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Exam 1: An Introduction to Accounting

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Question 71

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Both liabilities and equity are sources of a business's assets.

A) True
B) False

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Question 72

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Frey Company was founded January 1,2012.During 2012,the company experienced the following events: 1.earned cash revenue of $50,000. 2.paid cash expenses of $41,000. 3.issued common stock for $30,000 cash. 4.paid cash dividend of $2,000 to owners. Required: a)Write an accounting equation and record effects of each accounting event under appropriate general ledger account headings,showing dollar amounts of increases and decreases and totals at the end of the year. b)Prepare the 2012 income statement and balance sheet for Frey Company.

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Question 73

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Fill in the blanks indicated by the alphabetic letters in the following financial statements.Assume that the company started operations in the current year and that all transactions were for cash.

Which financial statement presents a summary of revenues and expenses of a business for a specific period of time,such as a month or year?

What are accounting events? What are transactions?

MNO Company paid $500 cash for salary expenses.Which of the following choices accurately reflects how this event would affect the company's financial statements?

The claims of a business's creditors are called

What amount of cash did Hardin have at the end of 2010?

What is stockholders' equity?

The income statement matches expenses and revenues.

Which of the following could describe the effects of an asset exchange transaction on a company's financial statements?

Lemars Corporation paid $60,000 cash to purchase land.

The following events are for Fun Travel Services for the year 2012,the first year of operations.Assume that all transactions involve the receipt or payment of cash. 1)The business acquired $20,000 from stock issued to owners. 2)Creditors loaned the company $7,000. 3)The company provided services to its customers and received $35,000. 4)The company paid expenses amounting to $23,000. 5)Purchased land for $9,000. 6)The company paid a dividend of $3,000 to its owners. Required: a)Show the effects of the above transactions on the accounting equation.Use appropriate elements and account headings. b)Prepare a balance sheet and income statement for the year 2012.

Springer Company estimated that,at the end of the year,the market value of land (which Springer had purchased several months earlier)had increased by $8,000.

A business's equity is the future obligations of the entity.

Rodriguez Company was founded in 2010.It acquired $40,000 cash by issuing stock to investors and an additional $20,000 cash by borrowing from creditors.During 2010,it received $9,000 cash revenues and paid $22,000 in cash expenses.The company then went out of business. Required: a)Explain the term,"business liquidation." b)What amount of cash did Rodriguez Company have on hand immediately before going out of business? c)What amount of cash will Rodriguez's creditors receive? d)What amount of cash will Rodriguez's stockholders receive?

Which financial statement reports the results of a business's operations?

During 2010,Cruz Company earned $5,000 in cash revenue,incurred $3,200 in cash expenses,and paid $500 in cash dividends to its owners.Based on this information,

Which of the following transactions is an asset use transaction?