Exam 1: An Introduction to Accounting

The historical cost concept requires that most assets be recorded at the amount paid for them, regardless of increases in market value.

Lexington Company engaged in the following transactions during Year 1, its first year in operation: (Assume all transactions are cash transactions.)Acquired $6,000 cash from issuing common stock.Borrowed $4,400 from a bank.Earned $6,200 of revenues.Incurred $4,800 in expenses.Paid dividends of $800. Lexington Company engaged in the following transactions during Year 2: (Assume all transactions are cash transactions.)Acquired an additional $1,000 cash from the issue of common stock.Repaid $2,600 of its debt to the bank.Earned revenues, $9,000.Incurred expenses of $5,500.Paid dividends of $1,280. What is the amount of total assets that will be reported on Lexington's balance sheet at the end of Year 1?

The statement of changes in stockholders' equity shows changes in which of the following accounts?

Which type of accounting information is intended to satisfy the needs of external users of accounting information?

Liabilities

Briefly distinguish between financial accounting and managerial accounting.

The following events are for Holiday Travel Services for Year 1, the first year of operations. Assume that all transactions involve the receipt or payment of cash. 1)The business acquired $50,000 from stock issued to owners.2)Creditors loaned the company $27,500.3)The company provided services to its customers and received $75,400.4)The company paid expenses amounting to $63,250.5)The company purchased land for $25,000.6)The company paid a dividend of $5,500 to its owners. Required:a)Show the effects of the above transactions on the accounting equation. (Start by using appropriate element and account headings). For those events that affect retained earnings, provide the appropriate account titles in a separate column. Enter a "0" if a transaction does not affect a given account. b)Prepare an income statement and balance sheet for and as of the end of Year 1.

The following transactions apply to Wilson Fitness Center for Year 1. 1)Started the business by issuing $48,000 of common stock for cash.2)Provided services to clients and received $65,500 cash.3)Borrowed $10,500 from the bank.4)Paid $8,500 for rent of equipment.5)Purchased land for $15,000.6)Paid $46,600 of salary expense.7)Cash dividends of $4,000 were paid to the stockholders. Required:a)What are the total assets of the business at the end of Year 1?b)Prepare a statement of cash flows for Year 1.

At the end of Year 2, retained earnings for the Baker Company was $2,350. Revenue earned by the company in Year 2 was $2,600, expenses paid during the period were $1,400, and dividends paid during the period were $800. Based on this information alone, what was the amount of retained earnings at the beginning of Year 2?

Which of the financial statements are required by the Generally Accepted Accounting Principles (GAAP)?

What financial statement elements are reported on a balance sheet?

Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter dollar amounts. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. Increase = IDecrease = DNot Affected = NA Perez Company paid $220,000 cash for salaries expense.

Santa Fe Company was started on January 1, Year 1, when it acquired $9,400 cash by issuing common stock. During Year 1, the company earned cash revenues of $5,600, paid cash expenses of $3,450, and paid a cash dividend of $1,000. Which of the following is true based on this information?

How does providing services for cash affect the accounting equation? Is it considered an asset source, asset use, or asset exchange transaction?

The statement of changes in stockholders' equity presents

Which of the following could describe the effects of an asset exchange transaction on a company's total assets, total liabilities and total stockholders' equity?

Yi Company provided services to a customer for $5,500 cash. Based on this information alone, which of the following statements is true?

During Year 2, Millstone Company provided $6,500 of services for cash, paid cash dividends of $1,000 to owners, and paid $4,000 cash for expenses. Liabilities were unchanged. Which of the following statements accurately describes the effect of these events on the elements of the company's financial statements?

If a corporation issues common stock for $50,000 cash, in which section of the statement of cash flows will this transaction be reported?

Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter dollar amounts. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA. Increase = IDecrease = DNot Affected = NA Jones Company paid $20,000 in cash dividends to its owners.