Test Bank | Chapter 1 Accounting in Business – 24th

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Fundamental Accounting Principles, 24e (Wild)

Chapter 1 Accounting in Business

1) Accounting is an information and measurement system that identifies, records, and communicates an organization's business activities.

2) Recordkeeping, or bookkeeping, is the recording of transactions and events, either manually or electronically. This is just one part of accounting.

3) An accounting system captures relevant data about transactions and then classifies, records, and reports data.

4) Financial accounting is the area of accounting aimed at serving external users by providing them with general-purpose financial statements.

5) Internal users of accounting information do not directly run the organization and have limited access to its accounting information.

6) Auditors verify the effectiveness of internal controls.

7) External auditors examine financial statements to verify that they are prepared according to generally accepted accounting principles.

8) External users include lenders, shareholders, customers, and regulators.

9) Regulators often have legal authority over certain activities of organizations.

10) Internal users include lenders, shareholders, brokers and nonexecutive employees.

11) Opportunities in accounting include auditing, consulting, market research, and tax planning.

12) Ethics is defined as maximizing personal wealth, regardless the cost.

13) The Sarbanes-Oxley Act (SOX) requires documentation and verification of internal controls. It also emphasizes effective internal controls.

14) The fraud triangle asserts that the three factors that must exist for a person to commit fraud are opportunity, pressure, and rationalization.

15) Management is not responsible for implementing internal controls and does not need to issue a report on internal controls.

16) A partnership is a business owned by two or more people.

17) Owners of a corporation are called shareholders or stockholders.

18) In the partnership form of business, the owners are called stockholders.

19) The balance sheet shows a company's net income or loss over a period of time.

20) The Financial Accounting Standards Board (FASB) is a group tasked with setting generally accepted account principles (GAAP).

21) The business entity principle means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.

22) GAAP aims to make information relevant, reliable, and comparable.

23) The business entity assumption means that a business is accounted for separately from other business entities, including its owner or owners.

24) As a general rule, revenues should not be recognized in the accounting records when earned, but rather when cash is received.

25) Specific accounting principles are basic assumptions, concepts, and guidelines for preparing financial statements and arise out of long-used accounting practice.

26) Limited liability and indefinite business life are characteristics of a corporation.

27) A sole proprietorship is a business with multiple owners.

28) Unlimited liability and separate taxation of the business are advantages of a sole proprietorship.

29) A partnership must pay an additional business income tax.

30) Objectives, qualitative characteristics, elements, and recognition and measurement are components of the FASB conceptual framework.

31) Objectivity means that financial information is supported by independent, unbiased evidence; it demands more than a person's opinion.

32) The going-concern assumption presumes that a business will continue operating instead of being closed or sold.

33) The measurement principle prescribes that accounting information is based on subjective opinion rather than cost.

34) The monetary unit assumption means that companies should express transactions in terms such as "a lot" or "very little".

35) The International Accounting Standards Board (IASB) issues International Financial Reporting Standards (IFRS) that identify preferred accounting practices.

36) A limited liability company offers the limited liability of a partnership or proprietorship and the tax treatment of a corporation.

37) A limited liability company offers the limited liability of a corporation and the tax treatment of a partnership or proprietorship.

38) The Securities and Exchange Commission (SEC) is a U.S. government agency that oversees proper use of GAAP by companies that sell stock and debt to the public.

39) The four common forms of business ownership include sole proprietorship, partnership, corporation, and non-profit.

40) The four common forms of business ownership include sole proprietorship, partnership, limited liability company (LLC), and corporation.

41) The three major types of business activities are operating, financing, and investing.

42) Planning is a part of each business activity (operating, investing, and financing), and gives each activity meaning and focus.

43) Financing activities provide the resources organizations use to pay for resources such as land, buildings, and equipment.

44) Investing activities include long-term borrowing and repaying of cash from lenders.

45) Investing activities are the acquiring and disposing of resources that an organization uses to acquire and sell its products or services.

46) Owner financing refers to resources contributed by creditors or lenders.

47) Revenues are increases in equity (via net income) from a company's sales of products and services to customers.

48) A net loss occurs when revenues exceed expenses.

49) Net income occurs when revenues exceed expenses.

50) Liabilities are the owner's claim on assets.

51) Assets are the resources a company owns or controls that are expected to yield future benefits.

52) Owner withdrawals are subtracted as expenses in the calculation of net income.

53) The accounting equation can be restated as: Assets − Equity = Liabilities.

54) The accounting equation implies that: Assets + Liabilities = Equity.

55) Owner's investments are increases in equity from the sale of products or services.

56) Every business transaction leaves the accounting equation in balance.

57) An external transaction is an exchange within an entity that may or may not affect the accounting equation.

58) From an accounting perspective, an event is a happening that affects the accounting equation, but cannot be measured.

59) Owner's equity is increased when cash is received from customers in payment of previously recorded accounts receivable.

60) An owner's investment increases equity via net income.

61) Return on assets is often stated in ratio form as the amount of average total assets divided by revenue.

62) Return on assets is often stated in ratio form as the amount of income divided by assets invested.

63) Return on assets is useful in evaluating management, analyzing and forecasting profits, and planning activities.

64) Arrow's net income of $120 million and average total assets of $1,500 million results in a return on assets of 8%.

65) Risk is the uncertainty about the return we will earn.

66) Generally, the lower the risk, the higher the return that can be expected.

67) U.S. Government Treasury bonds provide low return and low risk to investors.

68) The four basic financial statements include the balance sheet, income statement, statement of owner's equity, and statement of cash flows.

69) An income statement reports on investing and financing activities.

70) A balance sheet covers activities over a period of time such as a month or year.

71) The income statement describes revenues earned and expenses incurred along with the resulting net income or loss over a specified period of time.

72) The statement of cash flows shows the net effect of revenues and expenses for a reporting period.

73) The income statement shows the financial position of a business on a specific date.

74) The first section of the income statement reports cash flows from operating activities.

75) The balance sheet is based on the accounting equation.

76) Investing activities involve the buying and selling of assets such as land and equipment that are held for long-term use in the business.

