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Exam 1: Introduction to Accounting and Business

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Question 111

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On July 1 of the current year, the assets and liabilities of John Wong, DVM, are as follows: Cash, $27,000; Accounts Receivable, $12,300; Supplies, $3,100; Land, $35,000; Accounts Payable, $13,900. What is the amount of stockholders' equity as of July 1 of the current year?

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$63,500
$27,000 Cash + $12,300...

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Question 112

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Match the following business types with each business listed below. Each may be used more than once. -A health club and spa

A) Service firm
B) Manufacturing firm
C) Merchandising firm

D) All of the above
E) B) and C)

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Question 113

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If a shareholder wanted to know how money flowed into and out of the company, which financial statement would the shareholder use?

A summary of cash flows for Evelyn's Event Planning for the year ended December 31 is shown below.

What is the major difference between the objective of financial accounting and the objective of managerial accounting?

Indicate whether each of the following activities would be reported on the statement of cash flows as an operating activity, an investing activity, a financing activity, or does not appear on the cash flow statement. a) Cash paid for building b) Cash paid to suppliers c) Cash paid for dividends d) Cash received from customers e) Cash received from the sale of common stock f) Cash received from the sale of a building g) Borrowed cash from a bank

The assets and liabilities of Rocky's Day Spa at December 31 and expenses for the year are listed below. The stockholders' equity was $68,000 $48,000 in Common Stock and $20,000 in Retained Earnings) at January 1. The shareholders invested in an additional $10,000 of common stock during the year. Net income for the year is $45,625. $\begin{array} { | l | l | l | l | } \hline \text { Accounts payable } & \$ 4,375 & \text { Spa operating expense } & \$ 23,760 \\\hline \text { Accounts receivable } & 8,490 & \text { Office expense } & 2,470 \\\hline \text { Cash } & 13,980 & \text { Spa supplies } & 9,230 \\\hline \text { Fees earned } & 98,435 & \text { Wages expense } & 26,580 \\\hline \text { Spa furniture \& equipment } & 56,000 & \text { Dividends } & 38,170 \\\hline \text { Computers } & 2,130 & & \\\hline\end{array}$ Prepare a statement of retained earnings for Rocky's Day Spa for the current year ended December 31.

Proprietorships are owned by one owner and provide only services to their customers.

On March 1, the amount of retained earnings in Richard's Catering Company was $150,000. During March, stockholders were paid $31,000 in dividends from the business. The amounts of the various assets, liabilities, revenues, and expenses are as follows: $\begin{array} { l l } \text { Accounts payable } & \$ 10,250 \\\text { Accounts receivable } & 45,950 \\\text { Cash } & 23,840 \\\text { Fees earned } & 64,950 \\\text { Insurance expense } & 1,275 \\\text { Land } & 85,400 \\\text { Miscellaneous expense } & 1,210 \\\text { Prepaid insurance } & 3,000 \\\text { Rent expense } & 9,000 \\\text { Salary expense } & 20,300 \\\text { Supplies } & 900 \\\text { Supplies expense } & 525 \\\text { Utilities expense } & 2,800\end{array}$ Present, in good form, a) an income statement for March, b) a statement of retained earnings for March, and c) a balance sheet as of March 31.

The assets and liabilities of Rocky's Day Spa at December 31 and expenses for the year are listed below. The stockholders' equity was $68,000 $48,000 in Common Stock and $20,000 in Retained Earnings) at January 1. The shareholders invested in an additional $10,000 of common stock during the year. Net income for the year is $45,625. $\begin{array} { | l | l | l | l | } \hline \text { Accounts payable } & \$ 4,375 & \text { Spa operating expense } & \$ 23,760 \\\hline \text { Accounts receivable } & 8,490 & \text { Office expense } & 2,470 \\\hline \text { Cash } & ? ? ? & \text { Spa supplies } & 9,230 \\\hline \text { Fees earned } & 98,435 & \text { Wages expense } & 26,580 \\\hline \text { Spa furniture \& equipment } & 56,000 & \text { Dividends } & 38,170 \\\hline \text { Computers } & 2,130 & & \\\hline\end{array}$ Prepare a balance sheet for Rocky's Day Spa for the year ended December 31.

Use the accounting equation to answer each of the independent questions below. a) At the beginning of the year, Norton Company's assets were $75,000 and its stockholders' equity was $38,000. During the year, assets increased by $18,000 and liabilities increased by $4,000. What was the stockholders' equity at the end of the year? b) At the beginning of the year, Turpin Industries had liabilities of $44,000 and stockholders' equity of $66,000. If assets increased by $10,000 and liabilities decreased by $5,000, what was the stockholders' equity at the end of the year?

Paying an account payable increases liabilities and decreases assets.

How does receiving a bill to be paid next month for services received affect the accounting equation?

Match each transaction with its effect on the accounting equation. Each letter may be used more than once. -Received cash for services provided

Match each transaction with its effect on the accounting equation. Each letter may be used more than once. -Paid wages

Computer Corporation is starting its computer programming business and has sold stock of $15,000. Identify how the accounting equation will be affected.

Match each transaction with its effect on the accounting equation. Each letter may be used more than once. -Payment of dividends

The unit of measurement concept requires that economic data be recorded in dollars.

Explain the interrelationship between the balance sheet and the statement of cash flows.

Using the following accounts and their amounts, prepare in good format a balance sheet for Bright Futures Company for the month ended August 31. $\begin{array}{lr}\text { Telephone expense } & \$ 1,150 \\\text { Cash } & 3,000 \\\text { Accounts payable } & 1,540 \\\text { Dividends } & 800 \\\text { Fees eamed } & 15,700\\\text { Rent expense } & 1,400 \\\text { Supplies } & 140 \\\text { Accounts receivable } & 1,500 \\\text { Computer equipment } & 20,000 \\\text { Stockholders' equity August 1) } & 14,320 \\\text { Wages expense } & 4,800 \\\text { Utilities expense } & 750 \\\text { Notes payable } & 2,400 \\\text { Office expense } & 420\end{array}$