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Exam 1: Accounting in Business

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Question 61

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Risk is the _________________ about the return an investor expects to earn.

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Question 62

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At the beginning of the year, a company had $120,000 worth of liabilities. During the year, assets increased by $160,000 and at year-end they equaled $360,000. Liabilities decreased $20,000 during the year. Calculate the beginning and ending values of equity.

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Beginning equity = $...

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Question 63

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All of the following regarding a Certified Public Accountant are true except:

The accounting equation is ______________________________.

If a company receives $12,000 from the stockholders to establish a corporation, the effect on the accounting equation would be:

Liabilities are the owner's claim on assets.

Return on assets is often stated in ratio form as the amount of average total assets divided by income.

Assets created by selling goods and services on credit are:

The statement of cash flows shows the net effect of revenues and expenses for a reporting period.

The ______________ assumption assumes business will continue operating indefinitely instead of being closed or sold.

Grandmark Printing pays $2,000 rent to the landlord of the building where its facilities are located. How does this transaction affect the accounting equation for Grandmark?

The accounting principle that requires accounting information to be based on actual cost and requires assets and services to be recorded initially at the cash or cash-equivalent amount given in exchange, is the:

The accounting equation for Long Company shows an increase in its assets and an increase in its liabilities. Which of the following transactions could have caused that effect?

A parcel of land is offered for sale at $600,000, is assessed for tax purposes at $500,000, is recognized by its purchasers as easily being worth $575,000, and is sold for $570,000. At what amount should the land be recorded in the purchaser's books? What accounting principle supports your answer?

U.S. government bonds are:

Explain the accounting equation and define its terms.

For each of the following transactions, identify the effects as reflected in the accounting equation. Use "+" to indicate an increase and "-" to indicate a decrease. Use "A", "L", and "E" to indicate assets, liabilities, and equity, respectively. Part A has been completed as an example. $\begin{array} {| l | l | l | l| } \hline\text { a. } & \text { L. Chester invested } \$ 100,000 \text { in a corporation. } & + \mathrm { A } & + \mathrm { E } \\\hline \begin{array} { l } \text { b. }\end{array} & \begin{array} { l } \text { Land was purchased for } \$ 50,000 . \\\text { A down payment of } \$ 15,000 \text { eash was made and a note was } \\\text { signed for the balance. }\end{array} & & \\\hline \text { c. } & \text { Services were rendered to customers for cash. } & \\\hline \text { d. } & \text { A building was purchased for cash. } & & \\\hline \text { e. } & \text { Supplies were purchased for cash. } & & \\\hline \text { f. } & \text { Paid the office secretary's salary. } & & \\\hline \text { g. } & \text { The amount owed on the land from Part (b) was paid. } & & \\\hline\end{array}$

The financial statement that reports whether the business earned a profit and also lists the revenues and expenses is called the:

Objectivity means that financial information is supported by independent, unbiased evidence.

External users of accounting information include all of the following except: