Question 1

Adventures Unlimited Company distributes cash dividends. How does this transaction affect the accounting equation?

Accepted Answer

A)  The assets, liabilities, and equity remain the same. 
B)  The assets decrease and equity decreases. 
C)  The assets increase and liabilities decrease. 
D)  The assets decrease and equity increases. 
A)  The assets, liabilities, and equity remain the same. 
B)  The assets decrease and equity decreases. 
C)  The assets increase and liabilities decrease. 
D)  The assets decrease and equity increases.

Question 2

Assume Metro Corporation had a net income of $2,500 for the year ending December 2018. Its beginning and ending total assets were $32,500 and $19,500, respectively. Calculate Metro's return on assets (ROA). (Round your percentage answer to two decimal places.)

Accepted Answer

A)  7.69% 
B)  12.82% 
C)  9.62% 
D)  4.81% 
A)  7.69% 
B)  12.82% 
C)  9.62% 
D)  4.81%

Question 3

The primary objective of financial reporting is to ensure that all investment decisions are risk free.

Accepted Answer

A) True 
 B)False

Question 4

The balance sheet allows decision makers to determine their opinion about the financial position of the company.

Accepted Answer

A) True 
 B)False

Question 5

International Financial Reporting Standards (IFRS) is the main U.S. accounting rule book and is currently created and governed by the Financial Accounting Standards Board.

Accepted Answer

A) True 
 B)False

Question 6

Under U.S. GAAP, the monetary unit assumption states that transactions are recorded in dollars. What is the basis for this assumption?

Accepted Answer

Under U.S. GAAP, transactions

Question 7

The income statement is also called the statement of financial position.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following financial statements would be most useful if an analyst wants to know the likelihood of repayment of business debts?

Accepted Answer

A)  income statement 
B)  balance sheet 
C)  statement of retained earnings 
D)  statement of cash flows 
A)  income statement 
B)  balance sheet 
C)  statement of retained earnings 
D)  statement of cash flows

Question 9

An entity refers to one business which includes its owners.

Accepted Answer

A) True 
 B)False

Question 10

The balance sheet reports on the assets, liabilities, and stockholders' equity of the business as of a specific date.

Accepted Answer

A) True 
 B)False

Question 11

The three types of events that affect retained earnings are dividends, revenues, and expenses.

Accepted Answer

A) True 
 B)False

Question 12

The most that the owner of a sole proprietorship can lose, as a result of business debts or lawsuits, is the amount he/she has invested in the business.

Accepted Answer

A) True 
 B)False

Question 13

Beverly Dalton incorporated her CPA practice in 2013. At that time, the corporation purchased land for $29,000. The December 31, 2019 market value of the land is $85,000. On the December 31, 2019 balance sheet, this asset should be reported at ________ under U.S. GAAP and at ________ under international reporting standards.

Accepted Answer

A)  $29,000; $29,000 
B)  $85,000; $85,000 
C)  $29,000; $85,000 
D)  $85,000; $29,000 
A)  $29,000; $29,000 
B)  $85,000; $85,000 
C)  $29,000; $85,000 
D)  $85,000; $29,000

Question 14

________ represents a short-term liability created by purchasing "on account."

Accepted Answer

A)  Accounts Receivable 
B)  Notes Payable 
C)  Accounts Payable 
D)  Expenses 
A)  Accounts Receivable 
B)  Notes Payable 
C)  Accounts Payable 
D)  Expenses

Question 15

Briefly discuss each of the following corporate characteristics.
A. No mutual agency
B. Separate legal entity
C. Separation of ownership and management

Accepted Answer

A. No mutual agency - The stockholders o

Question 16

Match the accounting position to the job description.

