockholders' Equity - $117,000 Total Revenues - $74,000 Net Income - $22,000 The total assets and total​ stockholders' equity balances are as of December​ 31, 2024. Total revenues and net income are for the year ended December​ 31, 2024. No dividends were paid. Average net assets are $150,000 for Advanced and $200,000 for Dalton. Which business owes more to creditors and how much does that business​ owe?

Dalton owes​ more, Liabilities are $63,000

(T/F) Dividends are the expenses of a business.

False

What organization is responsible for the creation and governance of accounting standards in the United​ States?

Financial Accounting Standards Board

GAAP refers to guidelines for accounting information in the United States. The acronym GAAP in this statement refers to​ ________.

Generally Accepted Accounting Principles

What is the correct order of preparation of financial​ statements?

Income statement → statement of retained earnings → balance sheet → statement of cash flows

Which statement regarding the primary objective of financial reporting is​ correct?

Information that is faithfully representative is​ complete, neutral, and free from error.

The Financial Accounting Standards Board​ (FASB) works with many groups. Which group was congressionally​ created?

Public Company Accounting Oversight Board

Regarding generally accepted accounting principles​ (GAAP), which statement is incorrect​?

Relevant information is​ complete, neutral, and free from error.

​________ is the equity earned by profitable operations that is not distributed to stockholders.

Retained earnings

Which financial statement reports cash receipts and cash payments during a period of​ time?

Statement of cash flows

What is a major reason why corporate ownership is popular in the United​ States?

Stockholders have limited liability for the debts of the corporation.

What is true of the corporate form of​ business?

The board of directors sets policy for the corporation and appoints the officers.

A debt that a business owes is called​ ________.

a liability

The economic resources of a business such as​ furniture, building, and land are its​ ________.

assets

Which financial statement is used to report the economic​ resources, debt, and overall financial position of a​ company?

balance sheet

Lisa Smith decided to start her CPA practice as a professional​ corporation, Smith​ CPA, PC. The corporation purchased an office building for​ $35,000. The real estate agent said the building was worth​ $50,000 in the current market. The corporation recorded the building as a​ $50,000 asset because Lisa believes that is the real value of the building. Which concept or principle of accounting is being​ violated?

cost principle

Stuart Allen Corporation manufactures computer hardware. The president of the corporation bought a new car as a gift for his daughter and paid for it using cash from the business. Since the corporation paid for the​ car, it was recorded in its books as an asset. Which concept or principle of accounting did the corporation violate?

economic entity assumption

What event is NOT recorded by​ accountants?

effects of an economic boom

The​ owners' claims to the assets of the business are called​ ________.

equity

Which financial statement would be most useful if an analyst wants to know the profitability of a​ company?

income statement

The primary objective of financial reporting is to provide information useful for making investment and​ _________ decisions.

lending

McCoy Corporation provides plumbing services. Transactions during the first year of operations are provided below. ​a) Received​ $13,000 cash and issued common stock to Sharon McCoy. ​b) Paid​ $1,100 cash for equipment to be used for plumbing repairs. ​c) Borrowed​ $14,000 from a local bank and deposited the money in the checking account. ​d) Paid​ $300 rent for the year. ​e) Purchased​ $200 of office supplies by cash. ​f) Completed a plumbing repair project for a local lawyer and received​ $3,200 cash. Calculate the amount of total liabilities at the end of the first year.

​$14,000

Jason Repair Corporation incurred​ $1,500 as advertising expense and promised to pay the advertising agency within 30 days. What will decrease as a result of this​ transaction?

​Stockholders' equity