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Exam 1: Accounting and Business

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Question 51

Multiple Choice

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On May 20, White Repair Service extended an offer of $108,000 for land that had been priced for sale at $140,000. On May 30, White Repair Service accepted the seller's counteroffer of $115,000. On June 20, the land was assessed at a value of $95,000 for property tax purposes. On July 4, White Repair Service was offered $150,000 for the land by a national retail chain. At what value should the land be recorded in White Repair Service's records?

A) $108,000
B) $95,000
C) $140,000
D) $115,000

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

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Question 52

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Match the following business types with each business listed below. Each may be used more than once. -A health club and spa

A) Service business
B) Manufacturing business
C) Retail business

D) All of the above
E) B) and C)

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Question 53

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Two factors that typically lead to ethical violations are relevance and timeliness of accounting information.

The assets and liabilities of Bennett Designs at December 31, the end of the current year, and its revenue and expenses for the year are listed below. What were the total assets on December 31? $\begin{array} { l r l r } \text { Accounts payable } & \$ 42,000 & \text { Miscellaneous expense } & \$ 1,030 \\\text { Accounts receivable } & 10,340 & \text { Office expense } & 1,240 \\\text { Cash } & 21,420 & \text { Supplies } & 1,670 \\\text { Fees earned } & 73,450 & \text { Wages expense } & 23,550 \\\text { Land } & 47,000 & \text { Dividends } & 16,570 \\\text { Building } & 157,630 & &\end{array}$

For each of the following companies, identify whether they are a service, retail, or manufacturing business. $\begin{array} { | l | l | } \hline \text { A. } & \text { Kohl's } \\\hline \text { B. } & \text { Time Warner Cable } \\\hline \text { C. } & \text { General Motors } \\\hline \text { D. } & \text { Regal Cinemas } \\\hline \text { E. } & \text { Applebee's } \\\hline \text { F. } & \text { Sony } \\\hline \text { G. } & \text { Best Buy } \\\hline \text { H. } & \text { Banana Republic } \\\hline \text { I. } & \text { H\&R Block } \\\hline\end{array}$

Which of the following items relates to separating the reporting of business and personal economic transactions?

The business entity assumption means that

The role of accounting is to provide many different users with financial information to make economic decisions.

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?

Companies like Enron, HealthSouth, and Xerox Corporation have been caught in the midst of ethical lapses that led to fines, firings, and criminal and/or civil prosecution. List and briefly describe two factors that are responsible for what went wrong in these companies.

Using the following accounts and their amounts, prepare in good format a balance sheet for Bright Futures Company for the month ended August 31. $\begin{array}{lr}\text { Tel ephone expense } & 1,150 \\\text { Cash } & 3,000 \\\text { Accounts payable } & 1,540 \\\text { Dividends } & 800 \\\text { Fees earned } & 15,700 \\\text { Rent expense } & 1,400 \\\text { Supplies } & 140 \\\text { Accounts receivable } & 1,500 \\\text { Computer equipment } & 17,600 \\\text { Common stock } & 10,000 \\\text { Retained earnings (August } 1 \text { ) } & 4,320 \\\text { Wages expense } & 4,800 \\\text { Utilities expense } & 750 \\\text { Office expense } & 420\end{array}$ ?

The liabilities and stockholder's equity of a company are $132,000 and $244,000, respectively. Assets should equal

Determine the missing amount "X" for each of the following: $\begin{array}{|rr|r|r|}\hline\text { Assets } && \text { Liabilities } & \text { Stockholders' Equity } \\\hline\text { (a) } & \$ 78,500 & \$ 37,600 & X \\\hline\text { (b) } & X & \$ 53,280 & \$ 145,000 \\\hline \text { c) } & \$ 49,500 & X & \$ 34,000\\\hline\end{array}$

Given the following data: $\begin{array}{lrr}&\text { Dec. } 31 \text {, Year } 2&\text { Dec. } 31 \text {, Year } 1\\\text { Total liabilities } & \$ 128,250 & \$ 120,000 \\\text { Total stockholders' equity } & 95,000 & 80,000\end{array}$ Compute the ratio of liabilities to stockholders' equity for each year. Round to two decimal places.

Earning revenue

The basic difference between manufacturing and retail companies is the completion level of the products they purchase for resale to customers.

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. $\begin{array}{lrlr}\text { Fees earned } & \$ 165,000 & \text { Cash } & \$ 30,000 \\\text { Accounts receivable } & 16,000 & \text { Selling expenses } & 44,000 \\\text { Equipment } & 64,000 & \text { Common stock } & 47,000 \\\text { Accounts payable } & 12,000 & \text { Interest revenue } & 3,000 \\\text { Salaries \& wages expense } & 40,000 & \text { Income taxes expense } & 18,000 \\\text { Income taxes payable } & 5,000 & \text { Rent expense } & 20,000\end{array}$ ​ -Based on this information, is Scott Industries profitable? Explain your answer.

The financial statements of a proprietorship should include the owner's personal assets and liabilities.

Identify which of the following accounts would appear on a balance sheet. (a) Cash (b) Fees earned (c) Common stock (d) Wages payable (e) Rent expense (f) Supplies (g) Land

Which of the following is a manufacturing business?