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Exam 1: Accounting in Action

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Question 1

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At September 1, 2013, the balance sheet accounts for Roxanne's Restaurant were as follows: The following transactions occurred during the next two days: Roxanne invested an additional $22,000 cash in the business. The accounts payable were paid in full. (No payment was made on the notes payable.) Instructions Prepare a Balance Sheet at September 3, 2013.

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Cash ($5,000 + $22,000 - $3,8...

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Question 2

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Partners' equity, in a partnership, is decreased by

A) payment of dividends.
B) drawings.
C) owner's investments.
D) revenues.

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Question 3

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An external user could be

If total liabilities increased by $5,000, then

Measurement is the process of determining the amount that should be recognized.

Creditors are an example of an internal user of accounting information.

The income statement is prepared from the data in the

If supplies that have been purchased are used in the course of business, then

A corporation is only subject to the federal laws of corporations.

Sources of increases to owner's equity, in a proprietorship, are

Match the items below by entering the appropriate code letter in the space provided.

An Income Statement

Which of the following accounts would NOT be found on the Balance Sheet?

GAAP stands for Generally Accepted Accounting Principles.

The main objective of financial statements is to provide useful information to management.

Each of the following independent situations represents a departure from generally accepted accounting principles. 1. Strad Music Supplies is a proprietorship owned and operated by Giuseppe Amati. Giuseppe started the business with funds given to him by his uncle. He gives his uncle a copy of Strad's financial statements each year so that his uncle will see this was a good investment. In 2011 both Giuseppe and his uncle were disappointed that sales had decreased from the prior year. When Giuseppe wins $50,000 in a lottery during 2013, he decides to record the amount as revenue in the financial statements of the business to avoid disappointing his uncle even further. 2. Xavier Quinn, the owner of Quinn's Travel is thinking of retiring in two years time because the business is not as successful as he had hoped. Xavier has always been very careful to ensure that all assets and liabilities are recorded correctly. However, since he is thinking of retiring, Xavier decides that generally accepted accounting principles are no longer relevant, so he does not double check his work as carefully as he did previously. Instructions For each situation listed above: a. identify which principle has been violated b. describe what the correct accounting treatment would be, and c. why the correct treatment provides better information.

Owner's equity, in a proprietorship, at the end of the period is equal to

The cost and fair value of an asset are the same at the time of acquisition and in all subsequent periods.

The primary purpose of the Cash Flow Statement is to report

A balance sheet reports the assets, liabilities, and owner's equity at a specific date.