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Exam 1: Introducing Financial Accounting

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Question 71

Multiple Choice

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Atkins Company collected $1,750 as payment for the amount owed by a customer from services provided the prior month on credit. How does this transaction affect the accounting equation for Atkins?

A) Assets would decrease $1,750 and liabilities would decrease $1,750.
B) One asset would increase $1,750 and a different asset would decrease $1,750, causing no effect.
C) Assets would increase $1,750 and equity would increase $1,750.
D) Assets would increase $1,750 and liabilities would increase $1,750.
E) Liabilities would decrease $1,750 and equity would increase $1,750.

F) C) and E)
G) C) and D)

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Question 72

Multiple Choice

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The accounting concept that requires every business to be accounted for separately from other business entities, including its owner or owners is known as the:

A) Time-period assumption.
B) Business entity assumption.
C) Going-concern assumption.
D) Revenue recognition principle.
E) Cost principle.

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

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Question 73

True/False

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U.S. Government Treasury bonds provide low return and low risk to investors.

Savvy Sightseeing had beginning equity of $72,000; revenues of $90,000, expenses of $65,000, and dividends to stockholders of $9,000. Calculate the ending equity.

A ____________________ is a business that is owned by only one person.

The conceptual framework that the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are attempting to converge and enhance includes the following broad areas to guide standard setting except:

Identify the users and uses of accounting information.

Assets created by selling goods and services on credit are:

The Sarbanes-Oxley Act (SOX) requires each issuer of securities to disclose whether it has adopted a code of ethics for its senior financial officers and the contents of that code.

The International Accounting Standards Board (IASB) :

If the liabilities of a business increased $75,000 during a period of time and the stockholders' equity in the business decreased $30,000 during the same period, the assets of the business must have:

The ________________ assumption states that transactions and events are expressed in money units.

Financial accounting is the area of accounting that serves the decision making needs of internal users.

If Houston Company billed a client for $10,000 of consulting work completed, the accounts receivable asset increases by $10,000 and:

If a company is considering the purchase of a parcel of land that was originally 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:

Return on assets is useful to decision makers for evaluating management, analyzing and forecasting profits, and in planning activities.

A sole proprietorship is a business owned by one or more persons.

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

Stockholders' equity is increased when cash is received from customers in payment of previously recorded accounts receivable.

A financial statement providing information that helps users understand a company's financial status, and which lists the types and amounts of assets, liabilities, and equity as of a specific date, is called a(n) :