1.
award:
10 out of
10.00
Accounting is an information and m easurem ent system that identifies, records, and communicates
relevant, reliable, and comparable information about an organization's business activities. Select the
aspect of accounting associated with this activity.
Activities
Aspects of accounting
1.
Analyzing and interpreting reports.
Communicating
2.
Presenting financial information.
Communicating
3.
Maintaining a log of service costs.
Recording
4.
Measuring the costs of a product.
Recording
5.
Preparing financial statements.
Communicating
6.
Establishing revenues generated from a product.
Identifying
7.
Determining employee tasks behind a service.
Identifying
./
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2•
award:
10 out of
10.00
··············· potrns ························································· ·····················································································
Part A
Identify the following users of accounting information as either an internal or an ext ernal user.
Accounting information user
External /Internal
1.
Research and development director
Internal
2.
Human resources director
Internal
3.
Labor unions
External
~Shareholders
External
5.
Internal
Distribution managers
~Creditors
External
~uction supervisors
Internal
8.
Internal
Purchasing manager
./
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./
./
./
./
./
./
Part B
Identify the following questions as most likely to be asked by an internal or external user.
Questions
•• External / Internal
~ Internal
1.
What are reasonable payroll benefits and wages?
2.
Should we make a frve-year loan to that business?
External
3.
What are the costs of our product's ingredients?
Internal
4.
Do income levels justify the current stock price?
External
5.
Should we spend more to further re search our product?
Internal
6.
Which firm reports the highest sales and income?
External
7.
What are the costs of our service to customers?
Internal
./
./
./
./
./
./
3•
a·ward:
10 out of
10.00
·······················polrns- ·································································································································································································
Identify the area of accounting that is most involved in each of the following responsibilities:
Responsibilities
1.
Area of accounting
Internal auditing.
Managerial accounting
External auditing.
Financial accounting
3.
Cost accounting.
Managerial accounting
4.
Budgeting.
Managerial accounting
5.
Investigating violations of tax laws.
Tax accounting
6.
Planning transactions to minimize taxes.
Tax accounting
7.
Preparing external financial statements.
Financial accounting
8.
Reviewing reports for SEC compliance.
Financial accounting
2.
- -
--
-
./I
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./
./
./
./
./
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4.
award:
10 out of
10.00
Match each of the numbered descriptions with the term or phrase it best reftects.
Description
1.
Principles that determine whether an action is right or wrong.
--l---
Term or Phrase
Ethics
./
2.
Accounting professionals who provide services to many clients.
Public accountants
./
3.
A n accounting area that includes planning future transactions to minimize taxes paid.
Tax accounting
./
A n examination of an organization's accounting system and records that adds credibility to financial statements.
Audit
./
A mount a business earns after paying all expenses and costs associated wit h its sales and revenues.
Net income
./
r4
~:
5•
award:
10 out of
10.00
·························poiotS' ···················································································································································································································································································································· ·
Match each of the numbered descriptions with the principle or assumption it best reflects.
Description
1.
Usually created by a pronouncement from an authoritative body.
2.
Principle or Assumption
Specific accounting principle
.,/
Financial statements reflect the assumption that the business continues operating.
Going-concern assumption
.,/
3.
Derived from long-use<! and generally accepted accounting practices.
General accounting principle
.I
4.
Every business is accounted for separately from its owner or owners.
Business entity assumption
.,/
5.
Revenue is recorded only when the earnings process is complete.
Revenue recognition principle
.,/
6.
Information is based on actual costs incurred in transactions.
Cost principle
.,/
Matching principle
.,/
Full disclosure principle
.,/
-~I--
-+--
-~I--
7.
8.
-
A company records the expenses incurred to generate the revenues reported.
A company reports details behind financial statements that would impact users' decisions.
--'----
-~--
6.
award:
10 out of
10.00
A-G contain separate situations, identify each as being a sole proprietorship, partnership or corporation.
Description
Business organization
a.
Ownership of Zander Company is divided into 1,000 shares of stock.
Corporation
./
b.
Wallingford is owned by Trent Malone, who is personally liable for the company's debts.
Sole proprietorship
./
c.
Micah Douglas and Nathan Logan own Financial Services, a financial services provider.
Neither Doug~as nor Logan has personal responsibility for the debts of Financial Services.
Riley and Kay own Speedy Packages, a courier service . Both are personally liable for the
debts of the business.
Corporation
./
Partnership
./
./
./
./
d.
e.
IBC Services does not have separate legal existence apart from the one person who owns it.
Sole proprietorship
f.
Physio Products does not pay income taxes and has one owner.
Sole proprietorship
t----l-
g=-1 AJ pays its own income taxes and has two owners.
