Question 1

Describe the three forms of organizations and how they differ.

Accepted Answer

A proprietorship has a single owner whereas a partnership has two or more individuals together as co-owners. In both of these forms of organization, the owners are individually liable for the debts of the business. A corporation is a business owned by shareholders, who may or may not have a part in the day-to-day operations of the business. The shareholders of a corporation are not legally liable for the debts of the business, and it is easier to transfer the ownership of a corporation than a proprietorship or partnership.

Question 2

On January 1, 2019, Brad Thomas invested $30,000 in Thomas Repairs. During 2019, Brad withdrew $17,000 for personal use. Thomas Repairs reports the following balances on December 31, 2019: $\begin{array}{l}
\begin{array} { l r } 
\text { Accounts receivable } & \$ 9,000 \
\text { Accounts payable } & 4,200 \
\text { Service revenue } & 25,550 \
\text { Land } & 4,000 \
\text { Rent expense } & 4,500 \
\text { Note payable } & 3,800 \
\text { Supplies } & 900 \
\text { Brad Thomas, Capital, Jan. } 1,2019 & 0 \
\text { Salary expense } & 9,650 \
\text { Cash } & 18,500 \
\text { Brad Thomas, Withdrawals } & 17,000
\end{array}\
\
\text { Prep are a balance sheet dated December 31, 2019, for Thomas Repairs. }
\end{array}$

Accepted Answer

The answer of On January 1, 2019, Brad Thomas invested...

Question 3

Describe how the accounting equation can be used to analyse business transactions.

Accepted Answer

A transaction is an event that affects the financial position of an entity and can be reliably recorded. Transactions affect a business's assets, liabilities and owner's equity. Therefore, transactions are often analysed in terms of their effect on the accounting equation.

Question 4

For each of the following events, indicate the amount by which liabilities increased or decreased.
a)Owner invested cash of $25,000 and equipment valued at $10,500 into the business.
b)Purchased $600 of supplies on account.
c)Borrowed $10,000 from the bank, issuing a note payable.
d)Performed a service for $1,500 and immediately collected the cash.
e)Paid the employee salaries of $1,200 cash.
f)Purchased equipment for $550 cash.
g)Received monthly rent bill of $1,300, to be paid in the following period.
h)Performed a service on account for $2,300.

Accepted Answer

a)$0
b)$600 increase

Question 5

The financial statements should be prepared in what order?

Accepted Answer

A) Income statement, statement of owner's equity, balance sheet, statement of cash flows 
B) Statement of owner's equity, balance sheet, income statement, statement of cash flows 
C) Balance sheet, statement of owner's equity, income statement, statement of cash flows 
D) Balance sheet, income statement, statement of owner's equity, statement of cash flows 
A) Income statement, statement of owner's equity, balance sheet, statement of cash flows 
B) Statement of owner's equity, balance sheet, income statement, statement of cash flows 
C) Balance sheet, statement of owner's equity, income statement, statement of cash flows 
D) Balance sheet, income statement, statement of owner's equity, statement of cash flows

Question 6

Determine cash withdrawals for the period if net income is $34,000, beginning owner's equity is $29,000, and ending owner's equity is $45,000.

Accepted Answer

A) $74,000 
B) $5,000 
C) $11,000 
D) $18,000 
A) $74,000 
B) $5,000 
C) $11,000 
D) $18,000

Question 7

Which of the following financial statements reports an increase or decrease in net cash during the time period covered?

Accepted Answer

A) Income statement 
B) Trial balance 
C) Statement of owner's equity 
D) Cash flow statement 
A) Income statement 
B) Trial balance 
C) Statement of owner's equity 
D) Cash flow statement

Question 8

The statement that presents a summary of the revenues and expenses of an entity is called the:

Accepted Answer

A) statement of owner's equity. 
B) statement of financial position. 
C) income statement. 
D) balance sheet. 
A) statement of owner's equity. 
B) statement of financial position. 
C) income statement. 
D) balance sheet.

