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Accounting
Q:
What is the purpose of return on assets as an analytical tool?
Q:
What distinguishes liabilities from equity?
Q:
Explain the accounting equation, and define its terms.
Q:
Describe the relation between revenues, expenses, and net income.
Q:
Identify and describe the three major activities of business organizations.
Q:
How does the going-concern principle affect reporting asset values of a business?
Q:
Identify the two main groups involved in establishing generally accepted accounting principles.
Q:
Why should assets be recorded at historical cost?
Q:
How does the objectivity principle support ethical behavior?
Q:
Identify the three basic forms of business organizations.
Q:
Describe the three important guidelines for revenue recognition.
Q:
Explain why ethics are an integral part of accounting.
Q:
Identify several opportunities in accounting and its related fields.
Q:
What are two questions that an owner might be able to answer by looking at accounting information?
Q:
Identify the users and uses of accounting information.
Q:
What is the balance sheet? What is its purpose?
Q:
Explain the role of accounting in the information age.
Q:
Classify the following activities according to the appropriate section of the statement of cash flows.a. Operating activityb. Investing activityc. Financing activity1) Cash paid for withdrawals by owners.2) Cash paid for utilities.3) Cash received from a one-time sale of used office equipment.4) Cash paid for a delivery van to be used in the business.5) Cash received from owner contributions.6) Cash received from customers.
Q:
Select the appropriate financial statement for each of the following items.
(Note: some items may appear on more than one financial statement.)
a. Income statement
b. Statement of owner's equity
c. Balance sheet
d. Statement of cash flows
1)Consulting Revenue
2)Ahmad Khan, Capital
3)Cash investments by owner
4)Cash proceeds from a long-term loan
5)Supplies
6)Cash withdrawals by owner.
7)Cash payments to purchase equipment
8)Advertising Expense
Q:
Select the appropriate financial statement for each of the following accounts.
(Note: Some items may appear on more than one financial statement.)
a. Income statement
b. Statement of owner's equity
c. Balance sheet
d. Statement of cash flows
1)Rent Expense
2)Withdrawals
3)Notes payable
4)Cash
5)Accounts receivable
6)Jay Miller, Capital
7)Supplies Expense
8)Fees earned
Q:
Match each of the following items 1 through 8 with the financial statement a through d in which each item would most likely appear. An item may appear on more than one statement.
a. Income statement
b. Statement of owner's equity
c. Balance sheet
d. Statement of cash flows
1)Cash from investing activities.
2)Equity.
3)Revenues.
4)Liabilities.
5)Cash from operating activities.
6)Withdrawals.
7)Costs and expenses.
8)Assets.
Q:
Identify each of the following business activities 1 through 6 into the appropriate category a, b, and c.
a. Operating
b. Investing
c. Financing
1)Paid employee wages.
2)Purchase of land.
3)Sale of used equipment.
4)Borrowed money from a bank on a long-term note.
5)Paid utilities expenses.
6)Withdrawal of funds by owners.