Corporation
7.
award:
10 out of
10.00
a. Office Store has assets equal to $1 23,000 and liabilities equal to $47 ,000 at year-end. What is the
total equity for Office Store at year-end?
Assets
$
8
Liabilities
=
123,000
$
Equity
+
47,000
+
$
76,000./
award:
10 out of
•
10.00
········· points ·········································· · ·
b. At the beginning of the year, Addison Company's assets are $300,000 and its equity is $100,000.
Du ring the year, assets increase $80,000 and liabilities increase $50,000. What is the equity at the
end of the year?
Assets
Beginning
$
Change
Ending
9
$
Liabilities
300,000
=
80,000
=
380,000./ =
$
200,000~
Equi
+
+
$
100,000
50,000
$
+
250,000./ +
30,000./
$
130,000~
award:
10 out of
•
10.00
·······················points ···························································································································································································································································
c. At the beginning of the year, Quaker Company's liabilities equal $70,000. During the year, assets
increase by $60,000, and at y ear-end assets eCJiual $190,000. Liabilities decrease $5,000 during the
year. What are the beginning and ending amounts of equity?
Assets
~Beginning
$
~Change
1
Ending
i$
130,000./ = J $
60,000
= I
190,000
$
=
Liabilities
Eu
+
70,000
+
(5,000)
+
65,000~
+
$
60,000./
65,000./
$
125,000./
award:
10
10 out of
• 10.00
················poirns····
Determine the missing amount from each of the separate sit uations given below.
Assets
65,000./ =
100,000
=
~
(a)
J.$
rr
(c)
$
154,000
=
Liabilities
$
20,000
$
34,000
+
$
114,000./
+
$
+
$
+
$
Equity
45,000
66,000./
40,000
11.
award:
10 out of
10.00
Select a transaction that affects the accounting equation as follows:
Affect
Decreases an asset and decreases equity.
Business incurs an expense paid in cash
lncreases an asset and increases a liability.
Business purchases equipment on credit
1----f-
b.
c. ,__
__
e. ,__
__
f.
g.
__
d.
Transaction
Decreases a liability and increases a liability.
Business signs a note payable to extend the due dat e on an account payable
Decreases an asset and decreases a liability.
Business pays an account payable with cash
Increases an asset and decreases an asset.
Business purchases office supplies for cash
Increases a liability and decreases equity.
Business incurs an expense that is not yet paid
Increases an asset and increases equity.
,__
Owner(s) invests cash in the business
-~==
12.
award:
10 out of
10.00
Lena Holden began a professional practice on June 1 and plans to prepar.e financial state ments at the
end of each month. During June, Holden (the owner) completed these transactions:
Owner invested $60,000 cash in the company along with equipment that had a S1 5,000 market value.
The company paid $1 ,500 cash for rent of office space for the month .
The company purchased $10,000 of additional equipment on credit (payment due within 30 days).
The company completed work for a client and immediately collected the $2,500 cash earned .
The company completed work for a client and sent a bill for $8,000 to be receiv ed within 30 days.
The company purchased additional eq uipment for $6,000 cash.
The company paid an assistant $3,000 cash as wages for the month.
The company collected S5.000 cash as a partial payment for the amount owed by the client in
transaction e.
i. The company paid $10,000 cash to settle the liability created in transaction c.
j. Owner withdrew $1,000 cash from the company for personal use.
a.
b.
c.
d.
e.
f.
g.
h.
Required :
Enter the impact of each transaction on individual items of the accounting equation. (Enter dec reases to
account balances with a minus sign.)
lbLiabilities
Assets
Cash
+
a.
60,000J
+
b.
(1,500)J
+
Bal.
58,500
+
c.
0
58,500
+
Bal.
d.
Bal.
e.
Bal.
f.
Bal.
g.
Bal.
h.
Accounts
Receivable
'$
$
t
+
0
61,000
--
- - -a ;]
r
1
- -
8,000J ]
+
8,0000 I ++
1·
0
5,000J j +
-
_..__L
8, *
0
+
8,000
+
(5,000)./ +
[
51.000 .
3,00~
1$
31,000 _J_
0
31.00H - +
31,000
I
=
'$
~
+
_+_~_
+
:
$
75,000
0
./1-_
75,ooo
l
0
-
+
oI-
0
+
0
-
---~--t
~ ~
jl Expenses
'
1,500J
I
1.50~ ~
o
-+ -.--~
o-1--- +1 --1, 500 ---;
~
0
+
2.~ -
0
---~----~
75,oo~ ~ '-1---~--~-_:_~__!_:~-~-~J~'--~-1.___1_.5_0~--;I
I
75,00~
I~ I
-1- -_
75,000
0
10,000
+
+
0
75,000
0
+
0
10,000
+
75.00~ I ~
o ' +
-
0
*
+
$
Revenue
+
75.00~ -1--~-1--
+
W.
