Question 1

The SEC is a governmental agency that oversees world-wide financial markets and organizations that set accounting standards.

Accepted Answer

A) True 
 B)False

Question 2

The net income of Thomas Company was $73,000 for this year.The beginning balance of Thomas,Capital was $32,000 and the ending balance was $71,000.There were no new capital contributions during the year.What was the amount of withdrawals during the year?

Accepted Answer

A)  $71,000 
B)  $34,000 
C)  $144,000 
D)  $32,000 
A)  $71,000 
B)  $34,000 
C)  $144,000 
D)  $32,000

Question 3

Which of the follow statements regarding the primary objective of financial reporting is correct?

Accepted Answer

A)  The primary objective of financial reporting is to provide information useful for the acquisition of long-term assets. 
B)  Information that is faithfully represented is complete, neutral, and free from error. 
C)  Relevant information ensures that users of the information will make the correct decisions. 
D)  To be useful, information must follow the Generally Accepted Accounting Principles which are created and governed by the Securities and Exchange Commission. 
A)  The primary objective of financial reporting is to provide information useful for the acquisition of long-term assets. 
B)  Information that is faithfully represented is complete, neutral, and free from error. 
C)  Relevant information ensures that users of the information will make the correct decisions. 
D)  To be useful, information must follow the Generally Accepted Accounting Principles which are created and governed by the Securities and Exchange Commission.

Question 4

Using the following information,provide the complete accounting equation.
 $$\begin{array} { | l | l | } 
\hline \text { Use this information to } & \text { Provide the accounting equation } \
\hline \text { Assets } \$ 150,000 ; \text { Equity } \$ 60,000 & \
\hline \text { Liabilities } \$ 200,000 ; \text { Equity } & \
 45,000 & \
\hline \text { Assets } \$ 75,000 ; \text { Liabilities } \$ 40,000 & \
\hline
\end{array}$$

Accepted Answer

The answer of Using the following information,provide the complete accounting...

Question 5

Jason Repair Company incurred $1,500 as an advertising expense and promised to pay the advertising agency within 30 days.The company is a sole proprietorship.Which of the following will decrease as a result of this transaction?

Accepted Answer

A)  Assets 
B)  Jason, Capital 
C)  Liabilities 
D)  Revenues 
A)  Assets 
B)  Jason, Capital 
C)  Liabilities 
D)  Revenues

Question 6

Which of the following will be categorized as an operating activity on the statement of cash flows?

Accepted Answer

A)  Cash received by selling old equipment 
B)  Cash paid for purchase of new machinery 
C)  Cash paid to employees 
D)  Cash paid for patent 
A)  Cash received by selling old equipment 
B)  Cash paid for purchase of new machinery 
C)  Cash paid to employees 
D)  Cash paid for patent

Question 7

________ 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 8

Under the going concern principle,accountants must provide proof that the business will remain in operations long enough to use existing resources for their intended purpose.

Accepted Answer

A) True 
 B)False

Question 9

The balance of Morgan,Capital at the beginning of the year and the end of the year was $50,000 and $63,000,respectively.There were no new capital contributions during the year.Owner withdrawals were $25,000.What was the net income or loss for the year?

Accepted Answer

A)  Net income of $88,000 
B)  Net loss of $88,000 
C)  Net loss of $38,000 
D)  Net income of $38,000 
A)  Net income of $88,000 
B)  Net loss of $88,000 
C)  Net loss of $38,000 
D)  Net income of $38,000

Question 10

Johnson Waterworks Company provides plumbing services.The company is a sole proprietorship.Transactions during the first year of operations are provided below. 
a)The owner,Mitchell Johnson,contributed $14,000 cash in exchange for capital.
b)Paid $1,100 for equipment to be used for plumbing repairs.
c)Borrowed $13,000 from a local bank and deposited the money in the checking account.
d)Paid $300 in rent for the year.
e)Paid $200 for plumbing supplies to be used on various jobs next year.
f)Completed a plumbing repair for a law firm and received $3,300.
Calculate the amount of total assets at the end of the first year.Assume the plumbing supplies of $200 are left at the end of the year.

Accepted Answer

A)  $1,300 
B)  $1,100 
C)  $27,000 
D)  $30,000 
A)  $1,300 
B)  $1,100 
C)  $27,000 
D)  $30,000

Question 11

An owner's withdrawal represents an expense of the business.

Accepted Answer

A) True 
 B)False

Question 12

Stuart Allen Company manufactures computer hardware.The president of the company bought a new car as a gift for his daughter and paid for it using cash from the business.Since the company paid for the car,it was recorded in its books as an asset.Which of the following concepts or principles of accounting did the company violate?

