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Exam 1: Introduction to Accounting and Business

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Question 41

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How does the purchase of equipment by signing a note affect the accounting equation?

A) assets increase; assets decrease
B) assets increase; liabilities decrease
C) assets increase; liabilities increase
D) assets increase; owner's equity increases

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

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Question 42

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For each of the following companies,identify whether they are a service,merchandising,or manufacturing business.

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Question 43

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Paying an account payable increases liabilities and decreases assets.

Match each of the following characteristics with the financial statement that best describes it. Each may be used more than once. -Reports only revenues and expenses

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

Managerial accountants would be responsible for providing information regarding

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?

Explain the meaning of the business entity concept.

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

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 capital of the owner was $180,000 at April 1, the beginning of the current year. Mr. Thompson invested an additional $25,000 in the business during the year. ​ -Prepare a balance sheet for Thompson Computer Services for the current year ended March 31.

(a) A vacant lot acquired for $83,000 cash is sold for $127,000 in cash.What is the effect of the sale on thetotal amount of the seller's (1)assets, (2)liabilities,and (3)owner's equity?​ (b) Assume that the seller owes $52,000 for the land.After receiving the $127,000 cash in (a),the seller pays the $52,000 owed.What is the effect of the payment on the total amount of the seller's (1)assets, (2)liabilities,and (3)owner's equity?

Simpson Auto Body Repair purchased $20,000 of machinery.The company paid $8,000 in cash at the time of the purchase and signed a promissory note for the remainder to be paid in four monthly installments.​ (a)How will the purchase affect the accounting equation? (b)How will the payment of the first monthly installment affect the accounting equation (ignore interest)?

All of the following are general-purpose financial statements except a (n)

The financial statement that presents a summary of the revenues and expenses of a business for a specific period of time,such as a month or year,is called a (n)

Match each transaction with its effect on the accounting equation. Each letter may be used more than once. -Cash investment by owner

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

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

Identify which of the following items would appear on a balance sheet.

A statement of owner's equity reports the changes in the owner's equity for a period of time.

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