1
1
10,000
p O,OOO)J +-I-+- + - -
=
0
II
Holden,
With
drawals
Holden,
Capital
QT+
=
= I
31,000
-1-=
I
I
0 I =
_,__ 31,000 -1-=
3,000 _J_ _+_
0
+
I.
( 10.000)J~
----,-----~
47,000
+
Bal.
I :
j.
(1,000)J +
46,ooo I +
3,ooo I -:;--i $
Bal.
Bal.
+
1~0~ _1 _+
I
25,000
=
6,000./1 =
(6,000)J t +
+--.:-
25,000
II
~
i --+-1- 10,00~
_+__,,_____~
+
+
55,000
(3,000)J 1 +
52,000
+
=~
=
=
=
=
=
=
15,00~Ji =
15,000
o
10,000J
10,000J
25,000
- - ! - - - - ! - - - 10,000
0
0
-1---+--
2, 500J I +
61 ,000
+
Accounts
Payable
Equipment
+
Equity
+
l
I
+
a
o
+
+
+ :
~
-j-:- _
I-
10,50~
I$
I + 1,50~ I
1_J -_
IT
10,50~ I ~
1o.5oo
0
I
l'--___:<---+--10.50~
15.ao~
15,000
-%f: J
I
++
+
·1
10.50~ I
10,500
I-
$
1.500
3,oooJ
4,~
4.~
4,5~
4,500
I
13 •
award:
10 out of
10.00
········· poims-·
The following table shows the effects of five transac ti ons (a through e) on the assets, liabilities, and
equity of Trista's Boutique. Match the given transaction with its probable description.
=
Assets
Accounts
+ Receivable +
$ 21,000 + $
0 +
Cash
a.
e.
$ 3,000
- 4,000
+
b.
c.
d.
Office
Supplies
+
Accounts
+
l and
=
Payable
+ $ 19,000 = $
0
4,000
+
+ 1,000
+
Equity
Trista ,
+ Capital + Revenues
+ $ 43,000 + $
0
+
1,900
- 1,000
+ 1,900 -
1,900
- 1,000
1,900
$ 17 900 +
Transaction
1,000
Liabilities
$
0
+
$
4,000 +
$ 23,000
=
$
0
Description
a.
Purchased land for cash
b.
Purchased office supplies on credit
c.
Billed a client for services provided
d.
Paid the account payable created in transaction b
e.
Collected cash for the billing in transaction c
./
./
./
./
./
+ $ 43,000 +
$
1,900
14 •
award:
10 out of
10.00
················points ····························································· ·
On Oc tober 1, Keisha King organized Real Answers, a new consulting firm; on October 3, the owner
contributed $84 ,000 cash. On October 31 , the company's records show the following items and amounts.
Cash
Accounts receivable
Office supplies
Land
Office equipment
Accounts payable
Owner investments
$1 1,360
14,000
3,250
46 ,000
18,000
8,500
84,000
Cash with drawals bv owner
Consulting fees earned
Rent expense
Salaries expense
Telephone expense
Miscellan eous expenses
$ 2,000
14,000
3,550
7,000
760
580
Using the above information prepare an October income statement for the business.
REAL ANSWERS
Income Statement
./
For Month Ended October .31
.I
Revenues
Consulting fees earned
./ $
-=1_
14,000./
0
0
Total revenues
$
14,000
./
Expenses
Miscellaneous expenses
Rent expense
Telephone expense
Salaries expense
Total expenses
Net income
./
./
./
./
--i
./
(580)./
(3,550)./
(760)./
(7,000)./
0
0
(1 1,890)
$
"Red t -:xt ind c.at-:s no respcns.= Wa$ exoect-:d in a cell or a fc!TT'u!a· based calcu ation
pornts deducted.
1
2,110./
1s
incorrect: no
15 •
award:
10 out of
10.00
································potrns-··
On Oc tober 1, Keisha King organized Real Answ ers, a new consulting firm; on October 3, the owner
contributed $84,000 cash. On October 3 1, the company's records show the following items and amounts.
Cash
Accounts receivable
Office supplies
Land
Office equipment
Accounts payable
Ow ner investments
Cash withdrawals by owner
Consulting fees earned
Rent expense
Salaries expense
Telephone expense
Miscellaneous expenses
$1 1,360
14,000
3,250
46,000
18,000
8,500
84,000
$ 2,000
14,000
3,550
7,000
760
580
Using the above information prepare an October statement of owner's eq uity for Real Answers.
