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Exam 1: Accounting and Business

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Question 81

Multiple Choice

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Match the following characteristics with the form of business entity that best describes it. Each may be used more than once. -Owned by two or more individuals

A) Proprietorship
B) Partnership
C) Corporation

D) A) and B)
E) None of the above

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Question 82

Multiple Choice

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Match each transaction with its effect on the accounting equation. Each letter may be used more than once. -Used up supplies that were already on hand

A) Increase assets, increase liabilities
B) Increase liabilities, decrease stockholders' equity
C) Increase assets, increase stockholders' equity
D) No effect
E) Decrease assets, decrease liabilities
F) Decrease assets, decrease stockholders' equity

G) B) and F)
H) A) and C)

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Question 83

Multiple Choice

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Match the following characteristics with the form of business entity that best describes it. Each may be used more than once. -Generates 90% of business revenues

The following are examples of external users of accounting information except

Match each transaction with its effect on the accounting equation. Each letter may be used more than once. -Borrowed money from a bank

No significant differences exist between the accounting standards issued by the FASB and the IASB.

Reports as of a specific date

Financial reports that are available for user's to use in decision making show

Match each transaction with its effect on the accounting equation. Each letter may be used more than once. -Received cash for services provided

Revenue is earned only when money is received.

The main objective for all businesses is to maximize unrealized profits.

The asset created by a business when it makes a sale on account is termed

If net income for a company was $50,000, $20,000 in cash dividends were paid and the shareholders invested $10,000 in cash, the stockholders' equity increased by $40,000.

The accountant for Scott Industries prepared the following list of account balances from the company's records for the year ended December 31. Use this information to answer the question that follows. $\begin{array}{lrlr}\text { Fees earned } & \$ 165,000 & \text { Cash } & \$ 30,000 \\\text { Accounts receivable } & 16,000 & \text { Selling expenses } & 44,000 \\\text { Equipment } & 64,000 & \text { Common stock } & 47,000 \\\text { Accounts payable } & 12,000 & \text { Interest revenue } & 3,000 \\\text { Salaries \& wages expense } & 40,000 & \text { Income taxes expense } & 18,000 \\\text { Income taxes payable } & 5,000 & \text { Rent expense } & 20,000\end{array}$ ​ -Determine the total assets at the end of the current year for Scott Industries.

Indicate whether each of the following activities would be reported on the statement of cash flows as an operating activity, an investing activity, a financing activity, or does not appear on the cash flow statement. (a) Cash paid for building (b) Cash paid to suppliers (c) Cash paid for dividends (d) Cash received from customers (e) Cash received from the sale of common stock (f) Cash received from the sale of a building (g) Borrowed cash from a bank

Match each transaction with its effect on the accounting equation. Each letter may be used more than once. -Paid part of an amount owed to a creditor

Financial reports are used by

Company G has a ratio of liabilities to stockholders' equity of 0.12 and 0.28 for Year 1 and Year 2, respectively. In contrast, Company M has a ratio of liabilities to stockholders' equity of 1.13 and 1.29 for the same period. ​ REQUIRED: Based on this information, which company's creditors are more at risk and why? Should the creditors of either company fear the risk of nonpayment?

The assets and liabilities of Thompson Computer Services at March 31, the end of the current year, and its revenue and expenses for the year are listed below. The common stock was $120,000 and the retained earnings was $60,000 at April 1, the beginning of the current year. During the year, shareholders purchased an additional $25,000 in stock. Use this information the answer the questions that follow. $\begin{array} { l r l r } \text { Accounts payable } & \$ 2,000 & \text { Miscellaneous expense } & \$ 1,030 \\\text { Accounts receivable } & 10,340 & \text { Office expense } & 1,240 \\\text { Cash } & 21,420 & \text { Supplies } & 1,670 \\\text { Fees earned } & 73,450 & \text { Wages expense } & 23,550 \\\text { Land } & 47,000 & \text { Dividends } & 16,570 \\\text { Building } & 157,630 & &\end{array}$ ​ -Prepare an income statement for the current year ended March 31.

Select the type of business that is most likely to obtain large amounts of resources by issuing stock.