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Ownership 1. of a corporation is divided into units called shares or stock. True False 2. An owner's investment in a business always creates an asset (cash), a liability (note payable) and an equity (common stock). True False 3. Which of the following statements is true of external information users? They are directly involved in managing the organization Their needs are met by the managerial area of accounting They have limited access to an organization's accounting information They use accounting information to help improve the efficiency and effectiveness of an organization They are the only users of accounting information who rely on internal controls to monitor company activities 4. An Asset is: only acquired with cash something the company owns only contributed by stockholders a company's obligation to pay is also called contributed capital 5. A parcel of land is: offered for sale at $150,000, assessed for tax purposes at $95,000, recognized by its purchasers as being worth $140,000 and purchased for $137,000. The land should be recorded in the purchaser's books at: $95,000 $137,000 $138,500 $140,000 $150,000 6. Recording the items on the financial statements in dollars is: Objectivity principle Monetary unit principle Revenue recognition principle Going-concern principle Cost principle 7. On December 15, 2008, Myers Legal Services signed a $50,000 contract with a client to provide legal services to the client in 2009. Which accounting principle would require Myers Legal Services to record the legal fees revenue in 2009 and not 2008? Monetary unit principle Going-concern principle Cost principle Business entity principle Revenue recognition principle 8. Congress passed the Sarbanes-Oxley Act to Provide jobs to U.S. accountants and limit the number of jobs sent outside the country Impose penalties on CEO's and CFO's who knowingly sign off on bogus accounting reports, although at this time the penalties are token amounts Help curb financial abuses at companies that issue their stock to the public Force auditors to attest to the absolute accuracy of the financial statements Require that all companies publicly disclose their internal control plans 9. Revenue is properly recognized: When the customer's order is received Only if the transaction creates an account receivable At the end of the accounting period Upon completion of the sale or when services have been performed and the business obtains the right to collect the sale price When cash from a sale is received 10. Our company has three times as many assets as it does liabilities. If total liabilities are $55,000, what is the amount of owners' equity? $55,000 $110,000 $165,000 $220,000 Cannot be determined from the given information Assets = 3 (55,000) = 165,000 Assets 165,000 - Liabilities 55,000 = Owners' Equity 110,000 11. Assets created by selling goods and services on credit are: Accounts payable Accounts receivable Liabilities Expenses Equity 12. If the assets of a business increased $15,000 during a period of time and its equity decreased $46,000 during the same period, liabilities in the business must have: rev: 04-07-2011 Increased $11,000 Decreased $11,000 Increased $19,000 Decreased $19,000 Increased $61,000 Change in Assets = Change in (Liabilities + Equity) + 15,000 = x -46,000 x = + 61,000 13. Reebok had income of $150 million and average assets of $1,800 million. Its return on assets is: 8.33% 83.3% 12.0% 120% 16.7% $150 million/$1,800 million = 8.33% 14. Cash investments by owners in exchange for stock are listed on which of the following statements? Balance sheet Income statement Statement of retained earnings Statement of cash flows Statement of Cash Received 15. Acme Company had equity of $55,000 at the end of the current year. During the year the company had a $2,000 net loss and investments by owners in exchange for stock of $7,000. Compute equity as of the beginning of the year. $5,000 $46,000 $50,000 $52,000 $64,000 x - $2,000 + = $7000 55,000 x = 50,000 16. Rent expense that is paid with cash appears on which of the following statements? Balance sheet Income statement Statement of retained earnings Schedule of Accounts Receivable Statement of Cash Received 17. Fees earned (but not yet received in cash) by a business in exchange for services that it has provided appear on which of the following statements? Balance sheet Statement of Cash Received Statement of retained earnings Statement of cash flows Schedule of Accounts Receivable 18. A company had total equity of $89,000 on January 1, 2008. The following information is available for the year ended December 31, 2008: What are the total assets of the company at December 31, 2008? $27,000 $36,000 $53,000 $63,000 $350,000 2008 net loss = $350,000 - $403,000 = ($53,000) 2008 year-end equity = $89,000 - $53,000 = $36,000 2008 year-end assets = $27,000 + $36,000 = $63,000 19. If Beginning Retained Earnings was $184,300, net income for the period was $200,000 and Ending Retained Earnings was $322,000, what was the total amount of dividend distributed for the period? $62,300 $306,300 $337,700 $706,300 $137,700 184,300 + 200,000-322,000 = 62,300 20. Beginning Assets were $437,600, Beginning Liabilities were $262,560, Common Stock sold during the year totaled $45,000, Revenue for the year was $414,250, Expenses for the year were $280,000, Dividends declared was $22,700, and Ending Liabilities is $350,000. What was the Beginning Equity for the year? $700,160 $787,600 $187,600 $612,560 $175,040 437,600-262,560 = 175,040 1. Office Mart has assets equal to $123,000 and liabilities equal to $53,000 at year-end. What is the total equity for Office Mart at year-end? Total equity $ 70,000 2. At the beginning of the year, Logan Company's assets are $200,000 and its equity is $150,000. During the year, assets increase $70,000 and liabilities increase $30,000. What is the equity at the end of the year? Equity at the end of the year $ 190,000 3. At the beginning of the year, Keller Company's liabilities equal $60,000. During the year, assets increase by $80,000, and at year-end assets equal $180,000. Liabilities decrease $10,000 during the year. What are the beginning and ending amounts of equity? Beginning equity Ending equity $ 40,000 $ 130,000 4. Determine the missing amount from each of the separate situations given below. Liab ilitie s 95,000 89,000 132,000 Asse = ts (a) $ (b) $ (c) $ + Equity =$ 30,000 =$ 22,000 = $ 112,000 +$ +$ +$ 65,000 67,000 20,000 5. On October 1, Natalie King organized Real Solutions, a new consulting firm. On October 31, the company's records show the following items and amounts. Cash $ 2,000 Cash dividends 13,000 Consultin g fees earned Account s receivabl e Office supplies Land Office equipmen t 4,250 36,000 Rent expense Salaries expense $ 3,360 15,000 2,550 6,000 28,000 Telephon e expense 660 Account s payable 7,500 Miscellan eous expenses 680 Commo n stock 74,000 Using the above information prepare an October income statement for the business. REAL SOLUTIONS Income Statement For Month Ended October 31 Revenues: Consulting fees earned Expenses: Rent expense Salaries expense Telephone expense Miscellaneous expenses $ 15,000 $ Total expenses 9,890 $ 5,110 Net income Using the above information to prepare an October statement of retained earnings for Real Solutions. Retained earnings, Oct. 1 Add: Net income REAL SOLUTIONS Statement of Retained Earnings For Month Ended October 31 $0 5,110 Less: Cash dividends Retained earnings, Oct. 31 5,110 3,360 $ 1,750 Using the above information prepare an October 31 balance sheet for Real Solutions. REAL SOLUTIONS Balance Sheet October 31 Assets Cash Accounts receivable Office supplies Land $ 2,000 13,000 Office equipment Total Assets Liabilities Accounts payable Equity Common stock Retained earnings Total equity Total Liabilities and Equity $ 83,250 $ 7,500 74,000 1750 75,750 $ 83,250 ... View Full Document

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