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Exam 1: An Introduction to Accounting

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Question 1

Multiple Choice

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Which of the following would not describe the effects of an asset source transaction on a company's financial statements?

A) Option A
B) Option B
C) Option C
D) Option D

E) B) and D)
F) A) and B)

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Question 2

Multiple Choice

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The transaction, "provided services for cash," affects which two accounts?

A) Revenue and Expense
B) Cash and Revenue
C) Cash and Expense
D) Cash and Dividends

E) All of the above
F) A) and B)

Correct Answer

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B

Question 3

True/False

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The historical cost concept requires that most assets be recorded at the amount paid for them, regardless of increases in market value.

At the end of Year 2, retained earnings for the Baker Company was $3,500. Revenue earned by the company in Year 2 was $1,500, expenses paid during the period were $800, and dividends paid during the period were $500. Based on this information alone, retained earnings at the beginning of Year 2 was:

Robertson Company paid $1,850 cash for rent expense. As a result of this business event:

Indicate whether each of the following statements about accounting information is true or false. _______ a) Financial accounting is primarily intended to satisfy the information needs of internal stakeholders. _______ b) Managerial accounting information includes financial and nonfinancial information. _______ c) The accounting information intended to satisfy the needs of a company's employees is managerial accounting information. _______ d) GAAP requires that companies adhere to financial accounting standards. _______ e) Managerial accounting information is usually less detailed than financial accounting information.

Which of the following represents effects of an asset use transaction on a company's financial statements?

An asset source transaction increases a business's assets and the claims to assets.

Equity is a source of a business's assets, but liabilities are not.

Jackson Company paid $500 cash for salary expenses. Which of the following choices accurately reflects how this event affects the company's financial statements?

The stockholders of a business have a priority claim to its assets in the event of liquidation.

Which resource providers lend financial resources to a business with the expectation of repayment with interest?

Yowell Company began operations on January 1, Year 1. During Year 1, the company engaged in the following cash transactions: 1) issued stock for $40,000 2) borrowed $25,000 from its bank 3) provided consulting services for $39,000 cash 4) paid back $15,000 of the bank loan 5) paid rent expense for $9,000 6) purchased equipment for $12,000 cash 7) paid $3,000 dividends to stockholders "8) paid employees' salaries of $21,000 What is Yowell's net income for Year 1?"

Lexington Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.) 1. Acquired $6,000 cash from issuing common stock. 2) Borrowed $4,400 from a bank. 3) Earned $6,200 of revenues. 4) Incurred $4,800 in expenses. 5) Paid dividends of $800. Lexington Company engaged in the following transactions during Year 2: 1) Acquired an additional $1,000 cash from the issue of common stock. 2) Repaid $2,600 of its debt to the bank. 3) Earned revenues, $9,000. 4) Incurred expenses of $5,500. 5) Paid dividends of $1,280. The amount of retained earnings on Lexington's balance sheet at the end of Year 1 was:

Expenses are shown on the:

All of a business's temporary accounts appear on the income statement.

Santa Fe Company was started on January 1, Year 1, when it acquired $9,000 cash by issuing common stock. During Year 1, the company earned cash revenues of $4,500, paid cash expenses of $3,750, and paid a cash dividend of $250. Based on this information,

Zimmerman Company sold land for $25,000 cash. The original cost of the land was $25,000. Select the answer that indicates how this event affects the company's financial statements.

An asset use transaction does not affect the total amount of claims to a company's assets.

Which of the following accounts are permanent?