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Exam 1: Introduction to Accounting and Business

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Question 51

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The accountant for Franklin Company prepared the following list of account balances from the company's records for the year ended December 31, 2011: $\begin{array}{llll}\text { Fees Earned } & \$ 165,000 & \text { Cash } & \$ 30,000 \\\text { Accounts Receivable } & 14,000 & \text { Selling Expenses } & 44,000 \\\text { Equipment } & 64,000 & \text { Franklin, Capital } & 27,000 \\\text { Accounts Payable } & 12,000 & \text { Interest Income } & 3,000 \\\text { Salaries \& Wages Expense } & 40,000 & \text { PrepaidRent } & 2,000 \\\text { Income Taxes Payable } & 5,000 & \text { Income Taxes Expense } & 18,000 \\\text { Notes Payable } & 20,000 & \text { Rent Expense }&20,000\end{array}$ Determine the total liabilities at the end of 2011 for Franklin Company.

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Question 52

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The cost concept is the basis for entering the exchange price into the accounting records.

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Question 53

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Donner Company is selling a piece of land adjacent to their business premises. An appraisal reported the market value of the land to be $220,000. The Focus Company initially offered to buy the land for $177,000. The companies settled on a purchase price of $212,000. On the same day, another piece of land on the same block sold for $232,000. Under the cost concept, at what amount should the land be recorded in the accounting records of Focus Company?

A financial statement user would determine if a company was profitable or not during a specific period of time by reviewing

There are four transactions that affect Owner's equity. (a) What are the two types of transactions that increase Owner's equity? (b) What are the two types of transactions that decrease Owner's equity?

Using the following accounts and their amounts, prepare in good format an Income Statement for Bright Futures Company, month ended August 31, 2011: $\begin{array}{ll}\text { Telephone Expense } & \$ 1,150 \\\text { Cash } & \$ 3,000 \\\text { Accounts Payable } & \$ 1,540 \\\text { Jason Bright, Drawing } & \$ 800 \\\text { Fees Earned } & \$ 15,700 \\\text { Rent Expense } & \$ 1,400 \\\text { Supplies } & \$ 140 \\\text { Accounts Receivable } & \$ 1,500 \\\text { Computer Equipuent } & \$ 20,000 \\\text { Jason Bright, Capital } & \$ 14,320 \\\text { Wages Expense } & \$ 4,800 \\\text { Utilities Expense } & \$ 750 \\\text { Notes Payable } & \$ 2,400 \\\text { Office Expense } & \$ 420\end{array}$

Financial reports are used by

The primary role of accounting is to determine the amount of taxes a business will be required to pay to taxing entities.

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

The main objective for all business is to maximize unrealized profits.

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

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

Proprietorships are owned by one owner and provide only services to their customers.

Receiving a bill or otherwise being notified that an amount is owed is recorded until the amount is paid.

The rights or claims to the assets of a business may be subdivided into rights of creditors and rights of owners.

Which of the following is the best description of accounting's role in business?

Most businesses in the United States are

Which of the following financial statements reports information as of a specific date?

Expenses are recorded when

Accounting information users need reports about the economic activities and condition of businesses.