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Exam 1: Introducing Accounting in Business

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Question 31

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If the assets of a business increased $15,000 during a period of time and its equity decreased $4,000 during the same period,liabilities in the business must have:

A) Increased $11,000
B) Decreased $11,000
C) Increased $19,000
D) Decreased $19,000
E) Increased $61,000

F) A) and D)
G) A) and C)

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Question 32

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The following is a list of selected users of accounting information.Match the appropriate user a through e to the following information needs.

Premises

Responses

Lenders

Judge the soundness of a customer before making sales on credit

Employees

Assessing employment opportunities

Production Managers

Measuring risk and return of loans

Suppliers

Assessing the risk and return of acquiring shares

Shareholders

Monitor costs and ensure quality

Premises

Lenders

Employees

Production Managers

Suppliers

Shareholders

Responses

Judge the soundness of a customer before making sales on credit

Assessing employment opportunities

Measuring risk and return of loans

Assessing the risk and return of acquiring shares

Monitor costs and ensure quality

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Correct Answer

Premises

Responses

Lenders

Employees

Production Managers

Suppliers

Shareholders

Premises

Lenders

Employees

Production Managers

Suppliers

Shareholders

Responses

Question 33

Multiple Choice

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

The balance sheet shows whether or not the firm achieved its primary objective of earning a profit.

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.

For each of the following transactions for a corporation,identify the effects on 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. $\begin{array} { | l | l | l | l | } \hline \text { a. } & \begin{array} { l } \text { L. Berryman invested } \$ 100,000 \text { in the } \\\text { new corporation in exchange for stock }\end{array} & + \mathrm { A } & + \mathrm { E } \\\hline \text { b. } & \begin{array} { l } \text { Land was purchased for } \$ 50,000 . \text { A } \\\text { down payment of } \$ 15,000 \text { cash was } \\\text { made and a note was signed for the } \\\text { balance. }\end{array} & & \\\hline \text { c. } & \begin{array} { l } \text { Services were rendered to customers } \\\text { for cash. }\end{array} & & \\\hline \text { d. } & \text { A building was purchased for cash. } & & \\\hline \text { e. } & \text { Supplies were purchased for cash. } & & \\\hline \text { f. } & \text { Paid the office secretary's salary. } & & \\\hline \text { g. } & \begin{array} { l } \text { The amount owed on the land from } \\\text { part (b) was paid. }\end{array} & & \\\hline\end{array}$

Fast-Forward has the following beginning cash balance and cash transactions for the month of January.Using this information prepare a statement of cash flows. $\begin{array}{|l|l|r|}\hline\text { a. } & \text { Beginning cash balance } & \$ 3,200 \\\hline \text { b. } & \text { Cash investment by stockholders } & 15,000 \\\hline \text { c. } & \text { Cash payment toward long-term loan } & 1,000 \\\hline \text { d. } & \text { Cash payment of rent } & 1,800 \\\hline \text { e. } & \text { Purchased equipment for cash } & 7,500 \\\hline \text { f. } & \text { Purchased store supplies for cash } & 1,500 \\\hline \text { g. } & \text { Cash collected from customers } & 7,750 \\\hline \text { h. } & \text { Cash dividends paid } & 2,000 \\\hline \text { i. } & \text { Cash payment of wages } & 4,000\\\hline\end{array}$

The primary objective of financial accounting is:

Every business transaction should leave the accounting equation in balance.

Which of the following statements best describes the relationship of U.S.GAAP and IFRS?

Increases in retained earnings from a company's earnings activities are:

Identify the users and uses of accounting information.

The statement of cash flows reports on cash flows separated into operating,investing and financing activities over a period of time.

Ownership of a corporation is divided into units called shares or stock.

From the information given,prepare a November 30 balance sheet. On November 1 of the current year,Lois Bell began Lois Bell,Interior Design as a corporation with an initial investment of $50,000 cash.On November 30 her records showed the following (alphabetically arranged)selected accounts and amounts: $\begin{array}{|l|r|l|r|}\hline\text { Accounts Payable } & \$ 12,000 & \text { Office furnishings } & \$ 40,000 \\\hline \text { Accounts Receivable } & 23,000 & \text { Dividends } & 6,000 \\\hline \text { Cash } & 17,200 & \text { Rent expense } & 3,600 \\\hline \text { Fees earned } & 30,000 & \text { Salaries expense } & 6,200 \\\hline \text { Notes payable } & 4,250 & \text { Telephone expense } & 250\\\hline\end{array}$

U.S.government bonds are:

A company reported total equity of $145,000 on its December 31,2010,balance sheet.The following information is available for the year ended December 31,2011: 2011 Revenues……………..$210,000 2011 Expenses……………….165,000 Liabilities,at December 31,2011…. 92,000 What are the total assets of the company at December 31,2011?

The excess of expenses over revenues for a period is:

What is the balance sheet? What is its purpose?

The financial statement that shows: beginning and ending retained earnings balances and the effects of net income (loss) and a dividend for the period is the: