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Exam 1: Accounting and the Business Environment

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Question 101

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Which of the following financial statements is used to report the economic resources, debt, and overall financial position of a company?

A) income statement
B) balance sheet
C) statement of cash flows
D) statement of retained earnings

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Question 102

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Janice Wilford contributed $50,000 cash to JW Corporation in exchange for stock. As a result of this transaction, assets and revenues will increase.

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Question 103

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Office Supplies is an expense because the supplies will be used up in the future.

Ten years ago a corporation purchased a building for $160,000. At that time, the corporation felt that the building was worth $185,000. The current market value of the building is $430,000. The building has been assessed at $405,000 for property tax purposes. At which amount should the corporation record the building in its accounting records?

Metropolitan Casting Services started the year with total assets of $130,000 and total liabilities of $45,000. The revenues and the expenses for the year amounted to $130,000 and $50,000, respectively. During the year, the company did not issue any common stock, but it distributed dividends of $60,000. Calculate the amount of increase or decrease in stockholders' equity for the year.

Regarding the accounting equation, which of the following is a correct statement?

Rosewood Corporation purchased land for $100,000 by making a cash payment of $38,000 and promising to pay the remaining amount in a later accounting period. What is the net effect of this transaction on Rosewood's accounting equation?

Which of the following statements is true of a sole proprietorship?

Thirty years ago, Citywide Grocery Corporation purchased a building for its grocery store for $30,000. Based on inflation estimates, the amount of the building has been adjusted in the accounting records. The building is now reported at $75,000 in Citywide's financial statements. Which of the following concepts or principles of accounting is being violated?

An accounting firm collected cash on account. As a result of this transaction, total assets, liabilities, and equity are all unchanged.

Mars Electronic Company receives cash from a stockholder, John Tilden, and issues common stock to him. The two accounts involved in this transaction are ________.

Accountants record ________.

The Sarbanes-Oxley Act (SOX) ________.

Which of the following statements is true of the corporate form of business?

The Sarbanes-Oxley Act (SOX) requires companies to review internal control and take responsibility for the accuracy and completeness of their financial reports.

In a sole proprietorship, the owner is personally liable for the debts of the business.

________ is the equity earned by profitable operations that is not distributed to stockholders.

Following is an extract of account balances of Aztec Moving Services as of December 31, after the first year of operation. $\begin{array} { | l | r | } \hline \text { Accounts Receivable } & \$ 6,000 \\\hline \text { Accounts Payable } & 4,000 \\\hline \text { Salaries Expense } & 5,000 \\\hline \text { Repairs Expense } & 500 \\\hline \text { Truck } & 11,000 \\\hline \text { Equipment } & 11,000 \\\hline \text { Notes Payable } & 8,500 \\\hline \text { Cash } & 7,300 \\\hline \text { Supplies Expense } & 1,500 \\\hline \text { Service Revenue } & 29,000 \\\hline \text { Gasoline Expense } & 2,900 \\\hline \text { Salaries Payable } & 200 \\\hline\end{array}$ What is the amount of total assets at the end of the year?

Adams Service Company had a net income of $14,500 for the year ending December 31, 2018. The total assets on January 1, 2018 were $28,000. The total assets on December 31, 2018 were $16,000. Calculate Adam's return on assets (ROA). Show your computations and label your work. Round your answer to two decimal places.

The income statement shows whether or not a business can generate enough cash to pay its liabilities.