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Exam 1: Accounting in Business

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Question 21

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Return on assets is also known as return on investment.

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Question 22

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All of the following are classified as assets except:

A) Accounts Receivable.
B) Supplies.
C) Equipment.
D) Accounts Payable.
E) Land.

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Question 23

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Identify and describe the four basic financial statements:

Saddleback Company paid off $30,000 of its accounts payable in cash. What would be the effects of this transaction on the accounting equation?

Chou Co. has a net income of $43,000, assets at the beginning of the year are $250,000 and assets at the end of the year are $300,000. Compute its return on assets.

What is the balance sheet? What is its purpose?

Generally the lower the risk, the higher the return that can be expected.

The Superior Company acquired a building for $500,000. The building was appraised at a value of $575,000. The seller had paid $300,000 for the building 6 years ago. Which accounting principle would require Superior to record the building on its records at $500,000?

Understanding generally accepted accounting principles is not necessary to effectively use and interpret financial statements.

The statement of cash flows identifies cash flows separated into operating, investing, and financing activities over a period of time.

Which of the following accounting principles require that all goods and services purchased be recorded at actual cost?

The income statement describes revenues earned and expenses incurred over a specified period of time due to earnings activities.

Owners of a corporation are called shareholders or stockholders.

The accountant of Action Adventure Games, Inc. prepared a balance sheet after every 10 day period. The only resources invested by the owner were at the start of the company on June 1. During June, the first month of operation, the following balance sheets were prepared: Required: Describe the nature of each of the four transactions that took place between the balance sheet dates shown. Assume only one transaction affected each account. $\text {June}$ 10 $\quad$$\underline{\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad}$ 20 $\quad$$\underline{\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad}$ 30 $\quad$$\underline{\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad}$ $\quad$$\quad$$\underline{\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad}$

Alpha Company has assets of $600,000, liabilities of $250,000, and equity of $350,000. It buys office equipment on credit for $75,000. What would be the effects of this transaction on the accounting equation?

The four basic financial statements include the balance sheet, income statement, statement of retained earnings, and statement of cash flows.

The three major types of business activities are operating, financing, and investing.

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

The private-sector group that currently has the authority to establish generally accepted accounting principles in the United States is the:

Grandmark Printing pays $2,000 rent to the landlord of the building where its facilities are located. How does this transaction affect the accounting equation for Grandmark?