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Exam 1: Introduction to Accounting and Business

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Question 41

Multiple Choice

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Debts owed by a business are referred to as

A) accounts receivables
B) expenses
C) stockholders' equity
D) liabilities

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

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Question 42

True/False

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A retained earnings statement reports the changes in the retained earnings for a period of time.

A) True
B) False

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Question 43

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Some of the major fraudulent acts by senior executives started as what they considered to be small ethical lapses which grew out of control.

Generally accepted accounting principles regulate how and what financial information is reported by businesses.

Which of the following financial statements reports information as of a specific date?

On May 7,Carpet Barn Company offered to pay $83,000 for land that had a selling price of $105,000.On May 15,Carpet Barn accepted a counteroffer of $95,000.On June 5,the land was assessed at a value of $115,000 for property tax purposes.On December 10,Carpet Barn Company was offered $135,000 for the land by another company.At what value should the land be recorded in Carpet Barn Company's records?

Revenues are reported when

Accounting information users need reports about the economic activities and condition of businesses.

The primary financial statements of a corporation are the income statement,retained earnings statement,and the balance sheet.

Given the following data: Compute the ratio of liabilities to stockholders' equity for each year.Round to two decimal places.

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 were $60,000 at April 1, the beginning of the current year. During the year, shareholders purchased an additional $25,000 in stock. -Prepare an income statement for the current year ended March 31.

Karen Meyer owns and operates Crystal Cleaning Company.Recently,Meyer withdrew $10,000 from Crystal Cleaning,and she contributed $6,000,in her name,to the American Red Cross.The contribution of the $6,000 should be recorded on the accounting records of which of the following entities?

Which of the following is not a business transaction?

Which of the following groups of companies are all examples of a merchandising business?

Paying an account payable increases liabilities and decreases assets.

Krammer Company has liabilities equal to one fourth of the total assets.Krammer's stockholders' equity is $45,000.Using the accounting equation,what is the amount of liabilities for Krammer?

Indicate how the following transactions affect the accounting equation. a The purchase of supplies on account b The purchase of supplies for cash c Payment of cash dividends to stockholders d Revenues received in cash e Sale made on account

The assets and liabilities of Rocky's Day Spa at December 31 and expenses for the year are listed below.The stockholders' equity was $68,000 $48,000 in Common Stock and $20,000 in Retained Earnings at January 1.The shareholders invested in an additional $10,000 of common stock during the year.Net income for the year is $45,625. $\begin{array}{|l|r|l|r}\hline \text { Accounts payable } & \$ 4,375 & \text { Spa operating expense } & \$ 23,760 \\\hline \text { Accounts receivable } & 8,490 & \text { Office expense } & 2,470 \\\hline \text { Cash } & 13,980 & \text { Spa supplies } & 9,230 \\\hline \text { Fees earned } & ? ? ? & \text { Wages expense } & 26,580 \\\hline \text { Spa furniture \& equipment } & 56,000 & \text { Dividends } & 38,170 \\\hline \text { Computers } & 2,130 & & \\\hline\end{array}$ Prepare an income statement for Rocky's Day Spa for the current year ended December 31.

As of the end of its accounting period,December 31,Year 1,Great Plains Company has assets of $940,000 and liabilities of $300,000.During Year 2,stockholders invested an additional $73,000 and received $33,000 in dividends from the business.What is the amount of net income during Year 2,assuming that as of December 31,Year 2,assets were $995,000,and liabilities were $270,000?

An entity that is organized according to state or federal statutes and in which ownership is divided into shares of stock is a