Question 9

Borrowing money from a bank would:

Accepted Answer

A) have no effect on owner's equity. 
B) decrease assets. 
C) decrease liabilities. 
D) increase revenues. 
A) have no effect on owner's equity. 
B) decrease assets. 
C) decrease liabilities. 
D) increase revenues.

Question 10

Purchasing supplies for cash would:

Accepted Answer

A) decrease total assets and decrease owner's equity. 
B) increase total assets and increase liabilities. 
C) decrease liabilities and decrease total assets. 
D) have no effect on total assets. 
A) decrease total assets and decrease owner's equity. 
B) increase total assets and increase liabilities. 
C) decrease liabilities and decrease total assets. 
D) have no effect on total assets.

Question 11

Table 1-1
Following is a random list showing the account balances of various assets, liabilities, revenues, and expenses for Spiffy's Garage at December 31, 2019, the end of its first year of operations. $\begin{array} { | l | r | } 
\hline \text { Accounts receivable } & \$ 15,000 \
\hline \text { Accounts payable } & 3,500 \
\hline \text { Salary expense } & 4,500 \
\hline \text { Repairs expense } & 800 \
\hline \text { Truck } & 8,500 \
\hline \text { Equipment } & 6,300 \
\hline \text { Notes payable } & 8,200 \
\hline \text { Cash } & 6,800 \
\hline \text { Supplies expense } & 1,600 \
\hline \text { Service revenue } & 12,800 \
\hline \text { Gasoline expense } & 800 \
\hline \text { Salary payable } & 2,200 \
\hline
\end{array}$ The owner, Spiffy Sloan, invested $22,600 at the beginning of the year and withdrew $5,000 during the year for personal use.
-Refer to Table 1-1. Owner's equity at December 31, 2019, was:

Accepted Answer

A) $13,900. 
B) $22,700. 
C) $22,600. 
D) $18,700. 
A) $13,900. 
B) $22,700. 
C) $22,600. 
D) $18,700.

Question 12

Owner's equity is often referred to as net assets and represents the residual amount of business assets that can be claimed by the owner.

Accepted Answer

A) True 
 B)False

Question 13

Earning revenue on account:

Accepted Answer

A) decreases assets. 
B) increases liabilities. 
C) decreases owner's equity. 
D) increases owner's equity. 
A) decreases assets. 
B) increases liabilities. 
C) decreases owner's equity. 
D) increases owner's equity.

Question 14

Rules of professional conduct for accountants should:

Accepted Answer

A) be considered a minimum standard of performance. 
B) not be seen as strict when the client requests certain requirements. 
C) be the same as those for lawyers or engineers. 
D) clearly spell out right from wrong in every situation. 
A) be considered a minimum standard of performance. 
B) not be seen as strict when the client requests certain requirements. 
C) be the same as those for lawyers or engineers. 
D) clearly spell out right from wrong in every situation.

Question 15

Total assets at the end of the period were $330,000 and liabilities were 25% of owner's equity. Determine owner's equity at the end of the period.

Accepted Answer

A) $264,000 
B) $132,000 
C) $462,000 
D) $825,000 
A) $264,000 
B) $132,000 
C) $462,000 
D) $825,000

Question 16

Table 1-3
Ace Builders had the following transactions in June: earned $4,000 "on account" that will be collected in cash next month; collected $3,000 from a customer that was owed from a previous month; incurred $500 of repair expense and paid cash to the repairman; paid $1,200 cash to a supplier that it owed from the previous month; paid out $800 in cash withdrawals to the owner.
-For Ace Builders, what is the combined effect on owner's capital from the June transactions?

