Exam 1: Accounting and the Business Environment

Dynamic Production Services started the year with total assets of $130,000 and total liabilities of $50,000.The company is a sole proprietorship.The revenues and the expenses for the year amounted to $100,000 and $60,000,respectively.During the year,there were no new capital contributions and the owner withdrew $45,000.Calculate Dynamic's net income for the year.

Which of the following statements is TRUE of an income statement?

The guidelines for accounting information are called Generally Accepted Accounting Principles (GAAP).

Certified Public Accountants are licensed professional accountants who serve the general public.

Gulf Waterworks Company provides plumbing services.The company is a sole proprietorship.Transactions during the first year of operations are given below. a)The owner,Jason Robinson,contributed $6,000 cash in exchange for capital. b)Paid $5,000 cash for equipment to be used for plumbing repairs. c)Borrowed $26,000 from a local bank and deposited the money in the checking account. d)Paid $600 rent for the year. e)Purchased $1,800 of office supplies on account. f)Completed a plumbing repair project for a local lawyer and received $3,200 cash. Calculate the amount of total owner's equity at the end of the first year after recording the transactions.Assume office supplies of $1,800 are left at the end of the year.

According to the ________,acquired assets should be recorded at the amount actually paid rather than at the estimated market value.

The total amount of assets a business possesses may or may not be equal to the total of liabilities and owner's equity of the business.

Indicate the effects on the accounting equation of the following business transactions of ABC Service Company for b)to d)below.The company is a sole proprietorship.Use proper account titles.Transaction a)is answered as a guide. a)Mary Johnson,the sole proprietor,contributed cash in exchange for capital. b) Purchased equipment; signed a note payable. c) Performed services for a customer on account. d) At the end of the first month, paid office rent.

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

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

Accounting starts with economic activities that accountants review and evaluate using critical thinking and judgment to create useful information that helps individuals make good decisions.

Members of a limited-liability company (LLC)are not personally liable for the debts of the business.

Which of the following financial statements lists the entity's assets,liabilities,and owner's equity as of a specific date?

Lisa Smith decided to start her CPA practice as a sole proprietorship.The business purchased an office building for $35,000.The real estate agent said the building was worth $50,000 in the current market.The business recorded the building as a $50,000 asset because Lisa believes that is the real value of the building.Which of the following concepts or principles of accounting is being violated?

In a limited-liability company,the ________.

What is the calculation for return on assets (ROA)? What does ROA measure?

Which of the following organizations is responsible for the creation and governance of accounting standards in the United States?

The balance sheet shows whether or not a business is profitable.

Managerial accounting provides information to ________.

The left side of the accounting equation always equals the right side of the accounting equation.