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Exam 1: Introduction to Accounting and Business

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Question 1

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How does the purchase of equipment by signing a note affect the accounting equation?

A) assets increase;assets decrease
B) assets increase;liabilities decrease
C) assets increase;liabilities increase
D) assets increase;stockholders' equity increases

E) A) and C)
F) A) and B)

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Question 2

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Managerial accountants would be responsible for providing which of the following?

A) Tax reports to government agencies.
B) Profit reports to owners and management.
C) Expansion of a product line report to management.
D) Consumer reports to customers.

E) All of the above
F) A) and C)

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Question 3

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Four financial statements are usually prepared for a business.The statement of cash flows is usually prepared last.The retained earnings statement (RE) ,the balance sheet (B) ,and the income statement (I) are prepared in a certain order to obtain information needed for the next statement.In what order are these three statements prepared?

Which of the following would not normally operate as a service business?

The debt created by a business when it makes a purchase on account is referred to as an

A retained earnings statement reports all changes in cash for a period of time.

Identify which of the following accounts appear on a balance sheet.

The following data were taken from Harrison Company's balance sheet: $\begin{array}{lcc} & \text { Dec. 31,2012 } & \text { Dec. 31, 2011 } \\\text { Total liabilities} & \$ 150,000 & \$ 105,000 \\\text { Total stockholders' equity } & 75,000 & 60,000\end{array}$ a.Compute the ratio of liabilities to stockholders' equity. b.Has the creditors' risk increased or decreased from December 31,2011,to December 31,2012?

Which of the following is not an asset?

Debts owed by a business are referred to as

The rights or claims to the assets of a business may be subdivided into rights of creditors and rights of owners.

Goods purchased on account for future use in the business,such as supplies,are called

Which of the following concepts relate to separating the reporting of business and personal economic transactions?

Gomez Service Company paid its first installment on a note payable for an amount of $2,000.How will this transaction affect the accounting equation?

Net income and net profit do not mean the same thing.

The assets and liabilities of S&P Day Spa at December 31,2014 and expenses for the year are listed below.The retained earnings balance was $68,000 at January 1,2014.Net income for 2014 is $45,625. $\begin{array}{|l|l|l|l|}\hline\text { Accounts Payable } & \$ 4,375 & \text { Spa Operating Expense } & \$ 23,760 \\\hline \text { Accounts Receivable } & \$ 8,490 & \text { Office Expense } & \$ 2,470 \\\hline \text { Cash } & \$ 13,980 & \text { SpaSupplies } & \$ 9,230 \\\hline \text { Fees Earned } & ? ? ? & \text { Wages Expense } & \$ 26,580 \\\hline \text { Spa Furniture \& Equipment } & \$ 56,000 & \text { Dividends } & \$ 38,170 \\\hline \text { Computers } & \$ 2,130 & \text { Capita1 Stock } & \$ 10,000 \\\hline \end{array}$ Prepare an income statement for the current year ended December 31,2014.

The accountant for Franklin Company prepared the following list of account balances from the company's records for the year ended December 31,2011: $\begin{array}{llll}\text { FeesEarned } & \$ 165,000 & \text { Cash } & \$ 30,000 \\\text { Accounts Receivable } & 14,000 & \text { Selling Expenses } & 44,000 \\\text { Equipment } & 64,000 & \text { Capital Stock } & 7,000 \\\text { Accounts Payable } & 22,000 & \text { Retained Earnings } & 23,000 \\\text { Salaries \& Wages Expense } & 40,000 & \text { Prepaid Rent } & 2,000 \\\text { Dividends } & 5,000 & \text { Income Taxes Expense } & 13,000 \\\text { Salaries \& Wages Payable } & 15,000 & \text { Rent Expense } & 20,000\end{array}$ Determine the total assets at the end of 2011 for Franklin Company.

Indicate whether each of the following activities would be reported on the statement of cash flows as an operating activity,an investing activity,a financing activity,or not at all.

Which of the following are guidelines for behaving ethically?

An income statement is a summary of the revenues and expenses of a business as of a specific date.