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Exam 1: Accounting in Business

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Question 31

Multiple Choice

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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.

A) 8.4%.
B) 1.5%.
C) 17.2%.
D) 14.3%.
E) 15.6%.

F) B) and E)
G) D) and E)

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Question 32

Multiple Choice

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Contessa Company collected $42,000 cash on its accounts receivable. The effects of this transaction as reflected in the accounting equation are:

A) Total assets increase and equity decreases.
B) Total assets decrease and equity increases.
C) Total assets, total liabilities, and total equity are unchanged.
D) Both total assets and equity are unchanged and liabilities increase.
E) Both total assets and total liabilities decrease.

F) C) and E)
G) None of the above

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Question 33

Multiple Choice

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The basic financial statements include all of the following except:

On May 31 of the current year, the assets and liabilities of Riser, Inc. are as follows: Cash $20,500; Accounts Receivable, $7,250; Supplies, $650; Equipment, $12,000; Accounts Payable, $9,300. What is the amount of owner's equity as of May 31 of the current year?

Liabilities are the owner's claim on assets.

Revenues are increases in equity (via net income) from a company's sales of products and services to customers.

The following schedule reflects shows the first month's transactions of the Green Construction Company, owned by Jennifer Green: Provide descriptions for each transaction.

Investing activities are the acquiring and disposing of resources that an organization uses to acquire and sell its products or services.

Match the following definitions with terms 1 through 8. Place the letter that identifies the best definition in the blank space next to the term. ____ 1. Generally accepted accounting principles ____ 2. Time period assumption ____ 3. Statement of owner's equity. ____ 4. Balance sheet ____ 5. Objectivity principle ____ 6. Measurement (Cost) principle ____ 7. Securities and Exchange Commission ____ 8. IASB ____ 9. Full disclosure principle ____ 10. Statement of cash flows a. Prescribes that assets and services to be recorded initially on a cash or equal-to-cash basis. b. A principle that requires the information in financial statements to be supported by independent unbiased evidence. c. An independent group consisting of individuals from many countries that identify preferred accounting practices. d. Presumes that the life of a company can be divided into periods for reporting purposes. e. The concepts and rules that govern financial accounting. $110$ $\text { Copyright@ McGraw-Hil Education.All rights re sened. No reproduction or distribution without the prior wrikten consent of McGraw-Hill Education. }$ f. A financial statement that reports the changes in equity over the reporting period; including increases such as owner investment and net income and for decreases such as owner withdrawals or net loss. g. A report that identifies cash receipts and cash payments over a period of time. h. Prescribes that a company report the details behind financial statements that would impact user decisions. i. The governmental agency that has the legal authority to establish accounting rules. j. A report that describes a company's financial position at a point in time.

The statement of cash flows shows the net effect of revenues and expenses for a reporting period.

Operating activities include long-term borrowing and repaying cash from lenders, and cash investments or withdrawals by the owner.

Internal users include lenders, shareholders, brokers and nonexecutive employees.

In a business decision where there are ethical concerns, the preferred course of action should be one that:

Which of the following accounts is not included in the asset section of the balance sheet?

The term ________ refers to a liability that promises a future outflow of resources.

External users include lenders, shareholders, customers, and regulators.

Match the following terms with the appropriate definition

Zippy had cash inflows from operations $60,500; cash outflows from investing activities of $47,000; and cash inflows from financing of $25,000. The net change in cash was:

Explain the accounting equation and define its terms.

The assets of a company total $700,000; the liabilities, $200,000. What are the net assets?