-Controller

Accepted Answer

A) Performs reviews of companies to ensure compliance to rules and regulations 
B) Compiles financial statements, interacts with auditors, oversees regulatory reporting 
C) Specializes in accounting and financial management knowledge 
D) Serves the general public 
A) Performs reviews of companies to ensure compliance to rules and regulations 
B) Compiles financial statements, interacts with auditors, oversees regulatory reporting 
C) Specializes in accounting and financial management knowledge 
D) Serves the general public

Question 17

Which of the following formulae is used to calculate average total assets for the return on assets ratio?

Accepted Answer

A)  Average total assets = (Beginning total assets + Ending total assets) × 2 
B)  Average total assets = (Beginning total assets - Ending total assets) × 2 
C)  Average total assets = (Beginning total assets - Ending total assets) / 2 
D)  Average total assets = (Beginning total assets + Ending total assets) / 2 
A)  Average total assets = (Beginning total assets + Ending total assets) × 2 
B)  Average total assets = (Beginning total assets - Ending total assets) × 2 
C)  Average total assets = (Beginning total assets - Ending total assets) / 2 
D)  Average total assets = (Beginning total assets + Ending total assets) / 2

Question 18

List and briefly discuss four features that distinguish a corporation from other types of business organizations.

Accepted Answer

Students can list any four of the follow

Question 19

The Financial Accounting Standards Board is a U.S. governmental agency that oversees the creation and governance of accounting standards.

Accepted Answer

A) True 
 B)False

Question 20

Dynamic Production Services started the year with total assets of $120,000 and total liabilities of $55,000. The revenues and the expenses for the year amounted to $100,000 and $80,000, respectively. During the year, the company did not issue any common stock, but it distributed dividends of $50,000. Calculate Dynamic's net income for the year.

Accepted Answer

A)  $20,000 
B)  $100,000 
C)  $80,000 
D)  $120,000 
A)  $20,000 
B)  $100,000 
C)  $80,000 
D)  $120,000

Exam 1: Accounting and the Business Environment

Adventures Unlimited Company distributes cash dividends. How does this transaction affect the accounting equation?

Assume Metro Corporation had a net income of $2,500 for the year ending December 2018. Its beginning and ending total assets were $32,500 and $19,500, respectively. Calculate Metro's return on assets (ROA). (Round your percentage answer to two decimal places.)

The primary objective of financial reporting is to ensure that all investment decisions are risk free.

The balance sheet allows decision makers to determine their opinion about the financial position of the company.

International Financial Reporting Standards (IFRS) is the main U.S. accounting rule book and is currently created and governed by the Financial Accounting Standards Board.

Under U.S. GAAP, the monetary unit assumption states that transactions are recorded in dollars. What is the basis for this assumption?

The income statement is also called the statement of financial position.

Which of the following financial statements would be most useful if an analyst wants to know the likelihood of repayment of business debts?

An entity refers to one business which includes its owners.

The balance sheet reports on the assets, liabilities, and stockholders' equity of the business as of a specific date.

The three types of events that affect retained earnings are dividends, revenues, and expenses.

The most that the owner of a sole proprietorship can lose, as a result of business debts or lawsuits, is the amount he/she has invested in the business.

________ represents a short-term liability created by purchasing "on account."

Briefly discuss each of the following corporate characteristics. A. No mutual agency B. Separate legal entity C. Separation of ownership and management

Match the accounting position to the job description. -Controller

Which of the following formulae is used to calculate average total assets for the return on assets ratio?

List and briefly discuss four features that distinguish a corporation from other types of business organizations.

The Financial Accounting Standards Board is a U.S. governmental agency that oversees the creation and governance of accounting standards.

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Internal Control and Cash

Receivables

Plant Assets, Natural Resources, and Intangibles

Investments

Current Liabilities and Payroll

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost Management Systems: Activity-Based Just-In-Time

Cost Volume Profit Analysis

Variable Costing

Master Budgets

Flexible Budgets and Standard Cost Systems

Responsibility Accounting and Performance Evaluation

Short-Term Business Decisions

Capital Investment Decisions

Understanding Accounting Information Systems and their Components

Filters