Exam 1: Accounting in Business

Flash reported net income of $17,500 for the past year. At the beginning of the year the company had $200,000 in assets and $50,000 in liabilities. By the end of the year, assets had increased to $300,000 and liabilities were $75,000. Calculate its return on assets:

The characteristics below apply to at least one of the forms of business organization. a. Is a separate legal entity. b. Is allowed to be owned by one person only. c. Owner or owners are personally liable for debts of the business. d. Is a taxable entity. e. Is a business entity. f. May have a contract specifying the division of profits among the owners. g. Has an unlimited life Use the following format to indicate (with a "yes" or "no") whether or not a characteristic applies to each type of business organization.

You are reviewing the accounting records of Cathy's Antiques, owned by Cathy Miller. You have uncovered the following situations. Compose a memo to Ms. Miller. Cite the appropriate accounting principle and suggest an action for each separate item. 1. In August, a check for $500 was written to Wee Day Care Center. This amount represents child care for her son Brandon. 2. Cathy plans a Going Out of Business Sale for May, since she will be closing her business for a month-long vacation in June. She plans to reopen July 1 and will continue operating Cathy's Antiques indefinitely. 3. Cathy received a shipment of pine furniture from Quebec, Canada. The invoice was stated in Canadian dollars. 4. Joseph Clark paid $1,500 for a dining table. The amount was recorded as revenue. The table will be delivered to Mr. Clark in six weeks.

In the partnership form of business, the owners are called stockholders.

If a parcel of land that was originally purchased for $85,000 is offered for sale at $150,000, is assessed for tax purposes at $95,000, is recognized by its purchasers as easily being worth $140,000, and is sold for $137,000. At the time of the sale, assume that the seller still owed $30,000 to TrustOne Bank on the land that was purchased for $85,000. Immediately after the sale, the seller paid off the loan to TrustOne Bank. What is the effect of the sale and the payoff of the loan on the accounting equation?

Owners of a corporation are called shareholders or stockholders.

Explain why ethics are an integral part of accounting.

The question of when revenue should be recognized on the income statement (according to GAAP) is addressed by the:

Return on assets reflects the effectiveness of a company's ability to generate profit through productive use of its assets.

Assets removed from the business by the business owner for personal use are called ___________.

The accounts of Garfield Company with the increases or decreases that occurred during the past year are as follows: Except for net income, an investment of $3,000 by the owner, and a withdrawal of $11,000 by the owner, no other items affected the owner's capital account. Using the balance sheet equation, compute net income for the past year.

The primary objective of financial accounting is:

Graham Roofing Company, owned by R. Graham, began operations in May and completed the following transactions during that first month of operations. Show the effects of the transactions on the accounts of the accounting equation by recording increases and decreases in the appropriate columns in the table below. Do not determine new account balances after each transaction. Determine the final total for each account and verify that the equation is in balance.

Prepare a November 30 balance sheet in proper form for Green Bay Delivery Service from the following alphabetical list of the accounts at November 30:

The description of the relation between a company's assets, liabilities, and equity, which is expressed as Assets = Liabilities + Equity, is known as the:

Viscount Company collected $42,000 cash on its accounts receivable. The effects of this transaction as reflected in the accounting equation are:

Identify the three basic forms of business organizations.

Hal Burton began a Web Consulting practice and completed these transactions during September of the current year: Show the effects of the above transactions on the accounting equation of Halley Burton, Consultant. Use the following format for your answers. The first item is shown as an example. Increase = I Decrease = D No effect = N

The International Accounting Standards Board (IASB) is the government group that establishes reporting requirements for companies that issue stock to the public.

The balance sheet shows a company's net income or loss due to earnings activities over a period of time.