Question 1

Which of the following statements is true of the corporate form of business?

Accepted Answer

A) A corporation is organized understate law as a separate legal entity. 
B) Changes in the ownership of stock has a negative effect on the continuity of the corporation. 
C) Any stockholder may commit the corporation to a contract. 
D) It is easy for stockholders to lodge an effective protest against management. 
A) A corporation is organized understate law as a separate legal entity. 
B) Changes in the ownership of stock has a negative effect on the continuity of the corporation. 
C) Any stockholder may commit the corporation to a contract. 
D) It is easy for stockholders to lodge an effective protest against management.

Question 2

Analyze each of the following transactions in terms of their effects on the accounting equation of Hawkins Delivery Service.Enter the correct amounts in the columns of the spreadsheet.
a)The owner,James Hawkins contributes $75,000 to form the business.
b)The business purchases $750 of office supplies on account.
c)The business pays cash to purchase a delivery van for $25,000.
d)Services are performed for clients and $5,000 cash is received.
e)Cash is paid for office rent expense,$800 and utilities expense,$400.
f)The owner withdrew $1,000 from the company.

Accepted Answer

The answer of Analyze each of the following transactions in...

Question 3

Mary Williams contributed $50,000 cash to form BCD Company.As a result of this transaction,assets and revenues will increase.

Accepted Answer

A) True 
 B)False

Question 4

Best Plumbing Company provides plumbing services.Selected transactions of Best Plumbing Company are described as follows:
A.Received a $9,000 cash contribution from the owner,June Sharon.
B.Paid $6,000 cash for equipment to be used for plumbing repairs.
C.Borrowed $9,000 from a local bank and deposited the money in the checking account.
D.Paid $800 rent for the year.
E.Paid $200 cash for plumbing supplies to be used next year.
F.Completed a plumbing repair project for a local lawyer and received $6,000 cash.
Calculate the net income.Assume plumbing supplies of $200 are left.

Accepted Answer

A) $600 
B) $5,800 
C) $6,000 
D) $5,200 
A) $600 
B) $5,800 
C) $6,000 
D) $5,200

Question 5

Bliss Company settles a liability by making a payment in cash.How does paying this liability affect the accounting equation of the business?

Accepted Answer

A) assets and liabilities decrease 
B) liabilities decrease and equity increases 
C) assets and liabilities increase 
D) assets increase and equity decreases 
A) assets and liabilities decrease 
B) liabilities decrease and equity increases 
C) assets and liabilities increase 
D) assets increase and equity decreases

Question 6

Financial statements are prepared after an entity's transactions are analyzed and recorded.Which of the following reports is one of the required financial statements?

Accepted Answer

A) Statement of cash flows 
B) Statement of return on assets 
C) Statement of dividends 
D) Expense statement 
A) Statement of cash flows 
B) Statement of return on assets 
C) Statement of dividends 
D) Expense statement

Question 7

The most that the owner of a sole proprietorship can lose,as a result of business debts or lawsuits,is the amount he/she has invested in the business.

Accepted Answer

A) True 
 B)False

Question 8

Certified Public Accountants are licensed professional accountants who serve the general public.

Accepted Answer

A) True 
 B)False

Question 9

By looking at a statement of owner's equity,the effect of owner's withdrawals on the ending balance of the capital account can be determined.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is the correct accounting equation?

Accepted Answer

A) Assets + Liabilities = Equity 
B) Assets = Liabilities + Equity 
C) Assets + Revenues = Equity 
D) Assets + Revenues = Liabilities + Expenses 
A) Assets + Liabilities = Equity 
B) Assets = Liabilities + Equity 
C) Assets + Revenues = Equity 
D) Assets + Revenues = Liabilities + Expenses

Question 11

A business purchases a building for $250,000.The current market value is $375,000.The assessment value is $325,000.What value should the building be recorded at,and which accounting principle supports your answer?

Accepted Answer

The building should be recorde

Question 12

Owner's withdrawals represent increases in equity.

Accepted Answer

A) True 
 B)False

Question 13

The balance sheet shows whether or not a business is earning profits.

Accepted Answer

A) True 
 B)False

Question 14

The field of accounting that focuses on providing information for internal decision makers is ________.

Accepted Answer

A) managerial accounting 
B) financial accounting 
C) nonmonetary accounting 
D) governmental accounting 
A) managerial accounting 
B) financial accounting 
C) nonmonetary accounting 
D) governmental accounting

Question 15

Lush Lawns Company earned $1,000 for lawn mowing services rendered.The customer promised to pay at a later time.Which of the following accounts increased as a result of this transaction?