Accepted Answer

A)  monetary unit assumption 
B)  economic entity assumption 
C)  cost principle 
D)  going concern assumption 
A)  monetary unit assumption 
B)  economic entity assumption 
C)  cost principle 
D)  going concern assumption

Question 13

Janice Wilford contributed $50,000 cash to JW Company in exchange for capital.JW Company is a sole proprietorship.As a result of this transaction,assets and revenues will increase.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is the correct accounting equation?

Accepted Answer

A)  Assets + Liabilities = Equity 
B)  Assets = Liabilities + Equity 
C)  Assets + Revenues = Equity 
D)  Assets + Revenues = Liabilities + Expenses 
A)  Assets + Liabilities = Equity 
B)  Assets = Liabilities + Equity 
C)  Assets + Revenues = Equity 
D)  Assets + Revenues = Liabilities + Expenses

Question 15

What is the accounting equation? Briefly explain each of the three parts.

Accepted Answer

Assets = Liabilities + Equity.
Assets ar

Question 16

Any person or business to whom a business owes money is called the business's creditor.

Accepted Answer

A) True 
 B)False

Question 17

Outside investors ordinarily use financial accounting information to decide whether or not to invest in a business.

Accepted Answer

A) True 
 B)False

Question 18

List the three sections of the statement of cash flows and state what is included in each section.
 $$\begin{array} { | l | l | } 
\hline \text { Statement of cash flows sections } & \text { What is included in each section } \
\hline 1 . & \
\hline 2 . & \
\hline 3 . & \
\hline
\end{array}$$

Accepted Answer

\[\begin{array} { | l | l | } 
\hline \t

Question 19

International Financial Reporting Standards ________ U.S.Generally Accepted Accounting Principles.

Accepted Answer

A)  are the same as 
B)  are generally less specific than 
C)  are based less on principle than 
D)  leave less room for professional judgment than 
A)  are the same as 
B)  are generally less specific than 
C)  are based less on principle than 
D)  leave less room for professional judgment than

Question 20

The Public Company Accounting Oversight Board (PCAOB)was created ________.

Accepted Answer

A)  by the Sarbanes-Oxley Act (SOX) 
B)  to perform audits of public companies 
C)  to make restitution to investors who were defrauded by the issuance of fraudulent financial reports 
D)  to require auditors to take responsibility for the accuracy and completeness of financial reports from firms they audit 
A)  by the Sarbanes-Oxley Act (SOX) 
B)  to perform audits of public companies 
C)  to make restitution to investors who were defrauded by the issuance of fraudulent financial reports 
D)  to require auditors to take responsibility for the accuracy and completeness of financial reports from firms they audit

Exam 1: Accounting and the Business Environment

The SEC is a governmental agency that oversees world-wide financial markets and organizations that set accounting standards.

The net income of Thomas Company was $73,000 for this year.The beginning balance of Thomas,Capital was $32,000 and the ending balance was $71,000.There were no new capital contributions during the year.What was the amount of withdrawals during the year?

Which of the follow statements regarding the primary objective of financial reporting is correct?

Using the following information,provide the complete accounting equation. Use this information to Provide the accounting equation Assets \ 150,000; Equity \ 60,000 Liabilities \ 200,000; Equity 45,000 Assets \ 75,000; Liabilities \ 40,000

Jason Repair Company incurred $1,500 as an advertising expense and promised to pay the advertising agency within 30 days.The company is a sole proprietorship.Which of the following will decrease as a result of this transaction?

Which of the following will be categorized as an operating activity on the statement of cash flows?

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

Under the going concern principle,accountants must provide proof that the business will remain in operations long enough to use existing resources for their intended purpose.

The balance of Morgan,Capital at the beginning of the year and the end of the year was $50,000 and $63,000,respectively.There were no new capital contributions during the year.Owner withdrawals were $25,000.What was the net income or loss for the year?

An owner's withdrawal represents an expense of the business.

Janice Wilford contributed $50,000 cash to JW Company in exchange for capital.JW Company is a sole proprietorship.As a result of this transaction,assets and revenues will increase.

Which of the following is the correct accounting equation?

What is the accounting equation? Briefly explain each of the three parts.

Any person or business to whom a business owes money is called the business's creditor.

Outside investors ordinarily use financial accounting information to decide whether or not to invest in a business.

List the three sections of the statement of cash flows and state what is included in each section. Statement of cash flows sections What is included in each section 1. 2. 3.

International Financial Reporting Standards ________ U.S.Generally Accepted Accounting Principles.

The Public Company Accounting Oversight Board (PCAOB)was created ________.

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets,natural Resources,and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

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