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Exam 1: Accounting Information and Decision Making

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Question 21

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One of the differences between a partnership and a corporation is that owners of a partnership have limited liability.

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verified

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Question 22

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The costs of advertising, utilities, and salaries in the current reporting period are examples of liabilities.

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Question 23

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The equation best describing the income statement is:

Transactions of a company that include the purchase and sale of long-term productive assets are referred to as:

The assumption that a business can continue to remain in operation into the future is the:

The costs associated with producing revenues are referred to as:

A corporation is an entity that is legally separate from its owners.

The conceptual framework's qualitative characteristic of faithful representation includes:

Dividends are considered an expense in running the business and reported in the income statement.

The difference between revenues and expenses is referred to as net income or net loss.

Emmitt had the following final balances after the first year of operations: assets, $55,000; stockholders' equity, $25,000; dividends, $3,000; and net income, $10,000. What is the amount of Emmitt's liabilities?

Which financial statement is typically prepared first?

Consider the following account balances of the Shattuck Law Firm as of December 31, 2012: $\begin{array} { l r } \text { Accounts Payable } & \$ 4,400 \\\text { Salaries Expense } & 12,800 \\\text { Cash } & 1,700 \\\text { Common Stock } & 2,400 \\\text { Service Revenue } & 8,300 \\\text { Supplies } & 4,300 \\\text { Retained Earnings } & 1,100 \\\text { Utilities Expense } & 5,000\end{array}$ How many of these accounts would appear in Shattuck's 2012 balance sheet?

The two categories of stockholders' equity usually found in the balance sheet of a corporation are:

Limited liability means the stockholders are not held personally responsible for the financial obligations of the corporation.

For the past five years, Mookie Consulting Services reported the following annual net income and dividend amounts: $\begin{array} { c c c } \text { Year } & \text { Net Income } & \text { Dividends } \\1 & \$ 22,000 & \$ 2,000 \\2 & 17,000 & 2,000 \\3 & 9,000 & 1,000 \\4 & 14,000 & 3,000 \\5 & 25,000 & 4,000\end{array}$ If Mookie had Retained Earnings of $88,000 at the end of year 5, what was the company's Retained Earnings at the beginning of Year 1?

Below are typical transactions for a company. Indicate whether each transaction is classified as a financing, investing, or operating activity.

McGill purchases additional office equipment to better serves its customers. This purchase is classified as what type of activity?

Account classifications include assets, liabilities, stockholders' equity, dividends, revenues, and expenses. Indicate the account classification for each account name.

Investors and creditors rely heavily on financial accounting information in making investment and lending decisions.