Q:
Match the following definitions with the terms 1 through 9. Place the letter that identifies the best definition in the blank space next to the term.a. The relation between a company's assets, liabilities, and equity.b. An exchange of value between two parties.c. The principle that assumes transactions and events can be expressed in money units.d. A financial statement that reports the changes in equity over the reporting period; adjusted for increases such as owner investment and net income and for decreases such as owner withdrawals or net loss.e. A financial statement that lists cash inflows (receipts) and cash outflows (payments); the cash flows are arranged by operating, investing, and financing activities.f. Creditor's claims on assets.g. The cost of assets or services used to earn revenue.h. The principle that requires a business to be accounted for separately from its owners.i. The principle that revenue is recognized when earned.1)Business transaction2)Accounting equation3)Liabilities4)Statement of owner's equity5)Revenue recognition principle6) Monetary unit principle7)Expenses8)Statement of cash flows9)Business entity principle
Q:
Match the following definitions with terms 1 through 8. Place the letter that identifies the best definition in the blank space next to the term.a. The accounting principle that requires assets and services to be recorded initially at the cash or cash-equivalent amount given in exchange.b. A principle that requires the information in financial statements to be supported by independent unbiased evidence.c. Gross increase in equity from a company's earnings activities.d. A principle that requires financial statements to reflect the assumption that the business will continue operating instead of being closed or sold.e. Resources owned or controlled by a company that are expected to yield future benefits.f. A financial statement that reports the changes in equity over the reporting period; including increases such as owner investment and net income and for decreases such as owner withdrawals or net loss.g. Assets an owner takes from the company for personal use.h. Another term for equity.1)Net assets2)Owner withdrawal3)Objectivity principle4)Assets5) Revenues6)Cost principle7)Statement of owner's equity8)Going-concern principle
Q:
Match each of the following transactions and events to the accounting principle applicable to recording and reporting them.1) An insurance company receives insurance premiums for six future month's worth of coverage.2) Helen Cho, a sole proprietor, pays for her daughter's preschool out of business funds.3) To make the balance sheet look better, Helen Cho added several thousand dollars to the Equipment account that she believed was undervalued.4) A building is for sale at $480,000. An appraisal is given for $450,000.5) Mayan Imports receives a shipment from Mexico. The invoice is stated in pesos.a. Business entity principleb. Objectivity principlec. Cost principled. Going concern principlee. Monetary unit principlef. Revenue recognition principle
Q:
The following is a list of selected users of accounting information. Match the appropriate user to the following information needs.1)Production Managers 2)Lenders 3)Suppliers 4)Employees 5)Shareholders A)Judge the soundness of a customer before making sales on credit.B) Measuring risk and return of loans.C) Assessing the risk and return of acquiring shares.D)Monitor costs and ensure quality.E)Assessing employment opportunities.
Q:
Match each of the following terms with the most appropriate definition.1)Risk 2)Liabilities 3)Net income 4)Expenses 5)Managerial accounting 6)Planning 7)Return on assets 8)Financial accounting A) A financial ratio useful in evaluating management, analyzing and forecasting profits, and planning activities.B) Area of accounting aimed at serving external users.C) Costs of assets or services used to earn revenues.D) The uncertainty about the expected return to be earned.E) Creditor's claims on a company's assets.F) Defining the idea, goals, and actions of an organization.G) The excess of revenue over expensesH) Area of accounting aimed at serving the decision making needs of internal users.
Q:
Match the following terms with the appropriate definition.1)Social responsibility 2)Internal users 3)Operating activities 4)Financing activities 5)Investing activities 6)Accounting 7)Ethics 8)Recordkeeping 9)External users A)The acquisition and disposing of resources that an organization uses to acquire and sell products and services.B)Beliefs that distinguish right from wrong.C)The part of accounting that involves recording transactions and events, either electronically or manually.D)Persons using accounting information who are directly involved in managing the organization.E)An information and measurement system that identifies, records and communicates relevant reliable and comparable information about an organization's business activities.F)Provide the means organizations use to pay for resources such as land, buildings, and equipment to carry out plans.G)Concern for the impact of actions on society.H)The use of resources to research, develop, purchase, produce, distribute, and market products and services.I)Persons using accounting information who are not directly involved in the running of the organization.
Q:
A company reported total equity of $145,000 on its December 31, 2008 balance sheet. The following information is available for the year ended December 31, 2009: What are the total assets of the company at December 31, 2009?
A.$45,000.
B.$92,000.
C.$98,000.
D.$210,000.
E.$282,000.
Q:
A company's balance sheet shows: cash $22,000, accounts receivable $16,000, office equipment $50,000, and accounts payable $17,000. What is the amount of owner's equity?
A.$17,000.
B.$29,000.
C.$71,000.
D.$88,000.
E.$105,000.
Q:
Fees earned (but not yet received in cash) by a business in exchange for services it provided appear on which of the following statements?
A.Balance sheet.
B.Income statement.
C.Statement of owner's equity.
D.Statement of cash flows.
