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Exam 1: Introduction to Accounting and Business

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Question 91

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Gomez Service Company paid its first installment on a note payable in the amount of $2,000. How will this transaction affect the accounting equation?

A) increase liabilities Notes Payable) and decrease assets Cash)
B) decrease assets Cash) and decrease stockholders' equity Note Payable Expense)
C) decrease assets Cash) and decrease assets Notes Receivable)
D) decrease assets Cash) and decrease liabilities Notes Payable)

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

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Question 92

Multiple Choice

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Land, originally purchased for $30,000, is sold for $62,000 in cash. What is the effect of the sale on the accounting equation?

A) assets increase $62,000; stockholders' equity increases $62,000
B) assets increase $32,000; stockholders' equity increases $32,000
C) assets increase $62,000; liabilities decrease $30,000; stockholders' equity increases $32,000
D) assets increase $30,000; no change for liabilities; stockholders' equity increases $62,000

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

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Question 93

Multiple Choice

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Match each transaction with its effect on the accounting equation. Each letter may be used more than once. -Received utility bill to be paid next month

Indicate whether each of the following accounts represents an asset, liability, or stockholders' equity: a) Accounts Payable b) Wages Expense c) Common Stock d) Accounts Receivable e) Dividends f) Land

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

Which of the following is a service business?

The statement of cash flows consists of three sections: cash flows from operating activities, cash flows from income activities, and cash flows from equity activities.

Match each of the following characteristics with the financial statement it describes. Each financial statement may be used more than once. -The first statement prepared

Match each transaction with its effect on the accounting equation. Each letter may be used more than once. -Contribution of land by stockholder

Proper ethical conduct implies that you only consider what's in your best interest.

Dave Ryan is the CEO of Ryan's Arcade. At the end of its accounting period, December 31, Ryan's Arcade has as liabilities of $125,000. Using the accounting equation, determine the following amounts: a) stockholders' equity as of December 31 of the current year b) stockholders' equity as of December 31 at the end of the next year, assuming that assets increased by $65,000 and liabilities increased by $35,000 during the year

If a building is appraised for $85,000, offered for sale at $90,000, and the buyer pays $80,000 cash for it, the buyer would record the building at $85,000.

Which of the following is not an asset?

Give the major disadvantage of disregarding the cost concept and constantly revaluing assets based on appraisals and opinions.

Match each of the following characteristics with the financial statement it describes. Each financial statement may be used more than once. -Has three sections: operating, investing and financing

The assets and liabilities of the company are $128,000 and $84,000, respectively. Stockholders' equity should equal

An income statement is a summary of the revenues and expenses of a business as of a specific date.

Identify each of the following as either internal or external users of accounting information. $\begin{array} { | l | l | } \hline \text { A. } & \text { Payroll manager } \\\hline \text { B. } & \text { Bank } \\\hline \text { C. } & \text { President's secretary } \\\hline \text { D. } & \text { Internal Revenue Service } \\\hline \text { E. } & \text { Raw material vendors } \\\hline \text { F. } & \text { Social Security Administration } \\\hline \text { G. } & \text { Heal th insurance provider } \\\hline \text { H. } & \text { Managerial accountant } \\\hline\end{array}$

Revenue is earned only when money is received.

Debts owed by a business are referred to as