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Terms in this set (37)
ExpensesThe cost of assets consumed or services used in a company's ordinary business activitiesUnearned RevenueA liability arising when a customer pays in advance of receiving serviceGenerally accepted accounting principles arestandards that act as guidelines for reporting economic eventsCombining the economic record keeping of two separate businesses would violate thereporting entity conceptA debit to a liability account indicatesa decrease in the liabilityA complete journal entry includes all of the following exceptthe balance of the accounts in the entryMaxwell Flooring started the year with total assets of $160,000 and total liabilities of $75,000. During the year the business recorded $250,000 in revenues, $100,000 in expenses, and drawings of $30,000. The profit reported by Maxwell Flooring for the year was$250,000 - $100,000 = $150,000A local design company has been operating as a proprietorship. The business is growing and now the owner wants to incorporate. Which of the following would be considered a disadvantage of forming a corporation?accountability to many owners (shareholders)Partnershipowned by two or more peopleProprietorshipA business owned by one personTwo people have formed a partnership. One partner of a business creates a $10,000 debt, but the partnership does NOT have enough assets to cover the debt. In this situationboth partners will have to pay the debt out of their personal assets.Meadow Farms owns total assets of $150,000. If its total liabilities are $105,000, what is the total of its owner's equity?Assets $150,000 - liabilities $105,000 = owner's equity $45,000.Jonell Company compiled the following financial information as of December 31: Service revenue: $850,000 Owner's equity: $750,000 Equipment: $180,000 Operating expenses: $675,000 Cash: $200,000 Drawings: $45,000 Supplies: $55,000 Accounts payable: $85,000 Accounts receivable: $90,000 Jonell's assets on December 31 areEquipment $180,000 + Cash $200,000 + Supplies $55,000 + Accounts receivable $90,000 = $525,000.What assumption prevents some relevant information from being included in the financial statements because it cannot be quantified?monetary unitEthical dilemmasmay have more than one correct solution.A company that prepares financial statements every quarter is following theperiodicity concept.Based on the reporting entity concept, which of the following is correct?The activities of one company can be distinguished from those of another company.According to the ________, when assets are acquired they are recorded at the amount paid for them.historical cost principleWhich of the following develops International Financial Reporting Standards?International Accounting Standards BoardWhat could happen when an individual asset is increased?There could be an equal decrease in another asset.Which of the following applies to the income statement?Profit from the income statement flows into the statement of owner's equity.Which of the following is TRUE?Profit from the income statement flows into the statement of owner's equity. The ending owner's equity balance then flows into the balance sheet.Moran Steel started the year with total assets of $210,000 and total liabilities of $95,000. During the year the business recorded $200,000 in revenues, $110,000 in expenses, and drawings of $45,000. Owner's equity at the end of the year wasOpening equity ($210,000 - $95,000) + profit ($200,000 - $110,000) - drawings $45,000 = ending equity $160,000.If total liabilities decreased by $65,000 and owner's equity decreased by $20,000 during a period of time, then total assets must change by what amount and in what direction during that same period?Liabilities ($65,000) decrease + owner's equity ($20,000) decrease = total assets ($85,000) decrease.Bradley Company began the year with owner's equity of $2,000,000. During the year the company recorded expenses of $3,500,000, and had owner withdrawals of $300,000. If Bradley's ending owner's equity was $2,300,000, what was the company's revenue for the year?Opening $2,000,000 + revenues $? - expenses $3,500,000 - drawings $300,000 = ending $2,300,000.So $2,000,000 + x - $3,500,000 - $300,000 = $2,300,000. Solve for x: revenues must be $4,100,000.Parkton Company buys equipment for $10,000 on credit. Which financial statement will this transaction affect?When equipment is purchased on credit, assets will increase (equipment is an asset) and liabilities will increase (an account payable is created). Both assets and liabilities appear on the balance sheet. (Balance sheet only)Assets will be increased by $40,000 if an owner invests ________ and uses $30,000 of the cash to purchase a truck.If an owner invests $40,000, cash will increase and equity will also increase by $40,000. A purchase of a truck for $30,000 will have no effect on the overall assets as cash is decreased by $30,000 but capital assets are increased by the same amount.