E.Both A and B.
Q:
Rent expense that is paid with cash appears on which of the following statements?
A.Balance sheet.
B.Income statement.
C.Statement of owner's equity.
D.Statement of cash flows.
E.Both B and D.
Q:
Flash has beginning equity of $257,000, net income of $51,000, withdrawals of $40,000 and investments by owners of $6,000. Its ending equity is:
A.$223,000.
B.$240,000.
C.$268,000.
D.$274,000.
E.$208,000.
Q:
Flash had cash inflows from operations $62,500; cash outflows from investing activities of $47,000; and cash inflows from financing of $25,000. The net change in cash was:
A.$40,500 increase.
B.$40,500 decrease.
C.$134,500 decrease.
D.$134,000 increase.
E.$9,500 increase.
Q:
A company borrows $125,000 from the Eastside Bank and receives the loan proceeds in cash. This represents a(n):
A.Revenue activity.
B.Operating activity.
C.Expense activity.
D.Investing activity.
E.Financing activity.
Q:
A company acquires equipment for $75,000 cash. This represents a(n)
A.Operating activity.
B.Investing activity.
C.Financing activity.
D.Revenue activity.
E.Expense activity.
Q:
Determine the net income of a company for which the following information is available for the month of May. A.$190,000.
B.$210,000.
C.$230,000.
D.$400,000.
E.$610,000.
Q:
Use the following information as of December 31 to determine equity. A.$57,000.
B.$141,000.
C.$297,000.
D.$438,000.
E.$579,000.
Q:
The income statement reports all of the following except:
A.Revenues earned by a business.
B.Expenses incurred by a business.
C.Assets owned by a business.
D.Net income or loss earned by a business.
E.The time period over which the earnings occurred.
Q:
Accounts payable appear on which of the following statements?
A.Balance sheet.
B.Income statement.
C.Statement of owner's equity.
D.Statement of cash flows.
E.Transaction statement.
Q:
Cash investments by owners are listed on which of the following statements?
A.Balance sheet.
B.Income statement.
C.Statement of owner's equity.
D.Statement of cash flows.
E.Both C and D.
Q:
The financial statement that shows the beginning balance of owner's equity; the changes in equity that resulted from new investments by the owner, net income (or net loss); withdrawals; and the ending balance, is the:
A.Statement of financial position.
B.Statement of cash flows.
C.Balance sheet.
D.Income statement.
E.Statement of owner's equity.
Q:
The financial statement that describes where a company's cash came from and where it went during the period is the:
A.Statement of financial position.
B.Statement of cash flows.
C.Balance sheet.
D.Income statement.
E.Statement of changes in owner's equity.
Q:
A financial statement providing information that helps users understand a company's financial status, and which lists the types and amounts of assets, liabilities, and equity as of a specific date, is called a(n):
A.Balance sheet.
B.Income statement.
C.Statement of cash flows.
D.Statement of owner's equity.
E.Financial Status Statement.
Q:
A balance sheet lists:
A.The types and amounts of the revenues and expenses of a business.
B.Only the information about what happened to equity during a time period.
C.The types and amounts of assets, liabilities, and equity of a business as of a specific date.
D.The inflows and outflows of cash during the period.
E.The assets and liabilities of a company but not the owner's equity.
Q:
The financial statement that reports whether the business earned a profit and also lists the types and amounts of the revenues and expenses is called:
A.A Balance sheet.
B.A Statement of owner's equity.
C.A Statement of cash flows.
D.An Income statement.
E.A Statement of financial position.
Q:
The statement of owner's equity:
A.Reports how equity changes at a point in time.
B.Reports how equity changes over a period of time.
C.Reports on cash flows for operating, financing, and investing activities over a period of time.
D.Reports on cash flows for operating, financing, and investing activities at a point in time.
E.Reports on amounts for assets, liabilities, and equity at a point in time.
Q:
The statement of cash flows reports information on:
A.Revenue activities.
B.Operating activities.
C.Financing activities.
D.Investing activities.
