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Exam 1: Accounting Information and Decision Making

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Question 61

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Which statement below best describes the accounting equation?

A) The change in retained earnings equals net income less dividends.
B) Equality of revenue and expense transactions over time.
C) Resources of the company equal creditors' and owners' claims to those resources.
D) Financing activities equal investing and operating activities.

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Question 62

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The independent, private-sector group that is primarily responsible for setting financial reporting standards in the United States is the:

A) FASB.
B) IASB.
C) SEC.
D) IRS.

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Question 63

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Which of the following groups is not among the external users for whom financial statements are prepared?

List and describe the four financial statements most frequently provided to external users.

Cash, inventory, supplies, and buildings are examples of liabilities.

Accountants are responsible for measuring various operating, investing and financing activities. Which of the following correctly matches the activity with its type?

Consider the following account balances of the Shattuck Law Firm as of December 31, 2012: $\begin{array} { l r } \text { Accounts Payable } & \$ 4,400 \\\text { Salaries Expense } & 12,800 \\\text { Cash } & 1,700 \\\text { Common Stock } & 2,400 \\\text { Service Revenue } & 8,300 \\\text { Supplies } & 4,300 \\\text { Retained Earnings } & 1,100 \\\text { Utilities Expense } & 5,000\end{array}$ How many of these accounts would appear in Shattuck's 2012 income statement?

Financial accounting has an impact on everyday business decisions as well as wide-ranging economic consequences.

If a company has stockholders' equity of $60,000 at the end of the year, which of the following statements must be true?

Expenses are shown in which of the following statements?

An alternative form of the accounting equation is:

Using the information below from the accounting records of Thomas Corporation, owners' claims to the company's resources amount to: $\begin{array} { l r } \text { Assets } & \$ 1,200,000 \\\text { Liabilities } & \$ 800,000 \\\text { Net income } & \$ 100,000 \\\text { Retained earnings } & \$ 250,000\end{array}$

Amounts owed to suppliers, workers, governments, and utility companies are examples of liabilities.

Auditors are trained individuals hired by a company as an independent party to express a professional opinion of the accuracy of that company's financial statements.

GAAP is an abbreviation for:

Below is balance sheet information for five independent situations. Calculate the answer to each. 1. A company reports total assets of $2,000 and total liabilities of $900. What is the amount of stockholders' equity? 2. A company reports total liabilities of $2,400 and stockholders' equity of $1,100. What is the amount of total assets? 3. A company reports total assets of $2,700 and total stockholders' equity of $700. What is the amount of total liabilities? 4. A company reports an increase in assets of $1,700 and an increase in liabilities of $400. What is the amount of the change in stockholders' equity? 5. A company reports an increase in liabilities of $300 and a decrease in stockholders' equity of $800. What is the amount of the change in total assets?

The equation best describing the balance sheet is:

The 1933 Securities Act and the 1934 Securities Exchange Act were designed to restore investor confidence in financial accounting following the stock market crash in 1929.

Nina Corp. had the following net income (loss) the first three years of operation: $7,100, ($1,600) , and $3,600. If the Retained Earnings balance at the end of year three is $1,100, what was the total amount of dividends paid over these three years?

Use the following information available at the end of 2012 to prepare an income statement and balance sheet on December 31, 2012, for Goldie Company. Fees for services performed during the year, $120,000 Accounts payable, $18,500 Accounts receivable, $17,300 Miscellaneous costs for the year, $8,700 Supplies on hand, $2,700 Notes payable outstanding, $30,000 Interest cost on the note for the year, $3,000 Equipment, $84,400 Cash on hand, $11,200 Salaries cost for the year, $71,500 Supplies cost for the year, $9,400 Rent cost for the year, $12,000 Common stock that has been issued, $60,000 Retained earnings at the end of the year, $7,100