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Exam 1: Accounting Information and Decision Making

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Question 31

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Klein Interiors has the following account balances at the end of the year.Use only the appropriate accounts to prepare a balance sheet. $\begin{array} { | l | r | } \hline { \text { Accounts } } & \text { Balances } \\\hline \text { Equipment } & \$ 78,000 \\\hline \text { Accounts Payable } & 12,000 \\\hline \text { Common Stock } & 20,000 \\\hline \text { Service Revenue } & 62,000 \\\hline \text { Cash } & 8,000 \\\hline \text { Retained Earnings } & \boldsymbol { ? } \\\hline \text { Salaries Expense } & 38,000 \\\hline \text { Notes Payable } & 25,000 \\\hline\end{array}$

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Question 32

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Define accounting.Describe the two primary functions of financial accounting and its role in our society.

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Accounting is "the language of business....

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Question 33

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The independent,private-sector group that is primarily responsible for setting financial reporting standards in the United States is the:

How many of the following transactions are operating activities? Borrowed $50,000 from the bank Purchased $12,000 in supplies Provide services to customers for $27,000 Paid the utility bill of $750 Purchased a delivery truck for $12,000 Received $25,000 from issuing common stock

Liabilities are shown in which of the following statements?

The assumption that the assets and liabilities of the business are accounted for on the books of the company but not included in the records of the owner is the:

Limited liability means:

Double taxation refers to a corporation's income being taxed twice-first when the company earns it and pays corporate income taxes on it,and then again when stockholders pay personal income taxes on any amounts the firm distributes to them as dividends.

If a company reports revenues of $17,000 and expenses of $12,000,then net income equals $5,000.

Which of the following is an operating activity?

Investing cash flows generally include cash receipts and cash payments for transactions involving revenues and expenses.

The primary focus for financial accounting information is to provide information useful for: $\begin{array}{lll}&\text { Investing decisions } & \text {Credit decisions }\\\text { a. } & \text { Yes } & \text { Yes } \\\text { b. } & \text { Yes } & \text { No } \\\text { c. } & \text { No } & \text { Yes } \\\text { d. } & \text { No } & \text { No }\end{array}$

Emmitt had the following final balances after the first year of operations: assets,$55,000; stockholders' equity,$25,000; dividends,$3,000; and net income,$10,000.What is the amount of Emmitt's liabilities?

Financing activities are transactions involving externals sources of funding.

Stimpleton Company engages in the following cash payments: $\begin{array} { l r } \text { Purchase equipment } & \$ 2,000 \\\text { Pay rent } & 500 \\\text { Repay loan to the bank } & 5,000 \\\text { Pay workers' salaries } & 1,000\end{array}$ What is the total amount of cash paid for operating activities?

The primary functions of financial accounting are to measure business activities of a company and to communicate those measurements to internal parties for decision-making purposes.

The primary objective of financial reporting is to provide useful information to managers in making decisions.

The rules of financial accounting are called Generally Accepted Accounting Principles (GAAP).

At the end of the current period,Maltese,Inc.reports the following amounts: Assets = $50,000; Liabilities = $28,000; Dividends = $4,000; Revenues = $22,000; Expenses = $16,000.Calculate net income and stockholders' equity at the end of the period.

Of the following,the most important objective for financial reporting is to provide information useful for: