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Exam 1: Accounting in Business

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Question 21

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The monetary assumption:

A) Means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.
B) Presumes that the life of a company can be divided into time periods, such as months and years, and that useful reports can be prepared for those periods.
C) Means that we can express transactions and events in monetary, or money, units.
D) Prescribes that a company record the expenses it incurred to generate the revenue reported.
E) Means that a business is accounted for separately from other business entities, including its owner.

F) A) and B)
G) B) and D)

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Question 22

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Identify the three basic forms of business organizations and their key attributes.

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The three basic forms of business organi...

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Question 23

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Cornelia's Closet has the following account balances for the dates given: $\begin{array}{rr}&\text { October 1 } & \text { October 31 } \\\hline \text { Cash...... }&\$ 40,000 & 60,000 \\\text { Accounts Receivable }&40,000 & 38,000 \\\text { Accounts payable }&6,000 & ?\end{array}$ Also, its net income, for October 1 through October 31 was $20,000 and there were no investments or withdrawals by the owner. Determine the equity at both October 1 and October 31.

Describe the three important guidelines for revenue recognition.

Owner's investments are increases in equity from a company's earnings activities.

The Sarbanes-Oxley Act (SOX)requires each issuer of securities to disclose whether it has adopted a code of ethics for its senior financial officers and the contents of that code.

A company borrows $125,000 from the Northern Bank and receives the loan proceeds in cash. This represents a(n) :

A company's balance sheet shows: cash $24,000, accounts receivable $30,000, equipment $50,000, and equity $72,000. What is the amount of liabilities?

Which of the following purposes would financial statements serve for external users?

Determine the net income of a company for which the following information is available for the month of July. $\begin{array}{lr}\text { Employee salaries expense } & \$ 180,000 \\\text { Interest expense } & 10,000 \\\text { Rent expense } & 20,000 \\\text { Consulting revenue } & 400,000\end{array}$

A limited liability company offers the limited liability of a corporation and the tax treatment of a partnership or proprietorship.

Specific accounting principles are basic assumptions, concepts, and guidelines for preparing financial statements and arise out of long-used accounting practice.

Investing activities involve the buying and selling of assets such as land and equipment that are held for long-term use in the business.

The three common forms of business ownership include sole proprietorship, partnership, and corporation.

If the liabilities of a company increased $92,000 during a period of time and equity in the business decreased $30,000 during the same period, did the assets of the company increase or decrease? By what amount?

The characteristics below apply to at least one of the forms of business organization. a. Is a separate legal entity. b. Is allowed to be owned by one person only. c. Owner or owners are personally liable for debts of the business. d. Is a separately taxable entity. e. Is a business entity. f. May have a contract specifying the division of profits among the owners. g. Has an unlimited life Use the following format to indicate (with a "yes" or "no")whether or not a characteristic applies to each type of business organization. $\begin{array} { | l | l | l | l | } \hline & \text { Proprietorship } & \text { Partnership } & \text { Corporation } \\\hline \text { a. } & & & \\\hline \text { b. } & & & \\\hline \text { c. } & & & \\\hline \text { d. } & & & \\\hline \text { e. } & & & \\\hline \text { f. } & & & \\\hline \text { g. } & & & \\\hline\end{array}$

An example of an operating activity is:

How does the objectivity principle support ethical behavior?

The statement of owner's equity:

Technology: