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Exam 1: Introducing Financial Accounting

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Question 121

True/False

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Investing activities involve the buying and selling of assets such as land and equipment that are held for long-term use in the business.

A) True
B) False

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Question 122

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Net Income:

A) Decreases equity.
B) Represents the amount of assets stockholders put into a business.
C) Equals assets minus liabilities.
D) Is the excess of revenues over expenses.
E) Represents stockholders' claims against assets.

F) A) and C)
G) C) and D)

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Question 123

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Describe the three important guidelines for revenue recognition.

Soo Lin, the sole stockholder, began an Internet Consulting practice organized as a corporation and completed these transactions during April of the current year: Show the effects of the above transactions on the accounting equation of Soo Lin, Consultant. Use the following format for your answers. The first item is shown as an example. Increase = I Decrease = D No effect = N

Use the following information as of December 31 to determine equity.

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.

If a company purchases equipment costing $4,500 on credit, the effect on the accounting equation would be:

The business entity principle means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.

Generally the lower the risk, the higher the return that can be expected.

Rent expense appears on which of the following statements?

If assets are $365,000 and equity is $120,000, then liabilities are:

Accounting is an information and measurement system that does all of the following except:

Alpha Company has assets of $600,000, liabilities of $250,000, and equity of $350,000. It buys office equipment on credit for $75,000. What would be the effects of this transaction on the accounting equation?

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

What is the balance sheet? What is its purpose?

Prepare a December 31 balance sheet in proper form for Cane Property Management, Inc. using the following accounts and amounts:

The business entity assumption means that a business is accounted for separately from other business entities, including its owner or owners.

Rico's Taqueria had cash inflows from operating activities of $27,000; cash outflows from investing activities of $22,000, and cash outflows from financing activities of $12,000. Calculate the net increase or decrease in cash.

The assumption that requires that a business be accounted for separately from its owners is the __________________ assumption.

Operating activities include long-term borrowing and repaying cash from lenders, and cash investments or dividends to stockholders.