Accounting – Chapter 1 Test Answers – Flashcards
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Accounting Equation
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Assets= Liabilities + Stockholders equity Stockholders equity: commonstock+ retained earnings+ net income - dividends Net Income: Revenue - Expenses
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Income Statement
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Main parts Header: Name Company Income Statement Year Ended Month date, yr Revenue: Exenses: Net Income: R-E a financial statement listin an entity's revenues, expenses, and net income or net loss for a specific period also called the statement of operations
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Statement of Retained Earnings
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Header: Name Company Statement of Retained Earnings Year Ended Month, Date, yr Beginning retained earnings: Net Income: Cash Dividends: Ending retained earnings: Beg+Net-Div From the Income statement you get the net income
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Balance Sheet
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A= L+SE (has the entire equation) Assets: cash, supplies, land, accounts receivable, machines, TOTAL ASSETS Liabilities: Accounts payable, notes payable, TOTAL LIABILITIES Stockholders Equity: Common Stock + Ending Retained Earnings (get from the statement of retained earnings dont need to add the net income already did) , Total Liabilities, and stockholders equity (MUST BE EQUAL TO ASSETS) list of an entity's assets, liabilities, and owners' equity as of a specific date. Also called the statement of financial position
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Proprietorship
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one owner proprietor is personally liable
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Partnership
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two or more owners general partners are personally liable; limited partners are not
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LLC
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Members members are not personally liable
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Corporation
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stockholders- generally many owners stockholders are not personally liable a corporation is a legal entity an "artificial person" in the eyes of the law
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historical cost principle
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principle that states that assets and services should be recorded at their actual cost
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retained earnings
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the amount of stockholders equity that the corporation has earned through profitable operation and has not given back to stockholders
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The valuation of assets on the balance sheet is generally based on a. current fair market value as established by independent appraisers b. what it would cost to replace the asset c. historical cost d. selling price
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c. historical price
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The nature of an asset is best described as a. something owned by a business that has a ready market value b. something with physical form that's valued at cost in the accounting records c. an economic resource representing cash or the right to receive cash in the future d. an economic resource that's expected to benefit future operations
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d. an economic resource that's expected to benefit future operations
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Which financial statement covers a period of time? a. balance sheet b. income statement c. statement of cash flows d. both b and c
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d. both b and c
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How would net income be most likely to affect the accounting equation? a. increase liabilities and decrease stockholder's equity b. increase assets and increase liabilities c.decrease assets and decrease liabilities d. increase assets and increase stockholders' equity
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d. increase assets and increase stockholders' equity
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During the year, ChemClean, Inc., has $140,000 in revenues, $75,000 in expenses, and $3,000 in dividend payments. Stockholders' equity changed by a.+62,000 b. +68,000 c.-62,000 d.+65,000
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a. (140,000-75,000-3,000=62,000)
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During the year, ChemClean, Inc., has $140,000 in revenues, $75,000 in expenses, and $3,000 in dividend payments. a. net income of $62,000 b. net loss of $75,000 c. net income of $140,000 d. net income of $65,000
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d. 65,000 140,000-75,000
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Valor Corporation holds cash of $5,000 and owes $29,000 on accounts payable. Valor has accounts receivable of $40,000, inventory of $36,000 and land that costs $50,000. How much are Valors total assets and liabilities? total assets Liabilities a. 126,000 29,000 b. 29,000 131,000 c.131,000 29,000 d. 131,000 84,000
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c. $131,000 $29,000
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Which items are reported on the balance sheet? a. accounts payable b. retained earnings c. inventory d. all of the above
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d. all of the above
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During the year, Diaz Companys' equity increased from $46,000 to $62,000. Diaz earned net income of $20,000. How much in dividends did Diaz declare during the year? a. 16,000 b.5,000 c. 4,000 d. 0
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c. 46,000+ net income (20,000) - Dividends = 62,000; Dividends = 4,000
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Which of the following is a true statement about International Finacncial Reporting Standards?
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They are converging gradually with the U.S standards
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Accounting: a. is often called the language of business b. measures business activities c. processes data into reports and communicates the data to decision makers d. is all of the above
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d. is all of the above
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Which type of business organization transacts the most business and is the largest in terms of assets, income, and number of employees? a. proprietorship b. partnership c. limites- liability company d. corporation
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d. corporation
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where can you find common stock
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balance sheet
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where can you find income tax payable
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balance sheet
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where can you find dividends
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statement of retained earning, cash flow
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where can you find income tax expense
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income statement
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where can you find ending balance of retained earnings
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statement of retained earnings and balance sheet,
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where can you find total assets
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balance sheet
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where can you find long- term debt
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balance sheet
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where can you find revenue
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income statement
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where can you find cash spent to acquire the building
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cash flow
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where can you find selling, general, and administrative expenses
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income statement
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where can you find adjustments to reconcile net income to net cash provided by operations
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cash flow
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where can you find ending cash balance
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cash flow, balance sheet
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where can you find current liabilities
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balance sheet
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where can you find net income
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income statement, statement of retained earnings
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An entity that myst pay its own income taxers is: a. limited-liability company b. proprietorship c. corporation d. partnership
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c. corporation
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Wendy's, the restauraunt chain, sold a store location to Burger King, How can Wendy's determine the sale price of the store- by a professional appraisal, Wendy's cost, or the amount actually received from the sale?
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historical cost
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Inflation has been around 5% for some time. Lake Carolina Realtors is considering measuring its land values in inflation-adjusted amounts.
