Exam 1: Accounting in Business

Identify and describe the four basic financial statements:

An income statement reports on investing and financing activities.

An example of an investing activity is:

A balance sheet lists:

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

Owners of a corporation are called shareholders or stockholders.

The records of Roadmaster Auto Rentals show the following information as of December 31. The owner, Rob Fletcher withdrew $52,000 during the year for personal expenses. Prepare a December income statement, a December statement of owner's equity, and a December 30 balance sheet. Accounts payable \ 36,000 Wages expense \ 75,000 Insurance expense 2,000 Advertising expense 22,000 Accounts receivable 24,000 Cash 11,000 R. Fletcher, Capital, January 1 150,000 Office Furniture 15,000 Airplanes 150,000 Maintenance expense 39,000 Notes payable 47,000 Revenues 217,000 Hangar 60,000

Return on assets is also known as return on investment.

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:

Objectivity means that financial information is supported by independent, unbiased evidence; it demands more than a person's opinion.

Determine the net income of a company for which the following information is available for the month of September. Service revenue \ 300,000 Rent expense 48,000 Utilities expense 3,200 Salaries expense 81,000

Rushing had income of $150 million and average invested assets of $1,800 million. Its return on assets is:

Identify each of the following business activities 1 through 6 into the appropriate category a, b, and c. a. Operating b. Investing c. Financing ____ 1. Paid utilities expenses. ____ 2. Withdrawal of funds by owners. ____ 3. Purchase of land. ____ 4. Sale of used equipment. 5. Borrowed money from a bank on a long-term note. 6. Paid employee wages. ____ 7. Received investment from owner. ____ 8. Paid an amount due on a long-term bank loan.

Determine the net income of a company for which the following information is available for the month of July. Employee salaries expense \ 180,000 Interest expense 10,000 Rent expense 20,000 Consulting revenue 400,000

Risk is the ________ about the return an investor expects to earn.

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:

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

A ________ is a business that is owned by only one person.

A net loss occurs when revenues exceed expenses.

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?