77) Operating activities include long-term borrowing and repaying cash from lenders, and cash investments or withdrawals by the owner.

78) The purchase of supplies appears on the statement of cash flows as an investing activity because it involves the purchase of assets.

79) The income statement reports on operating activities at a point in time.

80) The statement of cash flows identifies cash flows separated into operating, investing, and financing activities over a period of time.

81) Ending capital reported on the statement of owner's equity is calculated by adding owner investments and net losses and subtracting net income and withdrawals.

82) The cost-benefit constraint prescribes that only information with benefits of disclosure less than the costs of providing it, need be disclosed.

83) The cost-benefit constraint says that information disclosed must have benefits to the user that are greater than the costs of providing it.

84) Net income is sometimes called earnings or profit.

85) Accounting is an information and measurement system that does all of the following except:

A) Identifies business activities.

B) Records business activities.

C) Communicates business activities.

D) Eliminates the need for interpreting financial data.

E) Helps people make better decisions.

86) Technology:

A) Has replaced accounting.

B) Has not improved the clerical accuracy of accounting.

C) Reduces the time, effort and cost of recordkeeping.

D) In accounting has replaced the need for decision makers.

E) In accounting is only available to large corporations.

87) The primary objective of financial accounting is to:

A) Serve the decision-making needs of internal users.

B) Provide accounting information that serves external users.

C) Monitor consumer needs, tastes, and price concerns.

D) Provide information on both the costs and benefits of looking after products and services.

E) Know what, when, and how much product to produce.

88) The area of accounting aimed at serving the decision making needs of internal users is:

A) Financial accounting.

B) Managerial accounting.

C) External auditing.

D) SEC reporting.

E) Bookkeeping.

89) External users of accounting information include all of the following except:

A) Shareholders.

B) Customers.

C) Purchasing managers.

D) Government regulators.

E) Creditors.

90) Which of the following is not true regarding a Certified Public Accountant?

A) Must meet education and experience requirements.

B) Must pass an examination.

C) Must exhibit ethical character.

D) May also be a Certified Management Accountant.

E) Cannot hold any certificate other than a CPA.

91) Which of the following factors is not a component of the fraud triangle?

A) Opportunity

B) Pressure

C) Rationalization

D) All of the above are components of the fraud triangle.

92) Which of the following is not true regarding ethics:

A) Ethics are beliefs that distinguish right from wrong.

B) Good ethics are good business.

C) Ethics do not affect the operations or outcome of a company.

D) Are critical in accounting.

E) Ethics are accepted standards of good and bad behavior.

93) A corporation is:

A) A business legally separate from its owners.

B) Controlled by the FASB.

C) Not responsible for its own acts and own debts.

D) The same as a limited liability partnership.

E) Not subject to double taxation.

94) The group that sets international preferred accounting practices is called the: 

A) AICPA.

B) IASB.

C) CAP.

D) SEC.

E) FASB.

95) The Securities and Exchange Commission (SEC) has given the task of setting GAAP to the:

A) APB.

B) FASB.

C) AAA.

D) AICPA.

E) IASB.

96) The accounting concept that requires every business to be accounted for separately from other business entities, including its owner or owners is known as the:

A) Time-period assumption.

B) Business entity assumption.

C) Going-concern assumption.

D) Revenue recognition principle.

E) Measurement (Cost) principle.

97) The rule that requires financial statements to reflect the assumption that the business will continue operating instead of being closed or sold, unless evidence shows that it will not continue, is the:

A) Going-concern assumption.

B) Business entity assumption.

C) Objectivity principle.

D) Measurement (Cost) Principle.

E) Monetary unit assumption.

98) If a company is considering the purchase of a parcel of land that was acquired by the seller for $85,000, is offered for sale at $150,000, is assessed for tax purposes at $95,000, is considered by the purchaser as easily being worth $140,000, and is purchased for $137,000, the land should be recorded in the purchaser's books at:

A) $95,000.

B) $137,000.

C) $138,500.

D) $140,000.

E) $150,000.

99) To include the personal assets and transactions of a business's owner in the records and reports of the business would be in conflict with the:

A) Objectivity principle.

B) Monetary unit assumption.

C) Business entity assumption.

D) Going-concern assumption.

E) Revenue recognition principle.

100) The accounting principle that requires accounting information to be based on actual cost and requires assets and services to be recorded initially at the cash or cash-equivalent amount given in exchange, is the:

A) Accounting equation.

B) Measurement (Cost) principle.

C) Going-concern assumption.

D) Realization principle.

E) Business entity assumption.

101) The rule that (1) requires revenue to be recognized when goods or services are provided to customers and (2) at the amount expected to be received from the customer is called the:

A) Going-concern assumption.

B) Measurement (Cost) principle.

C) Revenue recognition principle.

D) Objectivity principle.

E) Business entity assumption.

102) The question of when revenue should be recognized on the income statement according to GAAP is addressed by the:

A) Revenue recognition principle.

B) Going-concern assumption.

C) Objectivity principle.

D) Business entity assumption.

E) Measurement (Cost) principle.

103) The Superior Company acquired a building for $500,000. The building was appraised at a value of $575,000. The seller had paid $300,000 for the building 6 years ago. Which accounting principle would require Superior to record the building on its records at $500,000?

A) Monetary unit assumption.

B) Going-concern assumption.

C) Measurement (Cost) principle.

D) Business entity assumption.

E) Revenue recognition principle.

104) On December 15 of the current year, Conrad Accounting Services signed a $40,000 contract with a client to provide bookkeeping services to the client in the following year. Which accounting principle would require Conrad Accounting Services to record the bookkeeping revenue in the following year and not the year the cash was received?

A) Monetary unit assumption.

B) Going-concern assumption.

C) Measurement (Cost) principle.

D) Business entity assumption.

E) Revenue recognition principle.

105) Marsha Bogswell is the owner of Bogswell Legal Services. Which accounting principle requires Marsha to keep her personal financial information separate from the financial information of Bogswell Legal Services?

A) Monetary unit assumption.

B) Going-concern assumption.

C) Measurement (Cost) principle.

D) Business entity assumption.

E) Expense recognition (Matching) principle.