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stable monetary unit assumption
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General Motors wants to determine which division of the company -Chevrolet of GMC- is more profitable
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enitity assumptions
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You get an especially good buy on a computer, paying only $500 when it normally costs $1,200. What is your accounting value for this computer?
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historical cost
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assets are usually reported at their a. current market value b. appraised value c. historical cost d. none of the above
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historical cost
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Revenues are
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increases in reatined earnings resulting from selling products or performing services
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Which type of business organization provides the least amount of protection for bankers and other creditors of the company?
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corporation
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The financial Accounting Standards Board is responsible for establishing:
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generally accepted accounting principles
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___ means that the accounting information for a company must be prepared in such a way as to be capable of being compared with information from other companies in the same period and consistent with similar information for that company in previous periods.
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comparability
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To be useful, accounting information must have the fundamental qualitative characteristics of: a. faithful representation and timeliness b. materiality and understandability c. relevance and faithful represenation d. comparability and relevance
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c. relevance and faithful representation
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Verifiability means that the information:
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must be capable of being checked for accuracy
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Suppose you manage a Pizza Parlor restaurant. Identity the missing amount for each situation: Total asserts = Total liabilities + StockEqu a. ? = 190,000 + 110,000 b. 280,000 = 130,000 + ? c. 180,000 = ? + 90,000
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a. 300,000 b. 150,000 c.90,000
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Classify as an Asset, Liability, or Stockholders Equity: a. Accounts payable b. Common Stock c. Supplies d. Retained Earnings e. Land f. Prepaid Expenses g. Accounts receivable h. Long-term debt i. Merchandise inventory j. Notes Payable k. Accrued expense payable i. Equipment
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a. liability b. stockholders equity c. asset d. stockholders equity e. asset f. asset g. asset h. liability i. asset j. liability k. liability i. asset
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Identify each account or heading with the appropriate financial statements a. Dividends b. Salary Expense c. Inventory d. Sales revenue e Retained earnings f. net cash provided by operating activities g. Net income h. cash i. net cash used for financing activities j. accounts payable k. common stock l. Interest revenue m. long-term debt n. increase or decrease in cash
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a. Statement of retained earnings and cash flows b. income statement c. balance sheet d. income statement e. statement of retained earnings and balance sheet f. statement of cash flow g. balance sheet, income statement, cash flows h. balance sheet, cash flows i. cash flows j. balance sheet k. balance sheet l. income statement m. balance sheet n. cashflows
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Emerald Inc. begans the year with total liabilities of $80,000 and total stockholders equity of $80,000. During the year, total assets increased by 25%. How much are total assets at the end of the year?
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Assets = Liabilities + Stockholders Equity 160,000 = 80,000 + 80,000 160,000(1.25)=200,000
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JetWest Airlines Ltd. began the year with total assets of $130,000 and total liabilities of $37,000. Net income for the year was $28,000, and dividends were zero. How much is stockholders' equity at the end of the year?
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Assets - Liabilities = Stockholders' Equity 130,000 - 37,000 = 93,000 93,000+ 28,000[net income]=121,000
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The calculation of ending retained earnings considers beginning retained earnings, current net income or net loss, and dividends T/F
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true
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Long- term debt is a liability that is payable beyond one year from the date of the financial statement: T/F
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True
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Regarding financial statement elements: a. assets must provide immediate benefits to the company b. stockholders' equity represents the "outsider claim" to the assets c. revenue are inflows of resources that increase retained earnings d. merchandise inventory and dividends are assets of a company
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c. revenues are inflows of resources that increase the retained earnings
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Another way to state the accounting equation is:
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Assets= Liabilities + Paid - in capital + retained earnings
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An investor wishing to assess a company's overall financial posiotion at the end of the period would probably examine the:
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balance sheet
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A potential investor interested in evaluating a company's financial earning performance for the current period would probably examine which financial statements?
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income statement only
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Retained earnings appears on which of the following financial statements
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statement of retained earnings and balance sheet
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When a company is purchasing long- term assets, this is a sign of growth. This information can be obtained by examining
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the investing cash flows section of the statement of cash flows
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Decision makers who use accounting include: a. investors b. the SEC c. managers d. all of the above
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d. all of the above
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Characteristics of partnerships
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income and loss of the partnership "flows through" to the partners
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An important fact to consider when determining how to organize a business is that: a. members of an LLC have unlimited liability and are taxed like members of a partnership b. the proprietor and the proprietorship are seperate legal entities c. for accounting purposes, a proprietorship is a distinct entity d. the records of a partnership can include the partner's personal finances
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c. for accounting purposes, a proprietorship is a distinct entity
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On January 1, 2010, total assets for Liftoff Technologies were $125,000; on Decemeber 31,2010, total assets were $145,000. On Januaary 1, 2010, total liabilites were $110,000; on December 31, 2010, total liabilities were $115,000. What is the amount of the change and the direction of the change in Liftoff Technologies stockholders' equity for 2010?
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increase of $15,000
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Dividends:
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are distributions to stockholders of assets (usually cash) generated by net income
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ABC Company had the following accounts and balances at the end of the year: accounts payable: 12,000 cash: 74,000 common stockL 21,000 cost of goods sold: 85,000 dividends 8,000 equipment 50,000 inventory 25,000 term debt 33,000 revenues 200,000 salaries expense 24,000 Total assets for ABC company at the end of the year were:
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149,000
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transactions:
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provide objective information about the financial impact on a company
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which items are reported on a balance sheet? a. accounts payable b. retained earnings c. inventory d. all of the above
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d. all of the above
