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Exam 1: Accounting in Business

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Question 71

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________ is net income divided by average total assets.

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Question 72

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An exchange of value between two entities that yields a change in the accounting equation is called:

A) An external transaction.
B) The accounting equation.
C) Net Income.
D) Recordkeeping or bookkeeping.
E) An asset.

F) A) and E)
G) B) and D)

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Question 73

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________ users of accounting information are not directly involved in running the organization.

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

Which of the following accounts is not included in the calculation of a company's ending owner's equity?

If a company uses $1,300 of its cash to purchase supplies, the effect on the accounting equation would be:

The characteristics below apply to at least one of the forms of business organization. a. Is a separate legal entity. b. Is allowed to be owned by one person only. c. Owner or owners are personally liable for debts of the business. d. Is a separately taxable entity. e. Is a business entity. f. May have a contract specifying the division of profits among the owners. g. Has an unlimited life Use the following format to indicate (with a "yes" or "no") whether or not a characteristic applies to each type of business organization. $\begin{array} { | l | l | l | l } \hline & \text { Proprietor ship } & \text { Partnership } & \text { Corporation } \\\hline \text { a. } & & & \\\hline \text { b. } & & & \\\hline \text { c. } & & & \\\hline \text { d. } & & & \\\hline \text { e. } & & & \\\hline \text { f. } & & & \\\hline \text { g. } & & & \\\hline\end{array}$

The Financial Accounting Standards Board is the governmental agency that sets both broad and specific accounting principles.

Creditors' claims on the assets of a company are called:

Unlimited liability and separate taxation of the business are advantages of a sole proprietorship.

Revenue is properly recognized:

The three common forms of business ownership include sole proprietorship, partnership, and non-profit.

Prepare a April 30 balance sheet in proper form for Two Rivers Vending Service from the following alphabetical list of the accounts at April 30: $\begin{array}{llr} \text { Accounts recervable. } &\$10,000\\ \text { Accounts payable. } &18,000\\ \text { Building } &28,000\\ \text { Cash } &10,000\\ \text { Notes payable } &47,000\\ \text { Office equipment.} &12,000\\ \text { K. Fields, Capital. } &?\\ \text {Trucks. } &55,000\end{array}$

Explain why ethics are an integral part of accounting.

Prepare a December 31 balance sheet in proper form for Cane Property Management using the following accounts and amounts: $\begin{array}{ll}\text { Accounts payable }&\$40,000 \\ \text { ccounts receivable }&3,500 \\ \text {Accounts receivable}&5,000\\ \text { M. Bruno, Capital }&104,500\\ \text {Office equipment.}&10,000\\ \text {Advertising expense}&3,200\\ \text {Cash}&7,500\\ \text {Land}&35,000\\&132\end{array}$ $\begin{array}{llr} \text { Note payable. } &50,000\\ \text { Office supplies. } &1,500\\ \text { Salaries expense.} &12,000\\ \text { Salaries payable. } &1,000\\ \text { Building. } &100,000\\\end{array}$

If a company is considering the purchase of a parcel of land that was acquired by the seller for $85,000, is offered for sale at $150,000, is assessed for tax purposes at $95,000, is recognized by the purchaser as easily being worth $140,000, and is purchased for $137,000, the land should be recorded in the purchaser's books at:

A company acquires equipment for $75,000 cash. This represents a(n) :

An example of an operating activity is:

The assumption that requires that a business be accounted for separately from its owners is the ________ assumption.

U.S. government bonds are: