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Exam 1: Accounting in Business

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Question 31

Multiple Choice

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Risk is:

A) Derived from the idea of getting something back from an investment.
B) The reward for investment.
C) The uncertainty about the return expected to be earned.
D) Unrelated to return expected.
E) Net income divided by average total assets.

F) B) and E)
G) All of the above

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Question 32

Multiple Choice

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The assets of a company total $700,000; the liabilities, $200,000. What are the net assets?

A) $500,000.
B) $900,000.
C) $200,000.
D) It is impossible to determine unless the amount of this owners' investment is known.
E) $700,000.

F) A) and D)
G) D) and E)

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Question 33

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The private-sector group that currently has the authority to establish generally accepted accounting principles in the United States is the:

Atkins Company collected $1,750 as payment for the amount owed by a customer from services provided the prior month on credit. How does this transaction affect the accounting equation for Atkins?

Marsha Bogswell is the owner of Bogswell Legal Services. Which accounting principle requires Marsha to keep her personal financial information separate from the financial information of Bogswell Legal Services?

Billington Corp. borrows $80,000 cash from Second National Bank. How does this transaction affect the accounting equation for Billington?

The accounts of Odie Company with the increases or decreases that occurred during the past year are as follows: $\begin{array} { l c c } \text { Account } & \text { Increase } & \text { Decrease } \\\hline \text { Cash } & \$ 25,000 & \\\text { Accounts receivable } & & \$ ( 5,000 ) \\\text { Accounts payable } & & ( 11,000 ) \\\text { Notes payable } & 16,000 &\end{array}$ Except for net income, an investment of $3,000 by the owner, and a withdrawal of $11,000 by the owner, no other items affected owner's equity. Using the balance sheet equation, compute net income for the past year.

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 basic financial statements include all of the following except:

Match each of the most appropriate definition with the following terms.

If equity is $300,000 and liabilities are $192,000, then assets equal:

To include the personal assets and transactions of a business's owner in the records and reports of the business would be in conflict with the:

What distinguishes liabilities from equity?

A limited partnership:

According to the measurement (cost)principle, it is necessary for managers to report an approximation of an asset's market value upon purchase.

Describe the three types of activities reported on the statement of cash flows.

The idea that a business will continue to operate instead of being closed or sold underlies the going-concern assumption.

An owner's investment increases equity via net income.

The Securities and Exchange Commission (SEC)is a government agency that has legal authority to establish GAAP.

Generally accepted accounting principles are the basic assumptions, concepts, and guidelines for preparing financial statements.