E.B, C, and D.
Q:
The basic financial statements include the:
A.Balance Sheet.
B.Income Statement.
C.Statement of Owner's Equity.
D.Statement of Cash Flows.
E.All of these.
Q:
The statement of cash flows reports on cash flows for:
A.Operating activities.
B.Investing activities.
C.Financing activities.
D.Planning activities.
E.A, B and C only.
Q:
Risk is:
A.Net income divided by average total assets.
B.The reward for investment.
C.The uncertainty about the expected return to be earned.
D.Unrelated to expected return.
E.Derived from the idea of getting something back from an investment.
Q:
U. S. government bonds are:
A.High-risk and high-return investments.
B.Low-risk and low-return investments.
C.High-risk and low-return investments.
D.Low-risk and high-return investments.
E.High risk and no-return investments.
Q:
Harris Co. has a net income of $43,000, assets at the beginning of the year are $250,000 and assets at the end of the year are $300,000. Compute its return on assets.
A.8.4%
B.17.2%
C.14.3%
D.15.6%
E.1.5%
Q:
FastForward has net income of $18,955, and assets at the beginning of the year of $200,000. Assets at the end of the year total $246,000. Compute its return on assets.
A.7.7%.
B.8.5%.
C.9.5%.
D.11.8%.
E.13.0%.
Q:
Nike had income of $350 million and average invested assets of $2,000 million. Its ROA is:
A.1.8%.
B.35%.
C.17.5%.
D.5.7%.
E.3.5%.
Q:
Reebok had income of $150 million and average invested assets of $1,800 million. Its return on assets is:
A.8.3%.
B.83.3%.
C.12%.
D.120%.
E.16.7%.
Q:
Return on assets is:
A.Also called return on investment.
B.ROA.
C.Computed by dividing net income by average total assets.
D.Used in helping evaluate management.
E.All of these.
Q:
If assets are $365,000 and equity is $120,000, then liabilities are:
A.$120,000.
B.$245,000.
C.$365,000.
D.$485,000.
E.$610,000.
Q:
If a company paid $38,000 of its accounts payable in cash, what was the effect on the assets, liabilities, and equity?
A.Assets would decrease $38,000, liabilities would decrease $38,000, and equity would decrease $38,000.
B.Assets would decrease $38,000, liabilities would decrease $38,000, and equity would increase $38,000.
C.Assets would decrease $38,000, liabilities would decrease $38,000, and equity would not change.
D.There would be no effect on the accounts because the accounts are affected by the same amount.
E.None of these.
Q:
If the assets of a business increased $89,000 during a period of time and its liabilities increased $67,000 during the same period, equity in the business must have:
A.Increased $22,000.
B.Decreased $22,000.
C.Increased $89,000.
D.Decreased $156,000.
E.Increased $156,000.
Q:
Viscount Company collected $42,000 cash on its accounts receivable. The effects of this transaction as reflected in the accounting equation are:
A.Total assets decrease and equity increases.
B.Both total assets and total liabilities decrease.
C.Total assets, total liabilities, and equity are unchanged.
D.Both total assets and equity are unchanged and liabilities increase.
E.Total assets increase and equity decreases.
Q:
Zion Company has assets of $600,000, liabilities of $250,000, and equity of $350,000. It buys office equipment on credit for $75,000. What would be the effects of this transaction on the accounting equation?
A.Assets increase by $75,000 and expenses increase by $75,000.
B.Assets increase by $75,000 and expenses decrease by $75,000.
C.Liabilities increase by $75,000 and expenses decrease by $75,000.
D.Assets decrease by $75,000 and expenses decrease by $75,000.
E.Assets increase by $75,000 and liabilities increase by $75,000.
Q:
How would the accounting equation of Boston Company be affected by the billing of a client for $10,000 of consulting work completed?
A.+$10,000 accounts receivable, -$10,000 accounts payable.
B.+$10,000 accounts receivable, +$10,000 accounts payable.
C.+$10,000 accounts receivable, +$10,000 cash.
