Exam 1: Introduction to Accounting and Business

For each of the following, determine the amount of net income or net loss for the year.

Identify each of the following as either internal or external users of accounting information.

The accountant for Franklin Company prepared the following list of account balances from the company's records for the year ended December 31, 2011: Based on this information, is Franklin Company profitable? Explain your answer by including net income or loss.

Due to various fraudulent business practices and accounting coverups in the early 2000's, Congress enacted the Sarbanes-Oxley Act of 2002. The Act was responsible for establishing a new oversight board for public accountants called the

For accounting purposes, the business entity should be considered separate from its owners if the entity is

An income statement is a summary of the revenues and expenses of a business as of a specific date.

The assets and liabilities of the company are $175,000 and $40,000, respectively. Stockholders' equity should equal

Generally accepted accounting principles regulate how and what financial information is reported by businesses.

The following are examples of external users of accounting information except

Which of the following is not true of accounting principles?

The Sarbanes-Oxley Act prohibits CPAs from providing nonaudit investment banking services.

The accounting equation may be expressed as

Which of the following is the best description of accounting's role in business?

How does receiving a bill to be paid next month for services rendered affect the accounting equation?

Receiving a bill or otherwise being notified that an amount is owed is recorded until the amount is paid.

Which one of the following is the authoritative body in the United States having the primary responsibility for developing accounting principles?

The role of accounting is to provide many different users with financial information to make economic decisions.

On March 1, 2011, Cook's Catering Company Capital Stock balance was $30,000 and the balance of Retained Earnings was $120,000. During March, dividends of $31,000 were declared and paid by the business. Assets, liabilities, revenues, and expenses at March 31, 2011, were as follows: Present, in good form, (a) an income statement for March, (b) a retained earnings statement for March, and (c) a balance sheet as of March 31.

Company G has a ratio of liabilities to stockholders' equity of 0.12 and 0.28 for 2010 and 2011, respectively. In contrast, Company M has a ratio of liabilities to stockholders' equity of 1.13 and 1.29 for the same period. REQUIRED: Based on this information, which company's creditors are more at risk and why? Should the creditors of either company fear the risk of nonpayment?

The basic difference between manufacturing and merchandising companies is the completion level of the products they purchase for resale to customers.