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Exam 1: Accounting in Business

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Question 111

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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.

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1. D; 2. H...

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Question 112

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Use the following information for Meeker Corp. to determine the amount of equity to report. $\begin{array} { l r } \text { Cash } & \$ 70,000 \\\text { Buildings } & 125,000 \\\text { Land } & 205,000 \\\text { Liabilities } & 130,000\end{array}$

A) $530,000.
B) $140,000.
C) $20,000.
D) $270,000.
E) $390,000.

F) C) and D)
G) D) and E)

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Question 113

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Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (or Dodd-Frank) to:

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

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

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?

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

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.

Cornelia's Closet has the following account balances for the dates given: $\begin{array}{llr}&\underline{\text { October }} 1 & \underline{\text { October } 31}\\ \text { Cash.} &\$40,000&60,000\\ \text {Accounts Receivable } &40,000&38,000\\ \text {Accounts payable } &6,000&?\end{array}$ 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.

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

A partnership:

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

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

The financial statement that identifies a company's cash receipts and cash payments over a period of time is the:

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

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

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

Which of the following purposes would financial statements serve for external users?