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Exam 1: Accounting in Business

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Question 51

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

A) True
B) False

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Question 52

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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.

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1. Business entity assumption. Buddy sho...

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Question 53

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The International Accounting Standards Board (IASB)is the government group that establishes reporting requirements for companies that issue stock to the public.

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:

The accounting equation can be restated as: Assets - Equity = Liabilities.

Net income occurs when revenues exceed expenses.

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

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

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

The Sarbanes-Oxley Act (SOX)does not require public companies to apply both accounting oversight and stringent internal controls.

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:

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

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

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:

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.

Match each of the following items with the financial statement in which each item would most likely appear. An item may appear on more than one statement.

The monetary unit assumption means that all companies doing business in the United States must express transactions and events in U.S. dollars.

General accounting principles stem from long-used accounting practices.

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

The International Accounting Standards Board (IASB) :