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Final exam review_KEY

# Final exam review_KEY - Final Exam Review Financial...

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Final Exam Review Financial Accounting I Dr. Seyedin Chapters 1-9 SOLUTIONS 1. Presently the dominant body in the development of accounting principles is the: Financial Accounting Standards Board (FASB) 2. Name three different transactions that affect owner's equity, e.g., owner’s withdrawals: Revenues, expenses, and owner's investments 3. Is signing a contract for future services considered to be a transaction? No 4. Is rendering services considered to be a transaction? Yes 5. An entity that is organized according to state or federal statutes and in which ownership is divided into shares of stock is a: corporation 6. On which financial statement are liabilities reported: On the balance sheet 7. The total assets and the total liabilities of a business at the beginning and at the end of the year appear below. During the year, the owner had withdrawn \$10,000 for personal use and had made an additional investment of \$35,000 in the business. Assets Liabilities Beginning of year... \$300,000 \$190,000 End of year ......... 495,000 220,000 The amount of net income for the year was: Assets – Liabilities = Owner’s capital at the beginning 300,000 – 190,000 = 110,000 The same formula is true for the end of the year, thus the owner’s capital at the end is \$275,000. Now we can determine net income (loss) as follows: Beginning owner’s capital + additional investment – owner’s withdrawals + net income (or less net loss) = Owner’s capital at the end

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110,000 + 35,000 – 10,000 +net income = 275,000 NI = 140,000 8. A debt to equity ratio of .50 indicates: The liabilities are half as much as equities 9. The debt created by a business when it makes a purchase on account is referred to as a(n): account payable Goods purchased for future use in the business, such as supplies, are called: prepaid expenses 10.If total assets decreased by \$50,000 during a period of time and owner's equity increased by \$30,000 during the same period, then the amount and direction (increase or decrease) of the period's change in total liabilities is: Assets – Liabilities = Owner’s equity - 50,000 – Liab. = 30,000 - Liab. = 50,000 + 30,000 - Liab. = 80,000 Please note the signal minus (-) represents a decrease in liabilities. 11. What is the normal balance of the fees earned account? Revenue, credit 12. Are decreases recorded by credits to a liability account or an expense account? An expense account 13. A increases recorded by credits to a revenue or a drawing account? A revenue account 14. The verification that the total dollar amount of the debits equals the total dollar amount of the credits in the ledger is called a : trial balance 15. Write the journal entries to record the owner taking cash from the company for personal use: Drawing, debit; Cash, credit 16. A chart of accounts is: usually a listing of accounts in financial statement order
17. Is Salaries Expense an asset account? No 18. Is Accounts Receivable an asset account? Yes 19.

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