Financial Accounting Exam 1Study Guide Questions And Answers Verified 100% Correct

Financial Accounting Exam 1Study Guide Questions And Answers Verified 100% Correct What is a major reason why corporate ownership is popular in the United States? - ANSWER Stockholders have limited liability for the debts of the corporation. Regarding the separation of corporate ownership and management, which of the following is a true statement? A.Stockholders own the business, but a board of directors appoints corporate officers to manage the business. B. The corporation runs better with day−to−day input from stockholders. C. None of the stockholders have the ability to manage the business of the corporation. D. The corporate officers elect the board of directors. - ANSWER A. Stockholders own the business, but a board of directors appoints corporate officers to manage the business. Joshua Thomas Corporation manufactures and retails computer hardware. The president of the corporation bought a new car as a gift for his daughter and paid for it using cash from the business. Since the corporation paid for the car, it was recorded in its books as an asset. Which of the following concepts or principles of accounting did the corporation violate? A. Monetary unit assumption B. Economic entity assumption C. Going concern assumption D. Cost principle - ANSWER B. Economic entity assumption According to the ________, acquired assets should be recorded at the amount actually paid rather than at the estimated market value. - ANSWER cost principle As per the ________, the entity will remain in operation for the foreseeable future. - ANSWER going concern assumption Genity Corporation records business transactions in dollars and disregards changes in the value of a dollar over time. Which of the following accounting assumptions does this represent? A. Going concern assumption B. Monetary unit assumption C. Economic entity assumption D. Accounting period assumption - ANSWER B. Monetary unit assumption The Sarbanesminus−Oxley Act (SOX) ________. - ANSWER requires companies to take responsibility for the accuracy and completeness of their financial reports The equity of Autumn Company is $160,000 and the total liabilities are $50,000. The total assets are ________. - ANSWER $210,000 Sunlight Company has assets and equity that amount to $ 300,000 and $50,000, respectively. Liabilities total ________. - ANSWER $250,000 The owners' claims to the assets of the business are called ________. - ANSWER equity Vista Camera Services started the year with total assets of $120,000 and total liabilities of $55,000. The revenues and the expenses for the year amounted to $100,000 and $80,000, respectively. During the year, the company did not issue any common stock, but it distributed dividends of $50,000. What is the amount of stockholders' equity at the end of the year? - ANSWER $35,000 Vista Camera Services started the year with total assets of $110,000 and total liabilities of $45,000. The revenues and the expenses for the year amounted to $120,000 and $90,000, respectively. During the year, the company did not issue any common stock, but it distributed dividends of $50,000. What is the amount of stockholders' equity at the end of the year? - ANSWER $45,000 Gatto Production Services started the year with total assets of $120,000 and total liabilities of $65,000. The revenues and the expenses for the year amounted to $110,000 and $50,000 , respectively. During the year, the company did not issue any common stock, but it distributed dividends of $70,000. Calculate Gatto's net income for the year. - ANSWER $60,000 York Casting Services started the year with total assets of $110,000 and total liabilities of $40,000. The revenues and the expenses for the year amounted to $110,000 and $50,000, respectively. During the year, the company did not issue any common stock, but it distributed dividends of $50,000. Calculate the amount of increase or decrease in stockholders' equity for the year. - ANSWER a $10,000 increase York Casting Services started the year with total assets of $110,000 and total liabilities of $50,000. The revenues and the expenses for the year amounted to $140,000 and $50,000, respectively. During the year, the company did not issue any common stock, but it distributed dividends of $70,000. Calculate the amount of increase or decrease in stockholders' equity for the year. - ANSWER a $20,000 increase Which of the following is true of retained earnings? A. Retained earnings decrease with collection of revenue. B. Retained earnings decrease with payment of dividends. C. Retained earnings increase with payment on account. D. Retained earnings increase with purchase of assets. - ANSWER B. Retained earnings decrease with payment of dividends. Hamilton Lawn Services incurred $800 as a repair expense and paid for it in cash. This transaction will ________. - ANSWER decrease the stockholders' equity The net income of Edwards Corporation amounted to $74,000 for this year. The beginning balance of stockholders' equity was $33,000 and the ending balance was $73,000. The company issued no common stock during the year. What was the amount of dividends distributed during the year? - ANSWER $34,000 FASB - ANSWER Financial Accounting Standards Board ---sets accounting standards in the U.S. GAAP - ANSWER Generally Accepted Accounting Principals IFRS - ANSWER International Financial Reporting Standards --- non binding/more general than US GAAP IASB - ANSWER International Accounting Standards Board --- sets accounting standards in the rest of the world SEC - ANSWER Securities and Exchange Commision ---requires companies to publish improtant facts about thier business/regulates FASB and GAAP Assets - ANSWER economic resource that is expected to be beneficial in the future ---usually things, DEBIT/LEFT Liability - ANSWER economic obligation/debt payable to an individual or organization outside of the business ---payable, CREDIT/RIGHT Accounting equation - ANSWER assets = liabilities + owner's equity Types of business - ANSWER sole proprietorship, partnership, limited liability corp (llc), corp Proprietorship - ANSWER business owned by one person Partnership - ANSWER business owned and controlled by two or more people who have entered into a written agreement Limited liability corporation - ANSWER type of business with limited liability for the owners (don't pay corp income tax) ---business liable for debt Corporation - ANSWER business owned by stockholders who share in its profits but are not personally responsible for its debts