REAL ANSWERS
Statement of Owner's Equity
./
For Month Ended October 31
King, Capital, Oct. 1
./ $
Add: Net income
./
./
Add: Owner's investment
0
2,110./
84,000./
86,110
Less: Withdrawals by owner
./
(2.000)./
King, Capital, Oct. 31
./ $
84,110./
16.
award:
10 out of
10.00
················pi'.1trrnr··
On Oc tober 1, Keisha King organized Real Answ ers, a new consulting firm; on October 3, the owner
contributed $84 ,000 cash. On October 31 , the company 's records show the following items and amounts.
Cash
Accounts receivable
Office supplies
Land
Office equipment
Accounts payable
Owner investments
$1 1,360
14,000
3,250
46 ,000
18,000
8,500
84,000
Cash withdrawals by owner
Consulting fees earned
Rent expense
Salaries expense
Telephone expense
Miscellaneous expenses
$ 2,000
14,000
3,550
7,000
760
580
Using the above information prepare an October 3 1 balance sheet for Real Answers.
REAL ANSWERS
Balance Sheet
./
./
As of October 31
./
Assets
Liabilities
Cash
./ $
11,360./ Accounts payable
Land
./
./
./
./
46,000./
Accounts receivable
Office equipment
Office supplies
T
Total assets
./ $
./ $
T
./
14,000./ Tota.I liabilities
18,000./
0
92,610
Total liabilities and equity
0
8,500
./
Equity
3,250./ King , Capital
8,500./
./
- -
84,110./
./ $
92,610
0
17.
award:
10 out of
10.00
·· · · · ····· · poirns-·
On Oc tober 1, Keisha King organized Real Answ ers , a new consulting firm ; on October 3, the owner
invested $84,000 of assets. On October 31 , the company's records show the following items and
amounts.
Cash
Accounts receivab le
Office supplies
Land
Office equipment
Accounts payable
Owner investm ents
$1 1,360
14,000
3,250
46,000
18,000
8,500
84,000
$ 2,000
14,000
3,550
7,000
760
580
Cash withdrawals by owner
Consulting fees earned
Rent expense
Salaries expense
Telephone expense
Miscellaneous expenses
Also assume the following:
a. The owner's initial investment consists of $38,000 cash and $46,000 in land.
b. The company's $ 18,000 equipment purchase is paid in cash.
c. The accounts payable balance of $8,500 consists of the $3,250 office supplies purchase and $5,250
in employee salaries yet to be paid.
d . The company's rent, telephone, and miscellaneous expenses are paid in cash.
e. No cash has been collec ted on the $14,000 consulting fees earned.
Using the above information prepare an October 31 statement of cash flows for Real Answers. (Cash
outflows shou ld be ind icated by a minus s ign .)
REAL ANSWERS
Statement of Cash Flows
For Month Ended October 31
Cash flows from operating activities
Cash received from customers
$
T
0
Cash paid for rent
./
(3,550)./
Cash paid for telephone expenses
./
(760)./
Cash paid for miscellaneous expenses
./
(580)./
Cash paid to employees
.; _ _ _(_
1.1_50_1.1
---+I _
.;1
'$
Net cash used by operating activities
j_".'._
(6,640)
Cash flows from investing activities
Purchase of office equipment
./
( 18,000)./
Net cash used by investing activities
./.-~
]
(18.000)
Cash flows from financing activities
Investments by owner
Witl1drawals by owner
./
./
Net cash provided by financing activities
./
Net increase in cash
./
Cash balance, October 1
Cash balance, October 31
38,000./
(2.000)./
~~~~~~~-+
1
36,000
11,360./
0./
11,360
I
*Red taxt ind cat.es no resp<0nse \Vas ex?ect.s-d 1n a cell or a fom-ula· based caku ation 1s incorrect: no poin:s d.:d.1ae-:I.
award:
18.
10 out of
10.00
Swiss Group reports net income of $40,000 for 2013. At the beginning of 2013, Swiss Group had
$200,000 in assets. By the end of 20 13, assets had grown to $300,000.
What is Swiss Group's 2013 return on assets?
Return on assets
Choose Numerator:
Net income
$
----
Choose Denominator:
./
I
Average total assets
40,000./
I
$
<---I1
Return on assets
./I
=
250,000./ =
j
Return on assets
16%
-
19.
award:
10 out of
10.00
· · · · · · · -ii-otrns- ···
Match each description with its section from statement of cash flows.
Description
Statement of cash flow
1.
Cash paid for advertising
Cash flows from operating activity
2.
Cash paid for wages
Cash flows from operating activity
3.
Cash withdrawal by owner
Cash flows from financing activity
4.
Cash purchase of equipment
Cash flows from investing activity
5.
Cash paid for rent
Cash flows from operating activity
6.
Cash paid on an account payable (for :supplies)
Cash flows from operating activity
~ investment by owner
Cash flows from financing activity
8.
Cash flows from operating activity
Cash received from clients
./
./
./
./
./
./
./
./