106) A limited liability company (LLC):

A) Has owners called members.

B) Is subject to double taxation.

C) Includes a general owner with unlimited liability.

D) Is the same as a corporation.

E) Must have more than one owner.

107) A partnership:

A) Is also called a sole proprietorship.

B) Has unlimited liability for its partners.

C) Has to have a written agreement in order to be legal.

D) Is a legal organization separate from its owners.

E) Has owners called shareholders.

108) Which of the following accounting principles require that all goods and services purchased be recorded at actual cost?

A) Going-concern assumption.

B) Expense recognition (Matching) principle..

C) Measurement (Cost) principle.

D) Business entity assumption.

E) Consideration assumption.

109) Which of the following accounting principles prescribes that a company record its expenses incurred to generate the revenue reported?

A) Going-concern assumption.

B) Expense recognition (Matching) principle.

C) Measurement (Cost) principle.

D) Business entity assumption.

E) Consideration assumption.

110) Revenue is properly recognized:

A) When the customer makes an order.

B) Only if the transaction creates an account receivable.

C) At the end of the accounting period.

D) When goods or services are provided to customers and at the amount expected to be received from the customer.

E) When cash from a sale is received.

111) All of the following are external users of accounting information except:

A) Lenders.

B) Shareholders.

C) Board of directors.

D) Chief executive officer (CEO).

E) Customers.

112) All of the following are external users of accounting information except:

A) customers.

B) Internal Revenue Service.

C) human resource managers.

D) shareholders.

E) lenders.

113) If a company uses $1,300 of its cash to purchase supplies, the effect on the accounting equation would be:

A) Assets increase $1,300 and liabilities decrease $1,300.

B) One asset increases $1,300 and another asset decreases $1,300, causing no effect.

C) Assets decrease $1,300 and equity decreases $1,300.

D) Assets decrease $1,300 and equity increases $1,300.

E) Assets increase $1,300 and liabilities increase $1,300.

114) If a company receives $12,000 from the owner to establish a proprietorship, the effect on the accounting equation would be:

A) Assets decrease $12,000 and equity decreases $12,000.

B) Assets increase $12,000 and liabilities decrease $12,000.

C) Assets increase $12,000 and liabilities increase $12,000.

D) Liabilities increase $12,000 and equity decreases $12,000.

E) Assets increase $12,000 and equity increases $12,000.

115) If a company purchases equipment costing $4,500 on credit, the effect on the accounting equation would be:

A) Assets increase $4,500 and liabilities decrease $4,500.

B) Equity decreases $4,500 and liabilities increase $4,500.

C) One asset increases $4,500 and another asset decreases $4,500.

D) Assets increase $4,500 and liabilities increase $4,500.

E) Equity increases $4,500 and liabilities decrease $4,500.

116) An example of a financing activity is:

A) Buying office supplies.

B) Obtaining a long-term loan.

C) Buying office equipment.

D) Selling inventory.

E) Buying land.

117) An example of an operating activity is:

A) Paying wages.

B) Purchasing office equipment.

C) Borrowing money from a bank.

D) Selling stock.

E) Paying off a loan.

118) Operating activities:

A) Are the means organizations use to pay for resources like land, buildings and equipment.

B) Involve using resources to research, develop, purchase, produce, distribute and market products and services.

C) Involve acquiring and disposing of resources that a business uses to acquire and sell its products or services.

D) Are also called asset management.

E) Are also called strategic management.

119) An example of an investing activity is:

A) Paying wages of employees.

B) Withdrawals by the owner.

C) Purchase of land.

D) Selling inventory.

E) Contribution from owner.

120) Net Income:

A) Decreases equity.

B) Represents the amount of assets owners put into a business.

C) Equals assets minus liabilities.

D) Is the excess of revenues over expenses.

E) Represents owners' claims against assets.

121) If equity is $300,000 and liabilities are $192,000, then assets equal:

A) $108,000.

B) $192,000.

C) $300,000.

D) $492,000.

E) $792,000.

122) If assets are $300,000 and liabilities are $192,000, then equity equals:

A) $108,000.

B) $192,000.

C) $300,000.

D) $492,000.

E) $792,000.

123) Resources a company owns or controls that are expected to yield future benefits are:

A) Assets.

B) Revenues.

C) Liabilities.

D) Owner's Equity.

E) Expenses.

124) Increases in equity from a company's sales of products or services are:

A) Assets.

B) Revenues.

C) Liabilities.

D) Owner's Equity.

E) Expenses.

125) The difference between a company's assets and its liabilities, or net assets is:

A) Net income.

B) Expense.

C) Equity.

D) Revenue.

E) Net loss.

126) Creditors' claims on the assets of a company are called:

A) Net losses.

B) Expenses.

C) Revenues.

D) Equity.

E) Liabilities.

127) Decreases in equity from costs of providing products or services to customers are called:

A) Liabilities.

B) Equity.

C) Withdrawals.

D) Expenses.

E) Owner's Investment.

128) The description of the relation between a company's assets, liabilities, and equity, which is expressed as Assets = Liabilities + Equity, is known as the: 

A) Income statement equation.

B) Accounting equation.

C) Business equation.

D) Return on equity ratio.

E) Net income.

129) 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 increase in equity from a company's sales of products and services.

E) The costs of assets or services used.

130) 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.

131) Another name for equity is:

A) Net income.

B) Expenses.

C) Net assets.

D) Revenue.

E) Net loss.

132) When expenses exceed revenues, the result is called:

A) Net assets.

B) Negative equity.

C) Net loss.

D) Net income.

E) A liability.

133) A resource that the owner takes from the company is called a(n):

A) Liability.

B) Withdrawal.

C) Expense.

D) Contribution.

E) Investment.

134) Distributions of cash or other resources by a business to its owners are called:

A) Withdrawals.

B) Expenses.

C) Assets.

D) Retained earnings.

E) Net Income.

135) The assets of a company total $700,000; the liabilities, $200,000. What is the amount of equity?

A) $900,000.

B) $700,000.

C) $500,000.

D) $200,000.

E) It is impossible to determine unless the amount of the owners' investment is known.

