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Exam 1: Accounting in Business

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Question 51

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Using the accounting equation, equity is equal to ________.

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Question 52

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The materiality constraint looks at both the importance and relative size of an amount.

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Question 53

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Understanding generally accepted accounting principles is not necessary to effectively use and interpret financial statements.

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

All of the following are classified as assets except:

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.

The three common forms of business ownership include sole proprietorship, partnership, and corporation.

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

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

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

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

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.

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

Arrow's net income of $117 million and average assets of $1,400 million results in a return on assets of 8.36%.

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

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

Identify the users and uses of accounting information.

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: ACTION ADVENTURE GAMES Balance Sheet June 10 $\begin{array}{|l|l|l|l|} \hline \text {Assets } & & \text { Equity }\\\hline \text { Cash } & \$60,000 & \text { Owner, Capital }&\$60,000\\\hline \text { Total assets} & \text {\$60,000 } & \text { Total liabilities }&\$60,000\\&& \text { and equity }\\\end{array}$ ACTION ADVENTURE GAMES Balance Sheet June 20 $\begin{array}{|l|c|l|c|}\hline \text { Cash } & \$ 48,000 & \text { Notes payable } & \$ 18,000 \\\hline \text { Land. } & 10,000 & \text { Equity } & \\\hline \text { Building } & 20,000 & \text { Owner, Capital } & 60,000 \\\hline \text { Total assest } &\$78,000& \text { Total liabilities and} & \$ 78,000 \\\hline&& \text { equity}\end{array}$ ACTION ADVENTURE GAMES Balance Sheet June 30 $\begin{array}{|l|l|l|l|}\hline \text { Assets } & & \text { Liabilities } & \\\hline \text { Cash. } & \$ 51,000 & \text { Accounts payable. } & \$ 2,000 \\\hline \text { Office supplies.. } & 2,000 & \text { Notes payable. } & 18,000 \\\hline \text { Land. } & 10,000 & \text { Equity } & \\\hline \text { Building } & 20,000 & \text { Owner, Capital} & \underline{63,000} \\\hline \text { Total assets } & \$ 83,000 &\text { Total liabilities and } & \$ 83,000\\&&\text { equity } \\\hline \end{array}$ 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______________

The rule that (1) requires revenue to be recognized at the time it is earned, (2) allows the inflow of assets associated with revenue to be in a form other than cash, and (3) measures the amount of revenue as the cash plus the cash equivalent value of any noncash assets received from customers in exchange for goods or services, is called the:

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?