Exam 1: Introduction to Accounting and Business

The accountant for Scott Industries prepared the following list of account balances from the company's records for the year ended December 31: Fees earned \ 165,000 Cash Accounts receivable 14,000 Selling expenses Equipment 64,000 Common stock Accounts payable 12,000 Interest income Salaries \& wages expense 40,000 Frepaid rent Income taxes payable 5,000 Income taxes expense Notes payable 20,000 Rent expense -Determine the total assets at the end of the current year for Scott Industries.

The basic difference between manufacturing and merchandising companies is the completion level of the products they purchase for resale to customers.

Which of the following is not a role of accounting in business?

Which of the following accounts is a liability?

The unit of measure concept

Selected transactions completed by a corporation are described below. Indicate the effects of each transaction on assets, liabilities, and stockholders' equity by inserting "+" for increase and "−" for decrease in the appropriate columns at the right. If appropriate, you may insert more than one symbol in a column. A L a) Received cash from sale of common stock \_\_\_ \_\_\_ b) Purchased supplies on account \_\_\_ \_\_\_ c) Paid rent for the current month \_\_\_ \_\_\_ d) Received cash for services sold to customers \_\_\_ \_\_\_ e) Returned some defective supplies purchased in b) \_\_\_ \_\_\_ f) Paid insurance premiums in advance \_\_\_ \_\_\_ g) Paid cash to creditor for purchases in b) \_\_\_ \_\_\_ h) Charged customers for services sold on account \_\_\_ \_\_\_ i) Paid cash to a customer as a refund for an overcharge \_\_\_ \_\_\_ j) Received cash on account from customers \_\_\_ \_\_\_ k) Payment of dividends \_\_\_ \_\_\_ 1) Recorded the cost of supplies used during the year \_\_\_ \_\_\_ m) Received invoice for electricity used \_\_\_ \_\_\_ n) Paid wages \_\_\_ \_\_\_ o) Purchased a truck for cash \_\_\_ \_\_\_

Match the following characteristics with the form of business entity that best describes it. Each may be used more than once. -Easy and cheap to organize

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 common stock was $120,000 and the retained earnings were $60,000 at April 1, the beginning of the current year. During the year, shareholders purchased an additional $25,000 in stock. -Prepare a balance sheet 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 the total amount of the seller's 1) assets, 2) liabilities, and 3) stockholders' equity? b) Assume that the seller owes $52,000 on a loan 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) stockholders' equity?

Dividends paid to stockholders decrease assets and increase equity.

Two factors that typically lead to ethical violations are relevance and timeliness of accounting information.

Profit is the difference between

Match the following characteristics with the form of business entity that best describes it. Each may be used more than once. -Often used as an alternative to a partnership

The assets and liabilities of Rocky's Day Spa at December 31 and expenses for the year are listed below. The stockholders' equity was $68,000 $48,000 in Common Stock and $20,000 in Retained Earnings) at January 1. The shareholders invested in an additional $10,000 of common stock during the year. Net income for the year is $45,625. Accounts payable \ 4,375 Spa operating expense \ 23,760 Accounts receivable 8,490 Office expense 2,470 Cash 13,980 Spa supplies 9,230 Fees earned ??? Wages expense 26,580 Spa furniture \& equipment 56,000 Dividends 38,170 Computers 2,130 Prepare an income statement for Rocky's Day Spa for the current year ended December 31.

The accountant for Flagger Company prepared the following list of account balances from the company's records for the year ended December 31: Fees earned \ 165,000 Cash \ 30,000 Accounts receivable 14,000 Selling expenses 44,000 Equipment 42,000 Common stock 36,000 Accounts payable 12,000 Interest income 3,000 Salaries \& wages expense 40,000 Rent expense 51,000 Income taxes payable 5,000 Prepaid rent 2,000 Notes payable 20,000 Income taxes expense 18,000 Prepare an income statement for Flagger Company in good form.

Match each of the following characteristics with the financial statement it describes. Each financial statement may be used more than once. -The connecting link between the income statement and balance sheet

What are the three sections of the statement of cash flows?

Assets are

The accountant for Scott Industries prepared the following list of account balances from the company's records for the year ended December 31: Fees earned \ 165,000 Cash Accounts receivable 14,000 Selling expenses Equipment 64,000 Common stock Accounts payable 12,000 Interest income Salaries \& wages expense 40,000 Frepaid rent Income taxes payable 5,000 Income taxes expense Notes payable 20,000 Rent expense -Daniels Company made the following selected transactions during May: 1. Received cash from sale of stock, $55,000 2. Paid creditors on account, $7,000 3. Billed customers for services on account, $2,565 4. Received cash from customers on account, $8,450 5. Paid dividends to stockholders, $2,500 "6. Received the utility bill, $160, to be paid next month Indicate the effect of each transaction on the accounting equation by: a) Account type - A)assets, L)liabilities, SE)stockholders' equity, R)revenue, and E)expense b) Name of account c) The amount by of the transaction d) The direction of change increase or decrease) in the account affected Note: Each transaction has two entries. Entry Entry Account Type a) Name of Account b) Amount c) Increase or Decrease d) Account Type a) Name of Account b) Amount c) Increase or Decrease d) 1 2 3 4 5 6 "

Match the following characteristics with the form of business entity that best describes it. Each may be used more than once. -Organized as a separate legal taxable entity