136) On May 31 of the current year, the assets and liabilities of Riser, Inc. 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 May 31 of the current year?

A) $49,700.

B) $13,050.

C) $20,500.

D) $31,100.

E) $40,400.

137) On August 31 of the current year, the assets and liabilities of Gladstone, Inc. are as follows: Cash $30,000; Supplies, $600; Equipment, $10,000; Accounts Payable, $8,500. What is the amount of owner's equity as of August 31 of the current year?

A) $49,100.

B) $32,100.

C) $12,100.

D) $10,900.

E) $30,900.

138) Assets created by selling goods and services on credit are:

A) Accounts payable.

B) Accounts receivable.

C) Liabilities.

D) Expenses.

E) Equity.

139) An exchange of value between two entities that yields a change in the accounting equation is called:

A) The accounting equation.

B) Recordkeeping or bookkeeping.

C) An external transaction.

D) An asset.

E) Net Income.

140) Saddleback 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; equity, $30,000 increase.

B) Assets, $30,000 decrease; liabilities, $30,000 decrease.

C) Assets, $30,000 decrease; liabilities, $30,000 increase.

D) Liabilities, $30,000 decrease; equity, $30,000 increase.

E) Assets, $30,000 decrease; equity $30,000 decrease.

141) If Houston Company billed a client for $10,000 of consulting work completed, the accounts receivable asset increases by $10,000 and:

A) Accounts payable decreases $10,000.

B) Accounts payable increases $10,000.

C) Cash increases $10,000.

D) Revenue increases $10,000.

E) Revenue decreases $10,000

142) Alpha 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.

143) Contessa 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 total equity are unchanged.

D) Both total assets and equity are unchanged and liabilities increase.

E) Total assets increase and equity decreases.

144) If the liabilities of a business increased $75,000 during a period of time and the owner's equity in the business decreased $30,000 during the same period, the assets of the business must have:

A) Decreased $105,000.

B) Decreased $45,000.

C) Increased $30,000.

D) Increased $45,000.

E) Increased $105,000.

145) 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.

146) If the liabilities of a company increased $74,000 during a period of time and equity in the company decreased $19,000 during the same period, what was the effect on the assets?

A) Assets would have increased $55,000.

B) Assets would have decreased $55,000.

C) Assets would have increased $93,000.

D) Assets would have decreased $93,000.

E) None of the above.

147) If a company paid $38,000 of its accounts payable in cash, what was the effect on the accounting equation?

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 remains unchanged.

D) There would be no effect on the accounts because the accounts are affected by the same amount.

E) Assets would increase $38,000 and liabilities would decrease $38,000.

148) 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.

149) Rushing had net income of $240 million and average total assets of $2,000 million. Its return on assets is:

A) 12%.

B) 120%.

C) 80%.

D) 8%.

E) 800%.

150) Cage Company had net income of $160 million and average total assets of $2,000 million. Its return on assets (ROA) is:

A) 80%.

B) 0.8%.

C) 8%.

D) 12.5%.

E) 125%.

151) Speedy 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%.

152) Chou 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%.

153) U. S. treasury 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.

154) Risk is:

A) Net income divided by average total assets.

B) The reward for investment.

C) The uncertainty about the return we will earn.

D) Unrelated to return expected.

E) Derived from the idea of getting something back from an investment.

155) The statement of cash flows reports all of the following except:

A) Cash flows from operating activities.

B) Cash flows from investing activities.

C) Cash flows from financing activities.

D) The net increase or decrease in assets for the period reported.

E) The net increase or decrease in cash for the period reported.

156) The basic financial statements include all of the following except:

A) Balance Sheet.

B) Income Statement.

C) Statement of Owner's Equity.

D) Statement of Cash Flows.

E) Statement of Changes in Assets.

157) 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.

158) The financial statement that reports whether the business earned a profit and also lists the revenues and expenses is called the:

A) Balance sheet.

B) Statement of owner's equity.

C) Statement of cash flows.

D) Income statement.

E) Statement of financial position.

159) 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.

160) 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.

161) The financial statement that identifies a company's cash receipts and cash payments over a period of time 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.

162) 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.

163) Cash investments by owners are listed on which of the following statements?

A) Statement of owner's equity and income statement.

B) Income statement only.

C) Statement of owner's equity only.

D) Statement of cash flows only.

E) Statement of owner's equity and statement of cash flows.

164) 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.

165) 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.

166) 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.

167) Use the following information for Meeker Corp. to determine the amount of equity to report.

A) $390,000.

B) $140,000.

C) $20,000.

D) $530,000.

E) $270,000.

168) Determine the net income of a company for which the following information is available for the month of July.

A) $190,000.

B) $210,000.

C) $230,000.

D) $400,000.

E) $610,000.

169) Determine the net income of a company for which the following information is available for the month of September.

A) $263,800.

B) $432,200.

C) $171,000.

D) $167,800.

E) $252,000.

170) 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.

171) A company borrows $125,000 from the Northern 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.

172) Zippy had cash inflows from operations of $60,500; cash outflows from investing activities of $47,000; and cash inflows from financing of $25,000. The net change in cash was:

A) $38,500 increase.

B) $38,500 decrease.

C) $132,500 decrease.

D) $132,000 increase.

E) $11,500 decrease.

173) Zapper 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.

174) Cragmont has beginning equity of $277,000, net income of $63,000, withdrawals of $25,000 and no additional investments by owners during the period. Its ending equity is:

A) $365,000.

B) $239,000.

C) $189,000.

D) $315,000.

E) $277,000.

175) Rent expense appears on which of the following statements?

A) Balance sheet.

B) Income statement.

C) Statement of owner's equity.

D) Income statement and balance sheet.

E) Statement of cash flows and balance sheet.

176) 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.

177) A company reported total equity of $145,000 at the beginning of the year. The company reported $210,000 in revenues and $165,000 in expenses for the year. Liabilities at the end of the year totaled $92,000. What are the total assets of the company at the end of the year?

A) $45,000.

B) $92,000.

C) $98,000.

D) $210,000.

E) $282,000.

