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Exam 1: Accounting and Business

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Question 111

True/False

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Proper ethical conduct implies that you only consider what's in your best interest.

A) True
B) False

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Question 112

Multiple Choice

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

A) Makes up 10% of business organizations in the United States.
B) Combines the attributes of a partnership and a corporation.
C) Provides tax and liability advantages to the owners.
D) All are correct.

E) C) and D)
F) A) and D)

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Question 113

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All of the following statements regarding the ratio of liabilities to stockholders' equity are true except

Indicate whether each of the following accounts represents an asset, liability, or stockholders' equity: (a) Accounts Payable (b) Wages Expense (c) Common Stock (d) Accounts Receivable (e) Dividends (f) Land

Match the following business types with each business listed below. Each may be used more than once. -A tax preparation firm

Use the accounting equation to answer each of the independent questions below. (a) At the beginning of the year, Norton Company's assets were $75,000 and its stockholders' equity was $38,000. During the year, assets increased by $18,000 and liabilities increased by $4,000. What was the stockholders' equity at the end of the year? (b) At the beginning of the year, Turpin Industries had liabilities of $44,000 and stockholders' equity of $66,000. If assets increased by $10,000 and liabilities decreased by $5,000, what was the stockholders' equity at the end of the year?

Which of the following accounts is a liability?

The account balances of Awesome Travel Services at December 31 are listed below. There were no additional investments or dividends by Awesome Travel Services during the year. $\begin{array}{lrlr}\text { Accounts payable } & \$ 12,000 & \text { Retained earnings (Jan. 1) } & \$ 6,000 \\\text { Accounts receivable } & 14,000 & \text { Supplies } & 1,000 \\\text { Cash } & 18,000 & \text { Income taxes expense } & 1,300 \\\text { Common stock } & 4,000 & \text { Utilities expense } & 8,000 \\\text { Computer equipment } & 21,000 & \text { Wages expense } & 25,000 \\\text { Fees earned } & 78,000 & \text { Supplies expense } & 1,700\\\text { Rent expense } & 10,000\end{array}$ ? Prepare an income statement, a statement of stockholders' equity, and a balance sheet as of December 31.

For each of the following, determine the amount of net income or net loss for the year. (a) Revenues for the year totaled $\$ 71,300$ and expenses totaled $\$ 35,500$ . The shareholders purchased $\$ 15,000$ of common stock during the year. (b) Revenues for the year totaled $\$ 220,500$ and expenses total ed $\$ 175,000$ . The shareholders were paid $\$ 40,000$ dividends during the year. (c) Revenues for the year totaled $\$ 149,000$ and expenses total ed $\$ 172,000$ . The shareholders purchased $\$ 12,000$ of common stock and were paid $\$ 16,000$ in dividends during the year. (d) Revenues for the year totaled $\$ 198,150$ and expenses total ed $\$ 174,200$ . The shareholders were paid $\$ 35,000$ dividends during the year.

Stockholders' equity at the beginning of the year for ATLAS Inc. was $390,000, while its liabilities totaled $230,000. During the year its assets increased by $75,000; its liabilities decreased by $50,000. Which of these is stockholders' equity at the end of the year for ATLAS Inc.?

Match each transaction with its effect on the accounting equation. Each letter may be used more than once. -Paid cash for the purchase of supplies

Using the following accounts and their amounts, prepare in good format a statement of stockholder's equity for Bright Futures Company for the month ended August 31. No common stock was issued during the year. $\begin{array}{lr}\text { Tel ephone expense } & 1,150 \\\text { Cash } & 3,000 \\\text { Accounts payable } & 1,540 \\\text { Dividends } & 800 \\\text { Fees earned } & 15,700 \\\text { Rent expense } & 1,400 \\\text { Supplies } & 140 \\\text { Accounts receivable } & 1,500 \\\text { Computer equipment } & 17,600 \\\text { Common stock } & 10,000 \\\text { Retained earnings (August } 1 \text { ) } & 4,320 \\\text { Wages expense } & 4,800 \\\text { Utilities expense } & 750 \\\text { Office expense } & 420\end{array}$ ​ ​

Dividends paid to stockholders decrease assets and increase equity.

The primary role of accounting is to determine the amount of taxes a business will be required to pay to taxing entities.

On March 1, the amount of common stock and retained earnings in Richard's Catering Company was $100,000 and $50,000, respectively. During March, stockholders were paid $31,000 in dividends from the business. The amounts of the various assets, liabilities, revenues, and expenses are as follows: $\begin{array} { l r } \text { Accounts payable } & \$ 10,250 \\\text { Accounts receivable } & 45,950 \\\text { Cash } & 23,840 \\\text { Fees earned } & 64,950 \\\text { Insurance expense } & 1,275 \\\text { Land } & 88,400 \\\text { Miscellaneous expense } & 1,210 \\\text { Rent expense } & 9,000 \\\text { Sal ary expense } & 20,300 \\\text { Supplies } & 900 \\\text { Supplies expense } & 525 \\\text { Utilities expense } & 2,800\end{array}$ ? Present, in good form, (a) an income statement for March, (b) a statement of stockholder's equity for March, and (c) a balance sheet as of March 31.

Computer Corporation is starting its computer programming business and has sold stock of $15,000. Identify how the accounting equation will be affected.

Transactions affecting stockholders' equity include

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

If total assets decreased by $30,000 during a specific period and stockholders' equity decreased by $35,000 during the same period, the period's change in total liabilities was a $65,000 increase.

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