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Exam 1: Accounting in Business

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Question 61

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Specific accounting principles are basic assumptions,concepts,and guidelines for preparing financial statements and arise out of long-used accounting practice.

A) True
B) False

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Question 62

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

A) True
B) False

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Question 63

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Match the following terms with the appropriate definition. -Liabilities

In the partnership form of business,the owners are called stockholders.

Match the following terms with the appropriate definition. -An information and measurement system that identifies,records and communicates relevant reliable and comparable information about an organization's business activities.

The statement of cash flows identifies cash flows separated into operating,investing,and financing activities over a period of time.

How does the objectivity principle support ethical behavior?

Net Income:

Opportunities in accounting include auditing,consulting,market research,and tax planning.

The characteristics below apply to at least one of the forms of business organization. a.Is a separate legal entity. b.Is allowed to be owned by one person only. c.Owner or owners are personally liable for debts of the business. d.Is a separately taxable entity. e.Is a business entity. f.May have a contract specifying the division of profits among the owners. g.Has an unlimited life Use the following format to indicate (with a "yes" or "no")whether or not a characteristic applies to each type of business organization. $\begin{array} { | l | l | l | l | } \hline & \text { Proprietorship } & \text { Partnership } & \text { Corporation } \\\hline \text { a. } & & & \\\hline \text { b. } & & & \\\hline \text { c. } & & & \\\hline \text { d. } & & & \\\hline \text { e. } & & & \\\hline \text { f. } & & & \\\hline \text { g. } & & & \\\hline\end{array}$

Match the following activities with the appropriate section of the statement of cash flows. -Cash paid for a delivery van to be used in the business.

The difference between a company's assets and its liabilities,or net assets is:

A company's balance sheet shows: cash $24,000,accounts receivable $30,000,equipment $50,000,and equity $72,000.What is the amount of liabilities?

Unlimited liability and separate taxation of the business are advantages of a sole proprietorship.

Revenues are increases in equity (via net income)from a company's sales of products and services to customers.

Using the accounting equation,equity is equal to ________.

Congress passed the ________ to help curb financial abuses at companies that issue their stock to the public.

The records of Roadmaster Auto Rentals show the following information as of December 31.The sole stockholder,Rob Fletcher received dividends of $52,000 during the year.Prepare a December income statement,a December statement of retained earnings,and a December 31 balance sheet. $\begin{array} { l lll } \text { Accounts payable } & \$ 36,000 & \text { Wages expense } & \$ 75,000 \\\text { Insurance expense } & 2,000 & \text { Advertising expense } & 22,000 \\\text { Accounts receivable } & 24,000 & \text { Cash } & 11,000 \\\text { Common stock } & 60,000& \text { Office Furniture } & 15,000 \\\text { Airplanes } & 150,000& \text { Maintenance expense } & 39,000 \\\text { Notes payable } & 47,000 & \text { Revenues } & 217,000 \\\text { Hangar } & 60,000& \text { Retained earnings, January 1 } & 90,000\end{array}$

The description of the relation between a company's assets,liabilities,and equity,which is expressed as Assets = Liabilities + Equity,is known as 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?