178) Flitter reported net income of $17,500 for the past year. At the beginning of the year the company had $200,000 in assets and $50,000 in liabilities. By the end of the year, assets had increased to $300,000 and liabilities were $75,000. Calculate its return on assets:

A) 8.8%.

B) 7.0%.

C) 5.8%.

D) 35.0%.

E) 23.3%.

179) Dawson Electronic Services had revenues of $80,000 and expenses of $50,000 for the year. Its assets at the beginning of the year were $400,000. At the end of the year assets were worth $450,000. Calculate its return on assets.

A) 7.1%.

B) 7.5%.

C) 6.7%.

D) 20.0%.

E) 18.8%.

180) Rico's Taqueria had cash inflows from operating activities of $27,000; cash outflows from investing activities of $22,000, and cash outflows from financing activities of $12,000. Calculate the net increase or decrease in cash.

A) $61,000 increase.

B) $37,000 increase.

C) $7,000 decrease.

D) $7,000 increase.

E) $34,000 decrease.

181) Charlie's Chocolates' owner made investments of $50,000 and withdrawals of $20,000. The company has revenues of $83,000 and expenses of $64,000. Calculate its net income. 

A) $30,000.

B) $83,000.

C) $64,000.

D) $19,000.

E) $49,000.

182) Savvy Sightseeing had beginning equity of $72,000; revenues of $90,000, expenses of $65,000, and withdrawals by owners of $9,000. Calculate the ending equity.

A) $88,000.

B) $25,000.

C) $97,000.

D) $38,000.

E) $47,000.

183) Doc's Ribhouse had beginning equity of $52,000; net income of $35,000, and withdrawals by the owner of $12,000. The owner made no investments during the year. Calculate the ending equity.

A) $(5,000).

B) $29,000.

C) $5,000.

D) $99,000.

E) $75,000.

184) A company's balance sheet shows: cash $24,000, accounts receivable $30,000, equipment $50,000, and equity $72,000. What is the amount of liabilities?

A) $104,000.

B) $76,000.

C) $32,000.

D) $68,000.

E) $176,000.

185) If a company has excess space in its building that it rents to another company for $700, what is the effect on the accounting equation during the first month?

A) Assets would decrease $700 and liabilities would decrease $700.

B) Assets would decrease $700 and equity would increase $700.

C) Assets would increase $700 and equity would decrease $700.

D) Assets would increase $700 and equity would increase $700.

E) Liabilities would decrease $700 and equity would increase $700.

186) All of the following are classified as assets except:

A) Accounts Receivable.

B) Supplies.

C) Equipment.

D) Accounts Payable.

E) Land.

187) Which of the following accounts is not included in the calculation of a company's ending owner's equity?

A) Revenues.

B) Expenses.

C) Withdrawals.

D) Owner investments.

E) Cash.

188) All of the following are classified as liabilities except:

A) Accounts Receivable.

B) Notes Payable.

C) Wages Payable.

D) Accounts Payable.

E) Taxes Payable.

189) Billington Corp borrows $80,000 cash from Second National Bank. How does this transaction affect the accounting equation for Billington?

A) Assets would decrease $80,000 and liabilities would decrease $80,000.

B) Assets would decrease $80,000 and equity would increase $80,000.

C) Assets would increase $80,000 and equity would decrease $80,000.

D) Assets would increase $80,000 and liabilities would increase $80,000.

E) Liabilities would decrease $80,000 and equity would increase $80,000.

190) If the assets of a company increase by $55,000 during the year and its liabilities increase by $25,000 during the same year, then the change in equity of the company during the year must have been:

A) An increase of $80,000.

B) A decrease of $80,000.

C) An increase of $30,000.

D) A decrease of $30,000.

E) An increase of $25,000.

191) All of the following are classified as assets except:

A) Accounts Payable.

B) Accounts Receivable.

C) Cash.

D) Supplies.

E) Prepaid Insurance.

192) Grandmark Printing pays $2,000 rent to the landlord of the building where its facilities are located. How does this transaction affect the accounting equation for Grandmark?

A) Assets would decrease $2,000 and liabilities would decrease $2,000.

B) Assets would decrease $2,000 and equity would decrease $2,000.

C) Assets would increase $2,000 and equity would increase $2,000.

D) Assets would increase $2,000 and liabilities would increase $2,000.

E) Liabilities would decrease $2,000 and equity would increase $2,000.

193) Atkins Company collected $1,750 as payment for the amount owed by a customer from services provided the prior month on credit. How does this transaction affect the accounting equation for Atkins?

A) Assets would decrease $1,750 and liabilities would decrease $1,750.

B) One asset would increase $1,750 and a different asset would decrease $1,750, causing no net change in the accounting equation.

C) Assets would increase $1,750 and equity would increase $1,750.

D) Assets would increase $1,750 and liabilities would increase $1,750.

E) Liabilities would decrease $1,750 and equity would increase $1,750.

194) The accounting equation for Ying Company shows a decrease in its assets and a decrease in its equity. Which of the following transactions could have caused that effect?

A) Cash was received from providing services to a customer.

B) The company paid an amount due on credit.

C) Equipment was purchased for cash.

D) A utility bill was received for the current month, to be paid in the following month.

E) Advertising expense for the month was paid in cash.

195) The accounting equation for Long Company shows an increase in its assets and an increase in its liabilities. Which of the following transactions could have caused that effect?

A) Cash was received from providing services to a customer.

B) Cash was received as an owner investment.

C) Equipment was purchased on credit.

D) Supplies were purchased for cash.

E) Advertising expense for the month was paid in cash.

196) The expense recognition principle, also called the matching principle:

A) Prescribes that accounting information is based on actual cost.

B) Provides guidance on when a company must recognize revenue.

C) Prescribes that a company report the details behind financial statements that would impact users' decisions.

D) Prescribes that a company record the expenses it incurred to generate the revenue reported.

E) Means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.

197) The measurement principle, also called the cost principle:

A) Prescribes that accounting information is based on actual cost.

B) Provides guidance on when a company must recognize revenue.

C) Prescribes that a company report the details behind financial statements that would impact users' decisions.

D) Prescribes that a company record the expenses it incurred to generate the revenue reported.

