Question 1

The International Accounting Standards Board (IASB) is the government group that establishes reporting requirements for companies that issue stock to the public.

Accepted Answer

A) True 
 B)False

Question 2

Liabilities are the owner's claim on assets.

Accepted Answer

A) True 
 B)False

Question 3

The statement of retained earnings:

Accepted Answer

A)  Reports how retained earnings changes at a point in time. 
B)  Reports how retained earnings changes over a period of time. 
C)  Reports on cash flows for operating, financing, and investing activities over a period of time. 
D)  Reports on cash flows for operating, financing, and investing activities at a point in time. 
E)  Reports on amounts for assets, liabilities, and equity at a point in time.

Question 4

Identify and describe the two main groups involved in establishing generally accepted accounting principles.

Accepted Answer

The answer of Identify and describe the two main groups...

Question 5

Marsha Bogswell is the owner of Bogswell Legal Services, Inc. Which accounting principle requires Marsha to keep her personal financial information separate from the financial information of Bogswell Legal Services, Inc.?

Accepted Answer

A)  Monetary unit assumption. 
B)  Going-concern assumption. 
C)  Cost principle. 
D)  Business entity assumption. 
E)  Matching principle.

Question 6

Describe the three types of activities reported on the statement of cash flows.

Accepted Answer

The answer of Describe the three types of activities reported...

Question 7

Net Income:

Accepted Answer

A)  Decreases equity. 
B)  Represents the amount of assets stockholders put into a business. 
C)  Equals assets minus liabilities. 
D)  Is the excess of revenues over expenses. 
E)  Represents stockholders' claims against assets.

Question 8

External auditors examine financial statements to verify that they are prepared according to generally accepted accounting principles.

Accepted Answer

A) True 
 B)False

Question 9

How does the going-concern principle affect reporting asset values of a business?

Accepted Answer

The answer of How does the going-concern principle affect reporting...

Question 10

Explain why ethics are an integral part of accounting.

Accepted Answer

The answer of Explain why ethics are an integral part...

Question 11

The records of Roadmaster Auto Rentals, Inc. show the following information as of December 31. The owner, Rob Fletcher, the sole stockholder, received a dividend of $52,000 during the year.. Prepare a December income statement, a December statement of retained earnings, and a December 30 balance sheet.

Accepted Answer

The answer of The records of Roadmaster Auto Rentals, Inc....

Question 12

What is the purpose of return on assets as an analytical tool?

Accepted Answer

The answer of What is the purpose of return on...

Question 13

Assets are the resources a company owns or controls that are expected to yield future benefits.

Accepted Answer

A) True 
 B)False

Question 14

Describe the three important guidelines for revenue recognition.

Accepted Answer

The answer of Describe the three important guidelines for revenue...

Question 15

Cornelia's Closet has the following account balances for the dates given:
$\begin{array}{c}
\begin{array}{lll}
\
 \text {Cash....................................}\
 \text {Accounts Receivable............}\
 \text {Accounts payable.................}
\end{array}
\begin{array}{rr}
\underline{\text { October 1} } &\underline{ \text { October31 }}\
\$ 40,000 & 60,000 \
40,000 & 38,000 \
6,000 & ? 
\end{array}
\end{array}$

Also, its net income, for October 1 through October 31 was $20,000 and there were no investments or withdrawals by the owner. Determine the equity at both October 1 and October 31.

Accepted Answer

The answer of Cornelia's Closet has the following account balances...

Question 16

U. S. government bonds are:

Accepted Answer

A)  High-risk and high-return investments. 
B)  Low-risk and low-return investments. 
C)  High-risk and low-return investments. 
D)  Low-risk and high-return investments. 
E)  High risk and no-return investments.

Question 17

The assets of a company total $700,000; the liabilities, $200,000. What are the net assets?

Accepted Answer

A)  $900,000. 
B)  $700,000. 
C)  $500,000. 
D)  $200,000. 
E)  It is impossible to determine unless the amount of the common stock is known.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

The stockholders' claim on assets, also known as net assets, is called __________________.

Accepted Answer

The answer of The stockholders' claim on assets, also known...

Question 20

Generally accepted accounting principles are the basic assumptions, concepts, and guidelines for preparing financial statements.

Accepted Answer

A) True 
 B)False

Exam 1: Accounting in Business

The International Accounting Standards Board (IASB) is the government group that establishes reporting requirements for companies that issue stock to the public.

Liabilities are the owner's claim on assets.

The statement of retained earnings:

Identify and describe the two main groups involved in establishing generally accepted accounting principles.

Marsha Bogswell is the owner of Bogswell Legal Services, Inc. Which accounting principle requires Marsha to keep her personal financial information separate from the financial information of Bogswell Legal Services, Inc.?

Describe the three types of activities reported on the statement of cash flows.

Net Income:

External auditors examine financial statements to verify that they are prepared according to generally accepted accounting principles.

How does the going-concern principle affect reporting asset values of a business?

Explain why ethics are an integral part of accounting.

What is the purpose of return on assets as an analytical tool?

Assets are the resources a company owns or controls that are expected to yield future benefits.

Describe the three important guidelines for revenue recognition.

U. S. government bonds are:

The assets of a company total $700,000; the liabilities, $200,000. What are the net assets?

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

The stockholders' claim on assets, also known as net assets, is called __________________.

Generally accepted accounting principles are the basic assumptions, concepts, and guidelines for preparing financial statements.