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Exam 1: Introduction to Accounting and Business

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Question 101

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The business entity concept means that

A) the owner is part of the business entity
B) an entity is organized according to state or federal statutes
C) an entity is organized according to the rules set by the FASB
D) the entity is an individual economic unit for which data are recorded, analyzed, and reported

E) None of the above
F) A) and B)

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Question 102

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Two common areas of accounting that respectively provide information to internal and external users are:

A) forensic accounting and financial accounting
B) managerial accounting and financial accounting
C) managerial accounting and environmental accounting
D) financial accounting and tax accounting systems

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

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Question 103

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The assets and liabilities of Amos Moving Services at March 31, 2014, the end of the current year, and its revenue and expenses for the year are listed below. The capital of the owner was $180,000 at April 1, 2013, the beginning of the current year. Mr. Amos invested an additional $25,000 in the business during the year. $\begin{array}{llll}\text { Accounts Payable } & \$ 2,000 & \text { Miscellaneous Expense } &\$ 1,030\\\text { Accounts Receivable } & \$ 10,340 & \text { Office Expense } &\$1,240\\\text { Cash } & \$ 21,420 & \text { Supplies } & \$1,670\\\text { Fees Earned } & \$ 73,450 & \text { Wages Expense } &\$23,550\\\text { Land } & \$ 47,000 & \text { Drawing }&\$16,570\\Building&\$ 157,630\end{array}$ Prepare a statement of owner's equity for the current year ended March 31, 2014.

The unit of measurement concept requires that economic data be recorded in a common unit of measurement.

Explain the meaning of the business entity concept.

Discuss internal and external users of accounting information. What areas of accounting provide them with information? Give an example of the type of report each type of user might use.

On March 1, 2014, the amount of Norton Cook's capital in Cook's Catering Company was $150,000. During March, he withdrew $31,000 from the business. The amounts of the various assets, liabilities, revenues, and expenses are as follows: $\begin{array}{ll}\text{Accounts payable} & \$ 10,250 \\\text{Accounts receivable} & 45,950 \\\text{Cash} & 23,840 \\\text{Fees earned} & 64,950 \\\text{Insurance expense} & 1,275 \\\text{Land} & 85,400 \\\text{Miscellaneous expense} & 1,210 \\\text{Prepaid insurance} & 3,000 \\\text{Rent expense} & 9,000 \\\text{Salary expense} & 20,300 \\\text{Supplies} & 900 \\\text{Supplies expense} & 525 \\\text{Utilities expense} & 2,800 \\\end{array}$ Present, in good form, (a) an income statement for March, (b) a statement of owner's equity for March, and (c) a balance sheet as of March 31.

A statement of owner's equity reports the changes in the owner's equity for a period of time.

An example of an external user of accounting information is the federal government.

For each of the following companies, select whether they are a service, merchandising, or manufacturing business.

A summary of cash flows for Alex Design Services for the year ended December 31, 2012, is shown below. $\begin{array}{ll}\text { Cash receipts}\\\text { Cash received from customers } & \$ 83,990 \\\text { Cash received from additional investment by owner } & 25,000\end{array}$ Prepare a statement of cash flows for Alex Design Services for the year ended December 31, 2012.