E) Means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.

198) The revenue recognition principle: 

A) Prescribes that accounting information is based on actual cost.

B) Provides guidance on when a company must recognize revenue.

C) Prescribes that a company report the details behind financial statements that would impact users' decisions.

D) Prescribes that a company record the expenses it incurred to generate the revenue reported.

E) Means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.

199) The full disclosure principle:

A) Prescribes that accounting information is based on actual cost.

B) Provides guidance on when a company must recognize revenue.

C) Prescribes that a company report the details behind financial statements that would impact users' decisions.

D) Prescribes that a company record the expenses it incurred to generate the revenue reported.

E) Means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.

200) The materiality constraint:

A) Prescribes that accounting information is based on actual cost.

B) Provides guidance on when a company must recognize revenue.

C) Prescribes that only information that would influence the decisions of a reasonable person need be disclosed.

D) Prescribes that a company record the expenses it incurred to generate the revenue reported.

E) Means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.

201) The going concern assumption:

A) Means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.

B) Means that we can express transactions and events in monetary, or money, units.

C) Presumes that the life of a company can be divided into time periods, such as months and years, and that useful reports can be prepared for those periods.

D) Means that a business is accounted for separately from other business entities, including its owner.

E) Prescribes that a company record the expenses it incurred to generate the revenue reported.

202) The monetary unit assumption:

A) Means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.

B) Means that we can express transactions and events in monetary, or money, units.

C) Presumes that the life of a company can be divided into time periods, such as months and years, and that useful reports can be prepared for those periods.

D) Means that a business is accounted for separately from other business entities, including its owner.

E) Prescribes that a company record the expenses it incurred to generate the revenue reported.

203) The time period assumption:

A) Means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.

B) Means that we can express transactions and events in monetary, or money, units.

C) Presumes that the life of a company can be divided into time periods, such as months and years, and that useful reports can be prepared for those periods.

D)  Means that a business is accounted for separately from other business entities, including its owner.

E) Prescribes that a company record the expenses it incurred to generate the revenue reported.

204) The business entity assumption:

A) Means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.

B) Means that we can express transactions and events in monetary, or money, units.

C) Presumes that the life of a company can be divided into time periods, such as months and years, and that useful reports can be prepared for those periods.

D) Means that a business is accounted for separately from other business entities, including its owner.

E) Prescribes that a company record the expenses it incurred to generate the revenue reported.

205) Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (or Dodd-Frank). Which of the following are two of the important provisions of Dodd-Frank?

A) Clawback and dividend mandate.

B) Clawback and whistleblower.

C) Whistleblower and dividend mandate.

D) Dividend mandate and shareholder loss limitation.

E) Whistleblower and shareholder loss limitation.

206) Clawback provisions and whistleblower provisions are components of which legislation?

A) Sarbanes-Oxley Act.

B) Dodd-Frank Act.

C) Glass-Steagall Act.

D) Securities Exchange Act.

E) Gramm-Leach-Bliley Act.

207) Which of the following accounts is not included in the asset section of the balance sheet?

A) Cash.

B) Accounts receivable.

C) Supplies.

D) Land.

E) Services revenue.

208) Which of the following accounts is not included in the asset section of the balance sheet?

A) Buildings.

B) Wages expense.

C) Supplies.

D) Land.

E) Furniture.

209) Which of the following accounts is not included in the liability section of the balance sheet?

A) Accounts receivable.

B) Wages payable.

C) Accounts payable.

D) Notes payable.

E) Taxes payable.

210) Which of the following accounts is not included in the calculation of net income?

A) Services revenue.

B) Wages expense.

C) Rent expense.

D) Cash.

E) Rent revenue.

211) Which of the following combinations results in a net loss reported on the income statement?

A) Total revenues of $80,000 and total expenses of $74,000.

B) Total revenues of $70,000 and total expenses of $74,000.

C) Total revenues of $60,000 and total expenses of $52,000.

D) Total revenues of $20,000 and total expenses of $16,000.

E) Total revenues of $40,000 and total expenses of $31,000.

212) Which of the following combinations results does not result in the same amount of net income reported on the income statement?

A) Total revenues of $80,000 and total expenses of $60,000.

B) Total revenues of $170,000 and total expenses of $150,000.

C) Total revenues of $60,000 and total expenses of $40,000.

D) Total revenues of $70,000 and total expenses of $60,000.

E) Total revenues of $40,000 and total expenses of $20,000.

213) Match the following terms with the appropriate definition.

a. Financial accounting

b. Ethics

c. Recordkeeping

d. Internal users

e. Accounting

f. Certified Public Accountant (CPA)

g. Fraud triangle

h. Managerial accountingi. External users

____ 1. An information and measurement system that identifies, records and communicates relevant reliable and comparable information about an organization's business activities.

____ 2. The part of accounting that involves recording transactions and events, either electronically or manually.

____ 3. Persons using accounting information who are not directly involved in running the organization.

____ 4. Persons using accounting information who are directly involved in managing and operating the organization.

____ 5. The area of accounting that serves the decision-making needs of internal users.

____ 6. The area of accounting aimed at serving external users by providing them with general-purpose financial statements.

____ 7. Accounting specialists that have met educational and experience requirements, passed an examination and exhibit ethical characteristics to achieve a professional certification.

____ 8. Beliefs that distinguish right from wrong, considered accepted standards of good and bad behavior.

____ 9. A model that asserts the factors that must exist for a person to commit fraud.

214) Match each of the following terms with the most appropriate definition.

a. Return on assets

b. Assets

c. Expenses

d. Risk

e. Liabilities

f. Owner withdrawals

g. Accounting equation

h. Owner capital

____ 1. The uncertainty about the return to be earned.

____ 2. Resources such as cash that an owner puts into the company.

____ 3. A financial ratio stated as income divided by assets invested.

____ 4. Creditor's claims on a company's assets.

____ 5. Decreases in equity from costs of providing products or services to customers.

____ 6. Resources such as cash that an owner takes from the company for personal use.

____ 7.Resources a company owns or controls that are expected to yield future benefit.

____ 8. Expresses the relation of assets, liabilities and equity in a company, comparing the resources the company owns to the sources of funds to acquire the resources.

