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Exam 1: Introduction to Accounting and Business

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Question 31

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How does paying a liability in cash affect the accounting equation?

A) assets increase; liabilities decrease
B) assets increase; liabilities increase
C) assets decrease; liabilities decrease
D) liabilities decrease; stockholders' equity increases

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

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Question 32

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Indicate how the following transactions affect the accounting equation: (a) The purchase of supplies on account. (b) The purchase of supplies for cash. (c) Cash dividends paid to stockholders. (d) Revenues received in cash. (e) Revenues received on account.

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(a) Assets increase; liabilities increas...

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Question 33

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Assets are

A summary of cash flows for Alex Design Services for the year ended December 31, 2012, is shown below. Prepare a statement of cash flows for Alex Design Services for the year ended December 31, 2012.

At the end of its accounting period, December 31, 2011, Hsu's Financial Services has assets of $575,000 and stockholders' equity of $335,000. Using the accounting equation and considering each case independently, determine the following amounts. a. Hsu's liabilities as of December 31, 2011. b. Hsu's liabilities as of December 31, 2012, assuming that assets increased by $56,000 and stockholders' equity decreased by $32,000. c. Net income or net loss during 2012, assuming that as of December 31, 2012, assets were $592,000, liabilities were $450,000, and there were no additional capital stock sales or dividends paid in 2012.

Cash dividends paid to stockholders decrease assets and increase equity.

Revenues are reported when

The assets and liabilities of S&P Day Spa at December 31, 2011, and its revenue and expenses for the year are listed below. The Retained Earnings balance was $57,830 at January 1, 2011. Based on the data provided for S&P Day Spa, prepare a retained earnings statement for the year ended December 31, 2011.

Explain the meaning of: (a) the objectivity concept (b) the unit of measure concept

Which of the following groups are considered to be internal usersof accounting information?

Give the major disadvantage of disregarding the cost concept and constantly revaluing assets based on appraisals and opinions.

The accountant for Franklin Company prepared the following list of account balances from the company's records for the year ended December 31, 2011: Determine the total liabilities at the end of 2011 for Franklin Company.

The Sarbanes-Oxley Act of 2002 prohibits employment of auditors by their clients for what period after their last audit of the client?

Expenses are recorded when

Which type of accountant typically practices as an individual or as a member of a public accounting firm?

The financial statement that presents a summary of the revenues and expenses of a business for a specific period of time, such as a month or year, is called a(n)

What is the major difference between the objective of financial accounting and the objective of managerial accounting?

Declaring and paying cash dividends

CPA Associates was organized on January 1, 2011, as a corporation. List the errors that you find in the following financial statements and prepare the corrected statements for the three months ended March 31, 2011.

Transactions affecting stockholders' equity include