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Exam 1: Introduction to Accounting and Business

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Question 91

True/False

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Cash dividends paid to stockholders decrease assets and increase equity.

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Question 92

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Debts owed by a business are referred to as

A) accounts receivables
B) assets
C) stockholder's equity
D) liabilities

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Question 93

Multiple Choice

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The following are examples of external users of accounting information except

Given below are the accounts and amounts for Bright Futures Company as of August 31, 2011. All of the revenue and expense amounts are for the month of August. $\begin{array}{ll}\text { Telephone Expense } & \$ 1,150 \\\text { Cash } & 3,000 \\\text { AccountsPayable } & 1,540 \\\text { Dividends } & 800 \\\text { FeesEarned } & 15,700 \\\text { Rent Expense } & 1,400 \\\text { Supplies } & 140 \\\text { Accounts Receivable } & 1,500 \\\text { Computer Equipment } & 20,000 \\\text { Capital Stock } & 10,000 \\\text { WagesExpense } & 4,800 \\\text { Utilities Expense } & 750 \\\text { Notes Payable } & 2,400 \\\text { Retained Earnings } & 4,320 \\\text { Office Expense } & 420\end{array}$ Based on the data provided for Bright Futures Company, prepare in good format a balance sheet as of August 31, 2011.

The basic difference between manufacturing and merchandising companies is the completion level of the products they purchase for resale to customers.

The assets and liabilities of S&P Day Spa at December 31, 2014 and expenses for the year are listed below. The retained earnings balance was $68,000 at January 1, 2014. Prepare a retained earnings statement for the current year ended December 31, 2014.

The statement of cash flows consists of three sections: cash flows from operating activities, cash flows from income activities, and cash flows from equity activities.

The total assets and total liabilities of Paul's Pools, a corporation, at the beginning and at the end of the current fiscal year are as follows:

If stockholders wanted to know how money flowed into and out of the company, what financial statement would they use?

Company G has a ratio of liabilities to stockholders' equity of 0.12 and 0.28 for 2010 and 2011, respectively. In contrast, Company M has a ratio of liabilities to stockholders' equity of 1.13 and 1.29 for the same period. REQUIRED: Based on this information, which company's creditors are more at risk and why? Should the creditors of either company fear the risk of nonpayment?

If a corporation had net income of $60,000 and $20,000 in cash dividends were declared and paid then the retained earnings account would increase by $40,000.

No significant differences exist between the accounting standards issued by the FASB and the IASB.

Managerial accounting information is used by external and internal users equally.

Owners' rights to assets rank ahead of creditors' rights to assets.

Proper ethical conduct implies that you only consider what's in your best interest.

Revenue is earned only when money is received.

Which of the following is not a general-purpose financial statement?

Cash investments made by stockholders in exchange for capital stock in a business are reported on the statement of cash flows in the

Transactions affecting stockholders' equity include

Ramos Repair Company paid $750 in dividends to its stockholders. How does this transaction affect Ramos Repair Company's accounting equation?