215) The following is a list of selected users of accounting information. Match the appropriate user to the following decisions they make with accounting information.

a. Suppliers

b. Lenders

c. Shareholders

d. Purchasing Managers

e. Regulators

____ 1. Know what, when, and how much to purchase.

____ 2. Judge the soundness of a customer before making sales on credit.

____ 3. Assess whether a company has paid all required taxes and complied with securities rules.

____ 4. Assess whether an organization is likely to repay its loans with interest.

____ 5. Decide whether to buy, hold, or sell a company's stock.

216) 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.

____ 1. Generally accepted accounting principles

____ 2. Time period assumption

____ 3. Statement of owner's equity

____ 4. Balance sheet

____ 5. Income statement

____ 6. Measurement (Cost) principle

____ 7. Securities and Exchange Commission

____ 8. IASB

____ 9. Full disclosure principle

____10. Statement of cash flows

a. Prescribes that assets and services to be recorded initially on a cash or equal-to-cash basis.

b. Describes a company's revenues and expenses and computes net income or loss over a period of time.

c. An independent group consisting of individuals from many countries that identify preferred accounting practices.

d. Presumes that the life of a company can be divided into periods for reporting purposes.

e. The concepts and rules that govern financial accounting.

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. A report that identifies cash receipts and cash payments over a period of time.

h. Prescribes that a company report the details behind financial statements that would impact user decisions.

i. The governmental agency that has the legal authority to establish accounting rules.

j. A report that describes a company's financial position at a point in time.

217) 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.

____ 1. Statement of cash flows

____ 2. Events

____ 3. Monetary unit principle

____ 4. Business entity principle

____ 5. Revenue recognition principle

____ 6. Accounting equation

____ 7. Income statement

____ 8. Expenses

____ 9. Liabilities

a. The relation between a company's assets, liabilities, and equity.

b. Happenings, such as changes in market value, that effect the accounting equation and are reliably measured.

c. The principle that assumes transactions and events can be expressed in money units.

d. Describes a company's revenues and expenses along with the resulting net income or loss over a period of time.

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 recorded when earned through providing goods or services.

218) 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 utilities expenses.

____ 2. Withdrawal of funds by owners.

____ 3. Purchase of land.

____ 4. Sale of used equipment.

____ 5. Borrowed money from a bank on a long-term note.

____ 6. Paid employee wages.

____ 7. Received investment from owner.

____ 8. Paid an amount due on a long-term bank loan.

219) 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. Assets.

_____2. Withdrawals.

_____3. Revenues.

_____4. Cash from investing activities.

_____5. Expenses.

_____6. Liabilities.

_____7. Cash from operating activities.

_____8. Cash from financing activities.

220) Classify the following activities according to the appropriate section of the statement of cash flows.

a. Operating activity

b. Investing activity

c. Financing activity

____ 1. Cash received from a one-time sale of used office equipment.

____ 2. Cash paid for withdrawals by owners.

____ 3. Cash received from customers.

____ 4. Cash received from owner contributions.

____ 5. Cash paid for utilities.

____ 6. Cash paid for a delivery van to be used in the business.

221) Explain the role of accounting in the information age.

222) What is the balance sheet? What is its purpose?

223) Identify the users and uses of accounting information.

224) Identify several opportunities in accounting and distinguish between private accounting and public accounting.

225) Explain why ethics are an integral part of accounting.

226) Describe the two important guidelines for revenue recognition.

227) Identify the four basic forms of business organizations and their key attributes.

228) Identify and describe the two main groups involved in establishing generally accepted accounting principles.

229) How does the going-concern principle affect reporting asset values of a business?

230) Describe the income statement and the relation between revenues, expenses, and net income or loss.

231) Explain the accounting equation and define its terms.

232) What distinguishes liabilities from equity?

233) What is the purpose of return on assets as an analytical tool?

234) Define risk and return and discuss the relation between them.

235) Describe the three types of activities reported on the statement of cash flows.

236) Identify and describe the four basic financial statements:

237) The characteristics below apply to at least one of the forms of business organization.

a. Is a separate legal entity.

b. Is allowed to be owned by one person only.

c. Owner or owners are personally liable for debts of the business.

d. Is a separately taxable entity.

e. Is a business entity.

f. May have a contract specifying the division of profits among the owners.

g. Has an unlimited life

Use the following format to indicate (with a "yes" or "no") whether or not a characteristic applies to each type of business organization.

238) A parcel of land is offered for sale at $600,000, is assessed for tax purposes at $500,000, is recognized by its purchasers as easily being worth $575,000, and is sold for $570,000. At what amount should the land be recorded in the purchaser's books? What accounting principle supports your answer?

239) You are reviewing the accounting records of Buddy's Foreign Automotive, owned by Bruce Jones. You have uncovered the following situations. List the appropriate accounting principle related to each independent scenario and suggest a correct action for each.

1. In August, a check for $500 was written to Community Sports. This amount represents soccer camp for his daughter Cassie.

2. Bruce plans a Going Out of Business Sale for June, since he will be closing the business for a month-long vacation in July. He plans to reopen August 1 and will continue operating Buddy's Foreign Automotive indefinitely.

3. Buddy received a shipment of tools from Ontario, Canada. The invoice was stated in Canadian dollars.

4. Sandy Lane paid $1,500 for a major repair services. The amount was recorded as revenue. The parts for the repair must be ordered from overseas and the service won't be complete until the following month.

240) At the beginning of the year, a company had $120,000 worth of liabilities. During the year, assets increased by $160,000 and at year-end they equaled $360,000. Liabilities decreased $20,000 during the year. Calculate the beginning and ending values of equity.

241) At the beginning of the period, a company had $350,000 worth of assets, $110,000 worth of liabilities, and $240,000 worth of equity. Assume the only change during the period was a $30,000 purchase of equipment by issuing a note payable. Show the accounting equation with the appropriate amounts at the end of the period.

