MBA 5100 - Chapter 2 With Complete Solution Rated A+

MBA 5100 - Chapter 2 With Complete Solution Rated A+ Describe the basic elements of a financial accounting system Rules to record each economic event A framework to prepare the financial statements Controls to detect the errors in the recording process Rules of accounting are called ____________. Generally Accepted Accounting Principles (GAAP) GAAP determines.... ...What transactions are recorded When transactions are recorded Amount of the transaction recorded Transaction An economic event or condition that under generally accepted accounting principles directly affects an element of the accounting equation: Assets = Liabilities + Stockholders' Equity Integrated Financial Statement Approach Analyzes, records, and summarizes transactions by Integrating the accounting equation with Income statement Statement of Cash Flows The Accounting Equation Assets = Liabilities + Stockholders' Equity Expand Stockholders' Equity. What is the equation? Stockholders' Equity = Common Stock + Retained Earnings Expand Retained Earnings. What is the equation? Retained Earnings = Revenues - Expenses - Dividends Expand Net Income. What is the equation? Net Income = Revenues - Expenses What is the impact of common stock, revenue, expense, and dividend transactions on total on Stockholders' Equity? Issuance of Stock and/or Revenues = an increase on Stockholders' Equity Expenses and/or Dividends Paid = a decrease on Stockholders' Equity What are the controls for the accounting equation? - The accounting equation MUST balance - The ending cash balance on the Statement of Cash Flows must equal the cash balance on the Balance Sheet - The net income on the Income Statement must equal the net effects of revenues and expenses on retained earnings A __________ is an economic event that under generally accepted accounting principles affects an element of the financial statements and must be recorded. a. Framework b. Controls c. Set of rules d. Transaction d. Transaction The Statement of cash flows are linked to ______ on the balance sheet. Cash Net Income from the Income Statement is linked to _____ _____ _____. Retained Earnings Statement Retained Earnings is linked to the ______ ______ in ___________ _________. Balance Sheet; Stockholders' Equity Which of the following will NOT cause a change in the shareholder's equity of a business? a. Payment of a business debt. b. Payment of dividends. c. Sale of land at a profit. d. Losses from unprofitable operations. a. Payment of a business debt. The statement of cash flows is integrated with the balance sheet because a. the cash at the beginning of the period plus or minus the cash flows from operating, investing and financing activities equals the end of period cash reported on the balance sheet b. the cash at the beginning of the period plus or minus the net income equals the end of period cash reported on the balance sheet c. the cash at the beginning of the period plus or minus assets and liabilities equals the end of period cash reported on the balance sheet d. the cash at the beginning of the period plus or minus the cash flows from operating activities equals the end of period cash reported on the balance sheet a. the cash at the beginning of the period plus or minus the cash flows from operating, investing and financing activities equals the end of period cash reported on the balance sheet Johnson, Inc. issued $150,000 in capital stock in exchange for cash. What is the effect of this transaction? a. Total assets remain unchanged. b. Cash flow from Financing Activities will increase. c. Net Income will increase. d. Total Retained Earnings will increase. b. Cash flow from Financing Activities will increase. Rush Corporation repaid a $25,000 loan from the bank. Which of the following accurately shows the effects of the transaction? a. Increase cash $25,000 and decrease notes payable $25,000 b. Increase cash $25,000 and increase notes payable $25,000 c. Decrease cash $25,000 and decrease notes payable $25,000 d. Decrease cash $25,000 and increase notes payable $25,000 c. Decrease cash $25,000 and decrease notes payable $25,000 A transaction caused a $60,000 increase in both assets and total liabilities. This transaction could have been which of the following? a. Purchase for office equipment for $60,000 cash. b. Purchase of office equipment for $120,000, paying $60,000 cash and issuing a note payable for the balance. c. Repayment of a $60,000 bank loan. d. Investment of $60,000 cash in the business by the owner. b. Purchase of office equipment for $120,000, paying $60,000 cash and issuing a note payable for the balance. Zeller Corporation engaged in the following transaction "Sold a building for $80,000 cash." On the Statement of Cash Flows, the transaction would be classified as __________. a. Cash Flows from Operating Activities. b. Cash Flows from Investing Activities.