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Exam 1: Introduction to Accounting and Business

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Question 61

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The role of accounting is to provide many different users with financial information to make economic decisions.

A) True
B) False

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Question 62

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Receiving payments on an account receivable increases both equity and assets.

A) True
B) False

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Question 63

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select each of the following as an (A) increase in owner's equity, or a (B) decrease in owner's equity.

Using the following accounts and their amounts, prepare in good format a Balance Sheet for Bright Futures Company, month ended August 31, 2011: $\begin{array}{ll}\text { Telephone Expense } & \$ 1,150 \\\text { Cash } & \$ 3,000 \\\text { Accounts Payable } & \$ 1,540 \\\text { Jason Bright, Drawing } & \$ 800 \\\text { Fees Earned } & \$ 15,700 \\\text { Rent Expense } & \$ 1,400 \\\text { Suppliess } & \$ 140 \\\text { Accounts Receivable } & \$ 1,500 \\\text { Computer Equipment } & \$ 20,000 \\\text { Jason Bright, Capital } & \$ 14,320 \\\text { Wages Expense } & \$ 4,800 \\\text { Utilities Expense } & \$ 750 \\\text { Notes Payable } & \$ 2,400 \\\text { Office Expense } & \$ 420\end{array}$

How does paying a liability in cash affect the accounting equation?

On April 25, Gregg Repair Service extended an offer of $115,000 for land that had been priced for sale at $140,000. On May 3, Gregg Repair Service accepted the seller's counteroffer of $125,000. On June 20, the land was assessed at a value of $95,000 for property tax purposes. On August 4, Gregg Repair Service was offered $150,000 for the land by a national retail chain. At what value should the land be recorded in Gregg Repair Service's records?

Cash investments made by the owner to the business are reported on the statement of cash flows in the

The unit of measure concept:

Which of the following is true in regards to a Limited Liability Company?

The following are examples of external users of accounting information except:

The assets and liabilities of the company are $128,000 and $84,000, respectively. Owner's equity should equal

Determine the missing amount "X" for each of the following: $\begin{array}{|l|l|l|}\hline \text { Assets } & \text { Liabilities } & \text { Owner'sEquity } \\\hline \text { a. } \$ 78,500 & \$ 37,600 &X \\\hline \text { b. } X & \$ 53,280 & \$145,000 \\\hline \text{c. \$49,500}&X&\$34,000\\\hline\\\end{array}$

The monetary value charged to customers for the performance of services sold is called a(n)

Companies like Enron, WorldCom, and Tyco International, Ltd. have been caught in the midst of ethical lapses that led to fines, firings, and criminal and/or civil prosecution. List and briefly describe three factors that are responsible for what went wrong in these companies.

Which of the following groups are considered to be internal users of accounting information?

Eric Wood, CPA, was organized on January 1, 2011, as a proprietorship. List the errors that you find in the following financial statements and prepare the corrected statements for the three months ended March 31, 2011.

The basic difference between manufacturing and merchandising companies is the completion level of the products they purchase for resale to customers.

If a building is appraised for $85,000, offered for sale at $90,000, and the buyer pays $80,000 cash for it, the buyer would record the building at $85,000.

The owner's rights to the assets rank ahead of the creditors' rights to the assets.

Daniels Company is owned and operated by Thomas Daniels. The following selected transactions were completed by Daniels Company during May: 1. Received cash from owner as additional investment $\$ 55,000$ 2. Paid creditors on ac count $\$ 7,000$ . 3. Billed customers for services on account $\$ 2,565$ . 4. Received cash from customers on accounts $\$ 8,450$ . 5. Paid cash to owner for personal use, $\$ 2,500$ . 6. Received the utility bill $\$ 160$ , to be paid next month. Indicate the effect of each transaction on the accounting equation: 1) By Account type - (A) assets, (L)liabilities, (O)owner's (E) equity, (R)revenue, and (E) expense 2) Name of Account for the entry 3) The amount by of the transaction 4) Indicate the direction of change in the account that is affected. Note: Each transaction has two entries.