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Exam 1: Accounting in Business

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Question 71

Multiple Choice

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Which of the following accounting principles prescribes that a company record its expenses incurred to generate the revenue reported?

A) Going-concern assumption.
B) Expense recognition (Matching) principle.
C) Measurement (Cost) principle.
D) Business entity assumption.
E) Consideration assumption.

F) A) and B)
G) A) and C)

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Question 72

Multiple Choice

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Match each of the following terms with the most appropriate definition. -Reflects outflows of resources such as cash and other assets to stockholders.

A) Assets
B) Expenses
C) Return on assets
D) Accounting equation
E) Risk
F) Common stock
G) Dividends
H) Liabilities

I) G) and H)
J) E) and G)

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Question 73

Multiple Choice

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Match the following terms with the appropriate definition. -Statement of cash flows

The accounting equation implies that: Assets + Liabilities = Equity.

As a general rule,revenues should not be recognized in the accounting records when earned,but rather when cash is received.

Match the following terms with the appropriate definition. -Balance sheet

The accounting principle that requires accounting information to be based on actual cost and requires assets and services to be recorded initially at the cash or cash-equivalent amount given in exchange,is the:

Ethical behavior requires that:

The accounting concept that requires every business to be accounted for separately from other business entities,including its owner or owners is known as the:

For each of the following transactions,identify the effects as reflected in the accounting equation.Use "+" to indicate an increase and a "-" to indicate a decrease.Use "A","L",and "E" to indicate assests,liabilities and equity,respectively.Part A has been completed as an example.

If a company has excess space in its building that it rents to another company for $700,what is the effect on the accounting equation during the first month?

You are reviewing the accounting records of Buddy's Foreign Automotive,owned by Bruce Jones,its sole stockholder.You have uncovered the following situations.List the appropriate accounting principle related to each independent scenario and suggest a correct action for each . 1.In August,a check for $500 was written to Community Sports.This amount represents soccer camp for his daughter Cassie. 2.Bruce plans a Going Out of Business Sale for June,since he will be closing the business for a month-long vacation in July.He plans to reopen August 1 and will continue operating Buddy's Foreign Automotive indefinitely. 3.Buddy received a shipment of tools from Ontario,Canada.The invoice was stated in Canadian dollars. 4.Sandy Lane paid $1,500 for a major repair services.The amount was recorded as revenue.The parts for the repair must be ordered from overseas and the service won't be complete until the following month.

The following schedule reflects shows the first month's transactions of the Green Construction Company; Jennifer Green is its sole stockholder: Provide descriptions for each transaction.

Accounting is an information and measurement system that does all of the following except:

If Houston Company billed a client for $10,000 of consulting work completed,the accounts receivable asset increases by $10,000 and:

The cost-benefit constraint prescribes that only information with benefits of disclosure less than the costs of providing it,need be disclosed.

The private-sector group that currently has the authority to establish generally accepted accounting principles in the United States is the:

All of the following are classified as liabilities except:

Jet Styling has the following beginning cash balance and cash transactions for the month of January.Using this information prepare a statement of cash flows. a. $\begin{array}{lr}\text { Beginning cash balance ................... } & \$ 3,200 \\\end{array}$ b. $\begin{array}{lr}\text { Cash received from stock issuance.... } & 15,000 \\\end{array}$ c. $\begin{array}{lr}\text { Cash payment toward long-term loan } & 1,000 \\\end{array}$ d. $\begin{array}{lr}\text { Cash payment of rent ....................... } & 1,800 \\\end{array}$ e. $\begin{array}{lr}\text { Purchased equipment for cash .......... } & 7,500 \\\end{array}$ f. $\begin{array}{lr}\text { Purchased store supplies for cash ...... } & 1,500 \\\end{array}$ g. $\begin{array}{lr}\text { Cash collected from customers ......... } & 7,750 \\\end{array}$ h. $\begin{array}{lr}\text { Cash dividends paid ......................... } & 2,000 \\\end{array}$ i. $\begin{array}{lr}\text { Cash payment of wages .................... } & 4,000\end{array}$

All of the following are classified as assets except: