Exam 1: Accounting in Action

A balance sheet shows

Rachel Bells Havens is a friend of yours from high school. She decided to become a beautician after leaving high school, rather than to attend college. She recently opened her own shop, and has contracted her services to a local hospital. She is paid a monthly fee for her services, and receives a small gratuity from each of the patients. She has just received her first set of financial statements from her accountant. She is quite upset. The statements show a cash balance of $3,600 at the end of the month, but a net income of only $500. She has written you a letter, asking you whether such a situation is possible, or whether she should find another accountant. Required: Write a short letter to your friend. Use proper form. Answer her question completely, but briefly.

Owner's equity is best depicted by the following:

Accountants rely on a fundamental business concept-ethical behavior-in reporting financial information.

Which of the following is not an advantage of the corporate form of business organization?

The accounting equation for Quattro Enterprises is as follows: $\frac { \text { Assets } } { \$ 120,000 } = \frac { \text { Liabilities } } { \$ 60,000 } + \frac { \text { Stockholders' Equity } } { \$ 60,000 }$ If Quattro purchases office equipment on account for $25,000, the accounting equation will change to

The proprietorship form of business organization

The total assets and liabilities of Company at January 1 and December 31, 2018 are presented below. Instructions: 1. Assume dividends of $10,800 were paid and no additional stock was issued during the year. Revenues were $110,000. Compute (a) net income, and (b) expenses. 2. Assume additional stock was issued for $4,800 and no dividends were paid during the year. Expenses were $42,000. Compute (a) net income, and (b) revenues. 3. Assume additional stock was issued for $62,000 and dividends of $15,600 were paid during the year. Compute net income. 4. Assume additional stock was issued for $6,000 and net income was $51,000. Compute dividends paid.

The conceptual framework that underlies IFRS

Transactions that can be measured in dollars and cents are recorded in the financial information system.

The fair value principle is applied for

A net loss will result during a time period when

Stockholders' equity can be described as

Selected transactions for Parton Company are listed below. List the number of the transaction and then describe the effect of each transaction on assets, liabilities, and stockholders' equity. Sample: Issued common stock in exchange for cash investment. The answer would be-Increase in assets and increase in stockholders' equity. 1. Paid monthly utility bill. 2. Purchased new display case for cash. 3. Paid cash for repair work on security system. 4. Billed customers for services performed. 5. Received cash from customers billed in 4. 6. Paid dividends. 7. Incurred advertising expenses on account. 8. Paid monthly rent. 9. Received cash from customers when service was rendered.

If total liabilities decreased by $50,000 and stockholders' equity increased by $30,000 during a period of time, then total assets must change by what amount and direction during that same period?

Fat Possum's Service Shop started the year with total assets of $330,000 and total liabilities of $240,000. During the year, the business recorded $630,000 in revenues, $420,000 in expenses, and paid dividends of $60,000. Stockholders' equity at the end of the year was

The mere recording of economic events is called ______________, and is just one part of the _______________ process.

The economic entity assumption requires that the activities of an entity be kept separate and distinct from the activities of its owner and all other economic entities.

IFRS, compared to GAAP, tends to be more

Identify whether the following items would be reported on the income statement (IS) or balance sheet (BS). 1. Cash 2. Service Revenue 3. Notes Payable 4. Interest Expense 5. Accounts Receivable