Exam 1: Accounting and the Business Environment

On May 1, 2015, Deborah Merchant started Deborah's Launderette by investing $20,000. On May 3, the business borrowed $5,000 from a creditor and executed a note payable with the principal and interest to be due in one year. On May 7, the business purchased $15,000 of equipment for cash. On May 8, Deborah's Launderette rendered service to its first client and earned $3,000 in cash. On May 12, Deborah incurred repair expense of $1,800 and promised to pay the repair contractor the following month. On May 18, Deborah rendered service to a new client in the amount of $8,000 on account, as the client promised to pay the following month. At the end of May, Deborah took a withdrawal of $1,500. Prepare an income statement for the month of May, a statement of owner's equity for the month of May, and a balance sheet as of May 31, 2015.

The Sarbanes-Oxley Act (SOX)made it a criminal offense to:

David has decided to open an auto-detailing business. He will pick up an automobile from the client, take it to his parents' garage, detail it, and return it to the client. If he does all of the work himself and takes no legal steps to form a special organization, which type of business organization, in effect, has he chosen?

A sole proprietor makes a cash withdrawal from his company. How does this transaction affect the accounting equation?

The Public Company Accounting Oversight Board is a watchdog agency that monitors the work of independent accountants who audit public companies.

Which of the following statements best defines financial statements?

Which of the following statements is true of a sole proprietorship?

IFRS are comparatively more specific and more rule based than U.S. GAAP.

Which of the following financial statements lists the entity's assets, liabilities, and owner's equity as of a specific date?

According to the ________, the acquired assets should be recorded at the amount actually paid rather than at the estimated market value.

Which of the following financial statements reports an increase or decrease in net cash during the time period covered?

Robinson starts a plumbing service named Crusoe Waterworks. Transactions of Crusoe Waterworks during the first year of operations are given below:

The income statement is also called the statement of financial position.

The relative proportion of economic resources and obligations would be shown by the balance sheet.

Ace Inc. had the following transactions in June: Sold goods for $4,000 on account; received cash on account, $5,000; paid $800 for repair expense; paid $2,000 to a supplier that it owed from the previous month. What is the combined effect on Cash of the June transactions?

Which of the following amounts appears on both the statement of owner's equity and the balance sheet?

The assets of Sunlight Company are $270,000 and equity is $90,000. Liabilities will be:

Which of the following financial statements shows the changes in owner's capital during a period of time?

Martin Supply Service received $1,000 cash from a customer which was owed to the business from the previous month. Which of the following accounts would decrease as a result of this transaction?

Following is an extract of account balances of Wilson Mowing Service as of December 31 of the first year of operation: At the end of the year, what is the amount of total assets?