Exam 1: Accounting: the Language of Business

Match each of the following terms with the appropriate definition.Use each term only once. A.Sole proprietorship B.Partnership C.Corporation D.For-profit company E.Not-for-profit company -------------1. A company with the goal of maximizing the owners' wealth -------------2. An organization that exists to provide goods and services to a target group at a reduced cost or no cost -------------3. A company owned by two or more individuals -------------4. This type of organization is taxed twice; first as a business and second when shareholders receive dividends -------------5. A company with one owner

Income taxes owed to the federal government would be classified as a(n)

To ensure proper application of a CPA's technical knowledge,the Public Company Accounting Oversight Board issues:

The American Institute of Certified Public Accountants is responsible for establishing GAAP in the United States

Owners' equity is the residual interest in the organization's assets after deducting liabilities.

Passport Global sold 250 shares of $4.00 par value capital stock in exchange for equipment worth $3,000.The effect of this transaction on Passport Global would be to

A transaction does not require counterbalancing entries so that the total assets are equal to the total liabilities plus owner's equity.

Presented below are the balances,listed in alphabetical order,of Ferb Products,at December 1, 20X9: Accounts Payable \ 1,100 Accounts Receivable 4,000 Cash 7,300 Land 15,300 Machinery 31,600 Merchandise Inventory 12,200 Long-term Debt Payable 20,700 Note Payeble 2,200 [aid-in Capital 39,400 Following are the transactions for Ferb Products for the month of December 20X9: a.Borrowed an additional $1,300 in notes payable. b.Collected $1,900 from credit customers. c.Paid $2,600 of the amount owed on account. d.The owners contributed $12,000 cash in exchange for capital. Required: 1.Prepare an analysis of the transactions on the balance sheet equation. 2.Prepare a balance sheet as of December 31,20X9,considering the beginning balances and incorporating the effects of the December,20X9 transactions.

If assets increase $80,000 during a period and liabilities decrease $40,000,then owners' equity must have decreased $40,000.

Which of the following forms of business organizations protect the personal assets of the owners from creditors of the business?

Corporations are the most important form of business ownership because they conduct the vast majority of business.

The regulatory body overseeing disclosures for governmental organizations is

Sounds Good Entertainment acquired office equipment valued at $4,000 and office supplies valued at $600 by paying cash of $1,300 with the balance on account.The effect of this transaction on Sounds Good Entertainment would be to

Use the following balance sheet equation format to show the effect of the following transactions.Write the signs (+,-)for increases and decreases in components of the equation for each transaction. Total assets Total liabilities Owners' equity A.The owner invests cash in the company. B.The company borrows money from a bank,issuing a promissory note payable. C.The company acquires equipment by paying cash for the total amount. D.The company acquires inventory from the manufacturer on credit. E.The company returns part of the inventory purchased in part D. F.The company sells equipment acquired in part C to a competitor on open account at cost. G.The company pays the amount due on the inventory purchase in part D.

An entity

The U.S.Congress has charged the Public Company Accounting Oversight Board with the ultimate responsibility for developing generally accepted accounting principles.

Assets amount to $35,000 at the beginning of the period and $40,000 at the end of the period.Liabilities amount to $10,000 at the beginning of the period and $20,000 at the end of the period.What is the amount of the change and the direction of the change in owners' equity for the period?

Accounting does not provide information that is useful in making decisions that have economic consequences.

The annual report is a document prepared by the board of directors and distributed to current and potential investors.

Wendy Walia owns 500 shares of Rhodes Water Company.The capital stock of Rhodes Water Company has a par value of $3 per share.Wendy Walia sells her 500 shares of Rhodes Water stock to Steve Matelski for $10 per share.The effect of this transaction on Rhodes Water Company would be to