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Exam 1: Introduction to Accounting and Business

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Question 71

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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 concept, what is the amount that will be used to record this transaction in the accounting records?

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Question 72

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Earning revenue

A) increases assets, increases stockholders' equity
B) increases assets, decreases stockholders' equity
C) increases one asset, decreases another asset
D) decreases assets, increases liabilities

E) None of the above
F) A) and D)

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Question 73

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Cash dividends

All of the following are general-purpose financial statements except

As of the end of its accounting period, December 31, Year 1, Great Plains Company has assets of $940,000 and liabilities of $300,000. During Year 2, stockholders invested an additional $73,000 and received $33,000 in dividends from the business. What is the amount of net income during Year 2, assuming that as of December 31, Year 2, assets were $995,000, and liabilities were $270,000?

If total assets increased by $190,000 during a specific period and liabilities decreased by $10,000 during the same period, the period's change in total stockholders' equity was a $200,000 increase.

Which of the following would not normally operate as a service business?

Match the following business types with each business listed below. Each may be used more than once. -A modular homebuilder

The debt created by a business when it makes a purchase on account is referred to as an

Given the following: Beginning stockholders' equity $58,000 Ending stockholders' equity $30,000 Stockholder dividends $25,000 Calculate net income or net loss.

Match the following business types with each business listed below. Each may be used more than once. -A book publisher

Ramierez Company received its first electric bill in the amount of $60 which will be paid next month. How will this transaction affect the accounting equation?

The accountant for Scott Industries prepared the following list of account balances from the company's records for the year ended December 31: $\begin{array} { l r l } \text { Fees earned } & \$ 165,000 & \text { Cash } \\\text { Accounts receivable } & 14,000 & \text { Selling expenses } \\\text { Equipment } & 64,000 & \text { Common stock } \\\text { Accounts payable } & 12,000 & \text { Interest income } \\\text { Salaries \& wages expense } & 40,000 & \text { Frepaid rent } \\\text { Income taxes payable } & 5,000 & \text { Income taxes expense } \\\text { Notes payable } & 20,000 & \text { Rent expense }\end{array}$ -Shiny Kar Company had the following transactions. For each transaction, show the effect on the accounting equation by putting the amount and direction plus, minus, or NC for no change) in each box of the table below. $\begin{array}{|l|l|l|l|l|}\hline&&\text { Assets } & \text { Liabilities } & \text { Stockholder's equity} \\\hline \text { a) } & \text { Shiny K ar withdrew } \$ 500 \text { cash for food } \\\hline \text { b) } & \begin{array}{l}\text { Shiny K ar Company sold } 2 \text { cars for a total of } \\\$ 55,000 \text { on account }\end{array} \\\hline \text { c) } & \begin{array}{l}\text { The cost of the cars sold in b) above was } \\\$ 40,000\end{array} \\\hline \text { d) } & \begin{array}{l}\text { Shiny Kar received } \$ 35,000 \text { payment for } \\\text { a car previ ously sold on account }\end{array} \\\hline \text { e) } & \text { Shiny Kar paid } \$ 450 \text { for advertising } \\\hline \text { f) } & \begin{array}{l}\text { Shiny K ar purchased } \$ 150 \text { of cleaning } \\\text { supplies on account }\end{array} \\\hline\end{array}$

The stockholders' rights to the assets rank ahead of the creditors' rights to the assets.

Which of the items below is not a business entity?

The objectivity concept requires that

Which of the following is not a business transaction?

Which of the following is not true of accounting principles?

Which of the following is not a certification for accountants?

Assets that are used up during the process of earning revenue are called expenses.