Accepted Answer

A) Accounts Payable 
B) Supplies 
C) Cash 
D) Accounts Receivable 
A) Accounts Payable 
B) Supplies 
C) Cash 
D) Accounts Receivable

Question 16

Prepare an income statement and a statement of owner's equity for the month of May.Also,prepare a balance sheet as of May 31,2017,for McGuire Company.The financial transactions of McGuire Company for the month of May,their first month of operations,are as follows:
• On May 1,2017,the owner,Thomas McGuire contributed $20,000 cash to establish the business.
• On May 3,the company 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 company purchased $15,000 of equipment for cash.
• On May 8,McGuire Company rendered service to a client and earned $3,000 in cash.
• On May 12,the company incurred a repair expense of $1,800 and promised to pay the repair contractor the following month.
• On May 18,the company 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,McGuire withdrew $1,500 from the business.

Accepted Answer

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Revenues: @#IMG-DLM& 
Expenses: @#IMG-DLM& 
 @#IMG-DLM&

Question 17

Crusoe Waterworks Company provides plumbing services.Transactions of Crusoe Waterworks during the first year of operations are given below.
A.The owner,Robin Crusoe,invested $5,000 cash in the company.The cash was deposited in the business checking account.
B.Paid $4,000 cash for equipment to be used for plumbing repairs.
C.Borrowed $26,000 from a local bank and deposited the money in the checking account.
D.Paid $700 rent for the year.
E.Purchased $1,500 of office supplies on account.
F.Completed a plumbing repair project for a local lawyer and received $3,400 cash.
Calculate the amount of total owner's equity after recording the transactions.Assume office supplies of $1,500 are left at the end of the year.

Accepted Answer

A) $7,700 
B) $3,400 
C) $5,000 
D) $26,000 
A) $7,700 
B) $3,400 
C) $5,000 
D) $26,000

Question 18

Lorna Smith decided to start her own CPA practice as a professional corporation,Smith CPA PC.Her corporation purchased an office building for $35,000 that her real estate agent said was worth $50,000 in the current market.The corporation recorded the building as a $50,000 asset because Lorna believes that is the real value of the building.Which of the following concepts or principles of accounting is being violated?

Accepted Answer

A) cost principle 
B) economic entity assumption 
C) monetary unit assumption 
D) going concern assumption 
A) cost principle 
B) economic entity assumption 
C) monetary unit assumption 
D) going concern assumption

Question 19

Which of the following appears on both the income statement and statement of owner's equity?

Accepted Answer

A) Ending owner's capital 
B) Total revenues 
C) Net income 
D) Owner's withdrawals 
A) Ending owner's capital 
B) Total revenues 
C) Net income 
D) Owner's withdrawals

Question 20

Following is an extract of account balances of Wilson Mowing Services as of December 31 of the first year of operation.
 
What is the amount of total assets at the end of the year?

Accepted Answer

A) $15,000 
B) $32,300 
C) $18,000 
D) $25,300 
A) $15,000 
B) $32,300 
C) $18,000 
D) $25,300

Exam 1: Accounting and the Business Environment

Which of the following statements is true of the corporate form of business?

Mary Williams contributed $50,000 cash to form BCD Company.As a result of this transaction,assets and revenues will increase.

Bliss Company settles a liability by making a payment in cash.How does paying this liability affect the accounting equation of the business?

Financial statements are prepared after an entity's transactions are analyzed and recorded.Which of the following reports is one of the required financial statements?

The most that the owner of a sole proprietorship can lose,as a result of business debts or lawsuits,is the amount he/she has invested in the business.

Certified Public Accountants are licensed professional accountants who serve the general public.

By looking at a statement of owner's equity,the effect of owner's withdrawals on the ending balance of the capital account can be determined.

Which of the following is the correct accounting equation?

A business purchases a building for $250,000.The current market value is $375,000.The assessment value is $325,000.What value should the building be recorded at,and which accounting principle supports your answer?

Owner's withdrawals represent increases in equity.

The balance sheet shows whether or not a business is earning profits.

The field of accounting that focuses on providing information for internal decision makers is ________.

Lush Lawns Company earned $1,000 for lawn mowing services rendered.The customer promised to pay at a later time.Which of the following accounts increased as a result of this transaction?

Which of the following appears on both the income statement and statement of owner's equity?

Following is an extract of account balances of Wilson Mowing Services as of December 31 of the first year of operation. What is the amount of total assets at the end of the year?

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets, natural Resources, and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

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