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Exam 1: Introduction to Accounting and Business

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Question 41

Multiple Choice

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A financial statement user would determine if a company was profitable or not during a specific period of time by reviewing the

A) income statement
B) balance sheet
C) statement of cash flows
D) statement of stockholders' equity

E) A) and B)
F) A) and D)

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Question 42

Multiple Choice

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How does the payment of rent for equipment affect the accounting equation?

A) assets increase; assets decrease
B) assets decrease; stockholders' equity decreases
C) assets decrease; liabilities increase
D) assets increase; stockholders' equity increases

E) B) and C)
F) A) and B)

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Question 43

Multiple Choice

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A fiscal year for a business

The excess of revenue over the expenses incurred in earning the revenue is called capital.

A corporation is a business that is legally separate and distinct from its owners.

The ending balance of the retained earnings account appears in

Name and describe the four primary financial statements for a corporation.

The Austin Land Company sold land for $85,000 in cash. The land was originally purchased for $65,000. At the time of the sale, $40,000 was still owed to Regions Bank. After the sale, The Austin Land Company paid off the loan. Explain the effect of the sale and the payoff of the loan on the accounting equation.

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

Receiving payments on an account receivable increases both equity and assets.

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

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.

Given the following data: (a) Compute the ratio of liabilities to stockholders' equity for each year. Round your answer to two decimal places.(b) Has the creditors' risk increased or decreased from December 31, Year 1, to December 31, Year 2?

The assets section of the balance sheet normally presents assets in

Determine the total assets at the end of the current year for Scott Industries.

Donner Company is selling a piece of land adjacent to its business premises. An appraisal reported the market value of the land to be $220,000. The Focus Company initially offered to buy the land for $177,000. The companies settled on a purchase price of $212,000. On the same day, another piece of land on the same block sold for $232,000. Under the cost principle, at what amount should the land be recorded in the accounting records of Focus Company?

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 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

Net income and net profit do not mean the same thing.

Using the following accounts and their amounts, prepare in good format a balance sheet for Bright Futures Company for the month ended August 31.

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