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Exam 1: Accounting in Business

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Question 41

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The assets of a company total $700,000; the liabilities, $200,000. What are the net assets?

A) $900,000.
B) $700,000.
C) $500,000.
D) $200,000.
E) It is impossible to determine unless the amount of the common stock is known.

F) B) and E)
G) D) and E)

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Question 42

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The International Accounting Standards Board (IASB) is the government group that establishes reporting requirements for companies that issue stock to the public.

A) True
B) False

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Question 43

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Liabilities are the owner's claim on assets.

U. S. government bonds are:

Generally accepted accounting principles are the basic assumptions, concepts, and guidelines for preparing financial statements.

The records of Roadmaster Auto Rentals, Inc. show the following information as of December 31. The owner, Rob Fletcher, the sole stockholder, received a dividend of $52,000 during the year.. Prepare a December income statement, a December statement of retained earnings, and a December 30 balance sheet.

Cornelia's Closet has the following account balances for the dates given: $\begin{array}{c}\begin{array}{lll}\\ \text {Cash....................................}\\ \text {Accounts Receivable............}\\ \text {Accounts payable.................}\end{array}\begin{array}{rr}\underline{\text { October 1} } &\underline{ \text { October31 }}\\\$ 40,000 & 60,000 \\40,000 & 38,000 \\6,000 & ? \end{array}\end{array}$ Also, its net income, for October 1 through October 31 was $20,000 and there were no investments or withdrawals by the owner. Determine the equity at both October 1 and October 31.

As a general rule, revenues should not be recognized in the accounting records when earned, but rather when cash is received.

External auditors examine financial statements to verify that they are prepared according to generally accepted accounting principles.

Describe the three types of activities reported on the statement of cash flows.

Describe the three important guidelines for revenue recognition.

The statement of retained earnings:

What is the purpose of return on assets as an analytical tool?

Explain why ethics are an integral part of accounting.

Net Income:

How does the going-concern principle affect reporting asset values of a business?

Marsha Bogswell is the owner of Bogswell Legal Services, Inc. Which accounting principle requires Marsha to keep her personal financial information separate from the financial information of Bogswell Legal Services, Inc.?

Identify and describe the two main groups involved in establishing generally accepted accounting principles.

Assets are the resources a company owns or controls that are expected to yield future benefits.

The stockholders' claim on assets, also known as net assets, is called __________________.