242) The accounts of Odie Company with the increases or decreases that occurred during the past year are as follows:

Account Increase Decrease

Cash $25,000

Accounts receivable $(5,000)

Accounts payable (11,000)

Notes payable 16,000

Except for net income, an investment of $3,000 by the owner, and a withdrawal of $11,000 by the owner, no other items affected owner's equity. Using the balance sheet equation, compute net income for the past year.

243) The accounts of Mason Company at the end of the past year report the following amounts:

Accounts Amount

Owner Withdrawals, G. Mason……. $15,500

Revenues…………………………… $97,000

Expenses……………………………. $43,800

Owner investments………………..... 2,000

If the beginning equity for the year was $173,000, calculate the ending equity for Mason Company.

244) Cornelia's Closet has the following account balances for the dates given:

October 1 October 31

Cash $40,000 60,000

Accounts Receivable 40,000 38,000

Accounts payable 6,000 ?

Also, its net income, for October 1 through October 31 was $20,000 and there were no investments or withdrawals by the owner. Determine the equity at both October 1 and October 31.

245) If the liabilities of a company increased $92,000 during a period of time and equity in the business decreased $30,000 during the same period, did the assets of the company increase or decrease? By what amount?

246) Soo Lin began an Internet Consulting practice and completed these transactions during April of the current year:

Show the effects of the above transactions on the accounting equation of Soo Lin, Consultant. Use the following format for your answers. The first item is shown as an example.

Increase = I Decrease = D No effect = N

247) For each of the following transactions, identify the effects as reflected in the accounting equation. Use "+" to indicate an increase and "-" to indicate a decrease. Use "A", "L", and "E" to indicate assets, liabilities, and equity, respectively. Part A has been completed as an example.

248) The following schedule reflects shows the first month's transactions of the Green Construction Company, owned by Jennifer Green:

249) The accountant of Action Adventure Games prepared a balance sheet after every 10 day period. The only resources invested by the owner were at the start of the company on June 1. During June, the first month of operation, the following balance sheets were prepared:

Required: Describe the nature of each of the four transactions that took place between the balance sheet dates shown. Assume only one transaction affected each account.

June 10 _______________________________________________

20 _______________________________________________

30 _______________________________________________

250) Identify the risk and the return in each of the following examples.

a. Investing $500 in a certificate of deposit at 4.5% interest.

b. Placing a $100 bet on an NBA game.

c. Investing $10,000 in Microsoft stock.

d. Borrowing $20,000 in student loans.

251) Prepare an April 30 balance sheet in proper form for Two Rivers Vending Service from the following alphabetical list of the accounts at April 30:

252) Prepare a December 31 balance sheet in proper form for Smokey River Supplies from the following list of the accounts:

253) Prepare a December 31 balance sheet in proper form for Cane Property Management using the following accounts and amounts:

254) From the information given below, prepare a November income statement, a November statement of owner's equity, and a November 30 balance sheet. On November 1 of the current year, Victoria Garza began Garza Décor with an initial investment of $50,000 cash. On November 30, her records showed the following (alphabetically arranged) items and amounts.

255) Data for Kennedy Realty are as follows:

The owner, Finn Kennedy, withdrew a total of $30,000 for personal use during the year. Using the above data, prepare Kennedy Realty's Statement of Owner's Equity for the year ended December 31.

256) Jet Styling has the following beginning cash balance and cash transactions for the month of January. Using this information prepare a statement of cash flows.

257) The records of Roadmaster Auto Rentals show the following information as of December 31. The owner, Rob Fletcher withdrew $52,000 during the year for personal expenses. Prepare a December income statement, a December statement of owner's equity, and a December 30 balance sheet.

258) Verity Siding Company, owned by S. Verity, began operations in May and completed the following transactions during that first month of operations. Show the effects of the transactions on the accounts of the accounting equation by recording increases and decreases in the appropriate columns in the table below. Do not determine new account balances after each transaction. Determine the final total for each account and verify that the equation is in balance.

259) ________ is an information and measurement system that identifies, records and communicates relevant, reliable and comparable information about an organization's economic activities.

260) A ________ is a business that is owned by only one person.

261) ________ users of accounting information are not directly involved in running the organization.

262) ________ is the area of accounting aimed at serving external users by providing them with general-purpose financial statements.

263) Congress passed the ________ to help curb financial abuses at companies that issue their stock to the public.

264) ________ are beliefs that separate right from wrong and are considered accepted standards of good and bad behavior.

265) The assumption that requires that a business be accounted for separately from its owners is the ________ assumption.

266) The ________ assumption assumes that a business will continue operating indefinitely instead of being closed or sold.

267) The ________ assumption states that transactions and events are expressed in money units.

268) In accounting, the rule that requires that assets, services, and liabilities be recorded initially at the cash or cash-equivalent value of what was given up or of the item received is called the ________.

269) A disadvantage of a sole proprietorship is the fact that the owner has ________.

270) There are three major types of business activities. ________ activities are the means organizations use to pay for resources such as land, building, and equipment to carry out plans.

271) There are three major types of business activities. ________ activities involve the acquisition and disposal of resources that an organization uses to acquire and sell its products or services.

272) There are three major types of business activities. ________ activities involve using resources to research, develop, purchase, produce, distribute, and market products and services and receiving amounts from selling products and services.

273) Resources such as cash removed from the business by the business owner for personal use are called ________.

274) ________ are the increases in equity from a company's sales of products and services to customers.

275) A common characteristic of ________ is their ability to yield expected future benefits to a business.

276) Creditors' claims on assets that reflect company obligations to provide assets, products, or services to others are called ________.

277) The owner's claim on assets, also known as net assets, is called ________.

278) The accounting equation is ________.

279) The term ________ refers to a liability that promises a future outflow of resources.

280) Using the accounting equation, equity is equal to ________.

281) ________, which is one part of accounting, is the recording of transactions and events, either manually or electronically.

282) ________ is net income divided by average total assets.

283) Risk is the ________ about the return an investor expects to earn.

284) ________ explains changes in the owner's claim on the business's assets from net income or loss, owner investments, and owner withdrawals over a period of time.

285) The ________ describes a company's revenues and expenses along with the resulting net income or net loss over a period of time due to earnings activities.