Accepted Answer

A) Up $2,700 
B) Up $3,500 
C) Up $4,500 
D) Down $800 
A) Up $2,700 
B) Up $3,500 
C) Up $4,500 
D) Down $800

Question 17

On January 1, 2019, Brad Thomas invested $30,000 in Thomas Repairs. During 2019, Brad withdrew $17,000 for personal use. Thomas Repairs reports the following balances on December 31, 2019: $\begin{array}{l}
\begin{array} { l r } 
\text { Accounts receivable } & \$ 9,000 \
\text { Accounts payable } & 4,200 \
\text { Service revenue } & 25,550 \
\text { Land } & 4,000 \
\text { Rent expense } & 4,500 \
\text { Note payable } & 3,800 \
\text { Supplies } & 900 \
\text { Brad Thomas, Capital, Jan. 1, } 2014 & 0 \
\text { Salary expense } & 9,650 \
\text { Cash } & 18,500 \
\text { Brad Thomas, Withdrawals } & 17,000
\end{array}\\
\text { Prepare an income statement for the year ended December } 31,2019 .
\end{array}$

Accepted Answer

The answer of On January 1, 2019, Brad Thomas invested...

Question 18

Not-for-profit organizations need accounting information, as do profit-oriented organizations.

Accepted Answer

A) True 
 B)False

Question 19

According to GAAP, to be useful, accounting information must be all of the following except:

Accepted Answer

A) relevant. 
B) comparable. 
C) subjective. 
D) reliable. 
A) relevant. 
B) comparable. 
C) subjective. 
D) reliable.

Question 20

The Accounting Standards Board is responsible for authorizing:

Accepted Answer

A) the Canadian Institute of Chartered Accountants. 
B) the IFRS and ASPE accounting standards used in Canada. 
C) the code of professional conduct for accountants. 
D) the Securities and Exchange Commission. 
A) the Canadian Institute of Chartered Accountants. 
B) the IFRS and ASPE accounting standards used in Canada. 
C) the code of professional conduct for accountants. 
D) the Securities and Exchange Commission.

Describe the three forms of organizations and how they differ.

Describe how the accounting equation can be used to analyse business transactions.

The financial statements should be prepared in what order?

Determine cash withdrawals for the period if net income is $34,000, beginning owner's equity is $29,000, and ending owner's equity is $45,000.

Which of the following financial statements reports an increase or decrease in net cash during the time period covered?

The statement that presents a summary of the revenues and expenses of an entity is called the:

Borrowing money from a bank would:

Purchasing supplies for cash would:

Owner's equity is often referred to as net assets and represents the residual amount of business assets that can be claimed by the owner.

Earning revenue on account:

Rules of professional conduct for accountants should:

Total assets at the end of the period were $330,000 and liabilities were 25% of owner's equity. Determine owner's equity at the end of the period.

Not-for-profit organizations need accounting information, as do profit-oriented organizations.

According to GAAP, to be useful, accounting information must be all of the following except:

The Accounting Standards Board is responsible for authorizing:

Recording Business Transactions

Measuring Business Income: The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations and the Accounting Cycle

Accounting for Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Property, Plant, and Equipment; Goodwill; and Intangibles

Current Liabilities and Payroll

Filters

Exam 1: Accounting and the Business Environment

Describe the three forms of organizations and how they differ.

Describe how the accounting equation can be used to analyse business transactions.

The financial statements should be prepared in what order?

Determine cash withdrawals for the period if net income is $34,000, beginning owner's equity is $29,000, and ending owner's equity is $45,000.

Which of the following financial statements reports an increase or decrease in net cash during the time period covered?

The statement that presents a summary of the revenues and expenses of an entity is called the:

Borrowing money from a bank would:

Purchasing supplies for cash would:

Owner's equity is often referred to as net assets and represents the residual amount of business assets that can be claimed by the owner.

Earning revenue on account:

Rules of professional conduct for accountants should:

Total assets at the end of the period were $330,000 and liabilities were 25% of owner's equity. Determine owner's equity at the end of the period.

Not-for-profit organizations need accounting information, as do profit-oriented organizations.

According to GAAP, to be useful, accounting information must be all of the following except:

The Accounting Standards Board is responsible for authorizing:

Recording Business Transactions

Measuring Business Income: The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations and the Accounting Cycle

Accounting for Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Property, Plant, and Equipment; Goodwill; and Intangibles

Current Liabilities and Payroll

Filters