Exam 1: Accounting in Business

All of the following are classified as assets except:

Generally the lower the risk, the higher the return that can be expected.

Identify and describe the four basic financial statements:

Alpha Company has assets of $600,000, liabilities of $250,000, and equity of $350,000. It buys office equipment on credit for $75,000. What would be the effects of this transaction on the accounting equation?

Prepare a April 30 balance sheet in proper form for Two Rivers Vending Service, Inc. from the following alphabetical list of the accounts at April 30: Accounts receivable................. \1 0,000 Accounts payable.................. 18,000 Building................................... 28,000 Cash....................................... 10,000 Notes payable.......................... 47,000 Office equipment..................... 12,000 Stockholders' equity............... ? Trucks.................................... 55,000

Grandmark Printing pays $2,000 rent to the landlord of the building where its facilities are located. How does this transaction affect the accounting equation for Grandmark?

The accountant of Action Adventure Games, Inc. prepared a balance sheet after every 10 day period. The only resources invested by the owner were at the start of the company on June 1. During June, the first month of operation, the following balance sheets were prepared: Required: Describe the nature of each of the four transactions that took place between the balance sheet dates shown. Assume only one transaction affected each account. $\text {June}$ 10 $\quad$$\underline{\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad}$ 20 $\quad$$\underline{\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad}$ 30 $\quad$$\underline{\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad}$ $\quad$$\quad$$\underline{\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad}$

The three major types of business activities are operating, financing, and investing.

The income statement describes revenues earned and expenses incurred over a specified period of time due to earnings activities.

Owners of a corporation are called shareholders or stockholders.

Which of the following accounting principles require that all goods and services purchased be recorded at actual cost?

The statement of cash flows identifies cash flows separated into operating, investing, and financing activities over a period of time.

The Superior Company acquired a building for $500,000. The building was appraised at a value of $575,000. The seller had paid $300,000 for the building 6 years ago. Which accounting principle would require Superior to record the building on its records at $500,000?

Understanding generally accepted accounting principles is not necessary to effectively use and interpret financial statements.

Saddleback Company paid off $30,000 of its accounts payable in cash. What would be the effects of this transaction on the accounting equation?

The four basic financial statements include the balance sheet, income statement, statement of retained earnings, and statement of cash flows.

Return on assets is also known as return on investment.

What is the balance sheet? What is its purpose?

Chou Co. has a net income of $43,000, assets at the beginning of the year are $250,000 and assets at the end of the year are $300,000. Compute its return on assets.

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