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Exam 1: Introduction to Accounting and Business

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Question 1

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Given the following: ​ Beginning stockholders' equity $58,000 Ending stockholders' equity $30,000 Stockholder dividends $25,000 ​ Calculate net income or net loss.

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Question 2

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A corporation is a business that is legally separate and distinct from its owners.

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B) False

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Question 3

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Karen Meyer owns and operates Crystal Cleaning Company.Recently,Meyer withdrew $10,000 from Crystal Cleaning,and she contributed $6,000,in her name,to the American Red Cross.The contribution of the $6,000 should be recorded on the accounting records of which of the following entities?

Purchasing supplies on account increases liabilities and decreases equity.

An example of an external user of accounting information is the federal government.

Darnell Company purchased $88,000 of computer equipment from Joseph Company.Darnell Company paid for the equipment using cash that had been obtained from the initial investment by Donnie Darnell. ​ Which entity or entities (Darnell Company,Joseph Company,and Donnie Darnell)should record the transaction involving the computer equipment on their accounting records?

Bob Johnson is the sole owner of Johnson's Carpet Cleaning Service.Bob purchased a personal automobile for $10,000 cash plus he took out a loan for $20,000 in his name.Describe how this transaction is related to the business entity assumption.

Managerial accounting information is used by external and internal users equally.

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?

Dave Ryan is the CEO of Ryan's Arcade.At the end of its accounting period,December 31,Ryan's Arcade has assets of $450,000 and liabilities of $125,000.Using the accounting equation,determine the following amounts:

Explain the meaning of the business entity assumption.

Donner Company is selling a piece of land adjacent to its business premises.An appraisal reported the market value of the land to be $220,000.The Focus Company initially offered to buy the land for $177,000.The companies settled on a purchase price of $212,000.On the same day,another piece of land on the same block sold for $232,000.Under the cost principle,at what amount should the land be recorded in the accounting records of Focus Company?

The primary financial statements of a corporation are the income statement,retained earnings statement,and the balance sheet.

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.

If total assets increased by $190,000 during a specific period and liabilities decreased by $10,000 during the same period,the period's change in total stockholders' equity was a $200,000 increase.

At December 31 of the current year,Martin Consultants has assets of $430,000 and liabilities of $205,000.Using the accounting equation and considering each case independently,determine the following: ​ (a)stockholders' equity,as of December 31. (b)stockholders' equity,as of December 31 of the next year,assuming that assets increased by $12,000 and liabilities increased by $15,000. (c)stockholders' equity,as of December 31 of the next year,assuming that assets decreased by $8,000 and liabilities increased by $14,000.

An entity that is organized according to state or federal statutes and in which ownership is divided into shares of stock is a

Most businesses in the United States are

The stockholders' rights to the assets rank ahead of the creditors' rights to the assets.

Which of the following is not true of accounting principles?