Exam 1: Introduction to Accounting and Business

(a)A vacant lot acquired for $83,000 cash is sold for $127,000 in cash.What is the effect of the sale on the total amount of the seller's (1)assets,(2)liabilities,and (3)stockholders' equity? ​ (b)Assume that the seller owes $52,000 on a loan for the land.After receiving the $127,000 cash in (a),the seller pays the $52,000 owed.What is the effect of the payment on the total amount of the seller's (1)assets, (2)liabilities,and (3)stockholders' equity?

Net income and net profit do not mean the same thing.

Which of the following is true in regards to a limited liability company?

Debts owed by a business are referred to as

Daniels Company made the following selected transactions during May: 1. Received cash from sale of stock,$55,000 2. Paid creditors on account,$7,000 3. Billed customers for services on account,$2,565 4. Received cash from customers on account,$8,450 5. Paid dividends to stockholders,$2,500 6. Received the utility bill,$160,to be paid next month ​ Note: Each transaction has two entries.

Two factors that typically lead to ethical violations are relevance and timeliness of accounting information.

Give the major disadvantage of disregarding the cost principle and constantly revaluing assets based on appraisals and opinions.

Some of the major fraudulent acts by senior executives started as what they considered to be small ethical lapses which grew out of control.

Indicate how the following transactions affect the accounting equation. ​ (a)The purchase of supplies on account (b)The purchase of supplies for cash (c)Payment of cash dividends to stockholders (d)Revenues received in cash (e)Sale made on account

If a building is appraised for $85,000,offered for sale at $90,000,and the buyer pays $80,000 cash for it,the buyer would record the building at $85,000.

Which of the following accounts is a liability?​

No significant differences exist between the accounting standards issued by the FASB and the IASB.

Discuss internal and external users of accounting information.What areas of accounting provide them with information? Give an example of the type of report each type of user might use.

The total assets and total liabilities of Paul's Pools and Palaces at the beginning and at the end of the current fiscal year are as follows:

Given the following data: Dec.31,Year 2 Dec.31,Year 1 Total liabilities $128,250 $120,000 Total stockholders' equity 95,000 80,000 Compute the ratio of liabilities to stockholders' equity for each year.Round to two decimal places.

Dividends paid to stockholders decrease assets and increase equity.

Select the type of business that is most likely to obtain large amounts of resources by issuing stock.

The cost principle is the basis for entering the purchase price into the accounting records.

Donner Company is selling a piece of land adjacent to its business.An appraisal reported the market value of the land to be $120,000.The Focus Company initially offered to buy the land for $107,000.The companies settled on a purchase price of $115,000.On the same day,another piece of land on the same block sold for $122,000.Under the cost principle,what is the amount that will be used to record this transaction in the accounting records?

Receiving payments on an account receivable increases both equity and assets.