D.+$10,000 accounts receivable, +$10,000 revenue.
E.+$10,000 accounts receivable, -$10,000 revenue.
Q:
Photometer Company paid off $30,000 of its accounts payable in cash. What would be the effects of this transaction on the accounting equation?
A.Assets, $30,000 increase; liabilities, no effect; equity, $30,000 increase.
B.Assets, $30,000 decrease; liabilities, $30,000 decrease; equity, no effect.
C.Assets, $30,000 decrease; liabilities, $30,000 increase; equity, no effect.
D.Assets, no effect; liabilities, $30,000 decrease; equity, $30,000 increase.
E.Assets, $30,000 decrease; liabilities, no effect; equity $30,000 decrease.
Q:
An exchange of value between two entities is called:
A.The accounting equation.
B.Recordkeeping or bookkeeping.
C.A business transaction.
D.An asset.
E.Net Income.
Q:
Assets created by selling goods and services on credit are:
A.Accounts payable.
B.Accounts receivable.
C.Liabilities.
D.Expenses.
E.Equity.
Q:
On June 30 of the current year, the assets and liabilities of Phoenix Phildell are as follows: Cash $20,500; Accounts Receivable, $7,250; Supplies, $650; Equipment, $12,000; Accounts Payable, $9,300. What is the amount of owner's equity as of July 1 of the current year?
A.$8,300
B.$13,050
C.$20,500
D.$31,100
E.$40,400
Q:
The assets of a company total $700,000; the liabilities, $200,000. What are the claims of the owners?
A.$900,000.
B.$700,000.
C.$500,000.
D.$200,000.
E.It is impossible to determine unless the amount of this owners' investment is known.
Q:
The balance sheet equation is:
A.Revenues minus expenses equals net income.
B.Debits equal credits.
C.The bookkeeping phase of accounting.
D.Another name for the accounting equation.
E.Assets minus liabilities and equity.
Q:
Distributions by a business to its owners are called:
A.Withdrawals.
B.Expenses.
C.Assets.
D.Retained earnings.
E.Net Income.
Q:
A payment to an owner is called a(n):
A.Liability.
B.Withdrawal.
C.Expense.
D.Contribution.
E.Investment.
Q:
Which of the following statements is true about assets?
A.They are economic resources owned or controlled by the business.
B.They are expected to provide future benefits to the business.
C.They appear on the balance sheet.
D.Claims on them can be shared between creditors and owners.
E.All of these.
Q:
The excess of expenses over revenues for a period is:
A.Net assets.
B.Equity.
C.Net loss.
D.Net income.
E.A liability.
Q:
Another name for equity is:
A.Net income.
B.Expenses.
C.Net assets.
D.Revenue.
E.Net loss.
Q:
If assets are $99,000 and liabilities are $32,000, then equity equals:
A.$32,000.
B.$67,000.
C.$99,000.
D.$131,000.
E.$198,000.
Q:
Accounting
A.Is an information and measurement system.
B.Identifies, records, and communicates information about business activities
C.Helps people make better decisions
D.Involves interpreting information and designing information systems to provide useful reports that monitor and control a company's activities.
E.All of these
Q:
Revenues are:
A.The same as net income.
B.The excess of expenses over assets.
C.Resources owned or controlled by a company
D.The gross increase in equity from a company's earning activities.
E.The costs of assets or services used.
Q:
Net income:
A.Occurs when revenues exceed expenses.
B.Is the same as revenue.
C.Equals resources owned or controlled by a company.
D.Occurs when expenses exceed assets.
E.Represents assets taken from a company for an owner's personal use.
Q:
Expenses:
A.Increase equity.
B.Are gross increases in equity from a company's earning activity.
C.Are the costs of assets or services used to earn revenues.
D.Occur when equity exceeds revenue.
E.Are creditors claims on assets.
Q:
Assets = Liabilities + Equity is known as the:
A.Income statement equation.
B.Cost principle.
C.Objectivity principle.
D.Accounting equation.
E.Transaction principle.