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Exam 1: Accounting in Business

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Question 71

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________________ activities are the means organizations use to pay for resources such as land, building, and equipment.

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Question 72

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On December 15 of the current year, Myers Legal Services signed a $50,000 contract with a client to provide legal services to the client in the following year. Which accounting principle would require Myers Legal Services to record the legal fees revenue in the following year and not the year the cash was received?

A) Monetary unit assumption.
B) Going-concern assumption.
C) Cost principle.
D) Business entity assumption.
E) Revenue recognition principle.

F) C) and D)
G) A) and E)

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Question 73

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Accounting is an information and measurement system that does all of the following except:

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?

____________ are the increases in equity from a company's earnings activities

FastForward has the following beginning cash balance and cash transactions for the month of January. Using this information prepare a statement of cash flows.

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

Owner financing refers to resources contributed by creditors or lenders.

The rule that (1) requires revenue to be recognized at the time it is earned, (2) allows the inflow of assets associated with revenue to be in a form other than cash, and (3) measures the amount of revenue as the cash plus the cash equivalent value of any noncash assets received from customers in exchange for goods or services, is called the:

Net income occurs when revenues exceed expenses.

Explain the role of accounting in the information age.

The private group that currently has the authority to establish generally accepted accounting principles in the United States is the:

Quick Computer Service had revenues of $80,000 and expenses of $50,000 for the year. Its assets at the beginning of the year were $400,000. At the end of the year assets were worth $450,000. Calculate its return on assets.

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

The income statement shows the financial position of a business on a specific date.

Owner's equity is increased when cash is received from customers in payment of previously recorded accounts receivable.

Unlimited liability is an advantage of a sole proprietorship.

The International Accounting Standards Board (IASB)

Generally accepted accounting principles are the basic assumptions, concepts, and guidelines for preparing financial statements.

If a parcel of land that was originally acquired for $85,000 is offered for sale at $150,000, is assessed for tax purposes at $95,000, is recognized by its purchasers as easily being worth $140,000, and is sold for $137,000, the land should be recorded in the purchaser's books at: