Accounting Chapter 1 Exam

"Accounting is ingrained in our society and is vital to our economic system." Do you agree? - ANS Yes Listed here are some items found in the financial statements of Finzelberg. Indicate in which financial statement each item would appear. (a) Service revenue = ? (b) Equipment = ? (c) Advertising expense = ? (d) Accounts receivable = ? (e) Common stock = ? (f) Interest payable = ? - ANS (a) Service revenue = Income Statement (b) Equipment = Balance Sheet (c) Advertising expense = Income Statement (d) Accounts receivable = Balance Sheet (e) Common stock = Balance Sheet (f) Interest payable = Balance Sheet "A company's net income appears directly on the income statement and the retained earnings statement, and it is included indirectly in the company's balance sheet." Do you agree? - ANS Yes What is the basic accounting equation? - ANS Assets = Liabilities + Stockholders' Equity Which of these items are liabilities of White Glove Cleaning Service? (a) Cash (b) Accounts payable (c) Dividends (d) Accounts receivable (e) Supplies (f) Equipment (g) Salaries and wages payable (h) Service revenue (i) Rent expense - ANS (a) Cash = Not liability (b) Accounts payable = liability (c) Dividends = Not a liability (d) Accounts receivable = Not a liability (e) Supplies = Not a liability (f) Equipment = Not a liability (g) Salaries and wages payable = liability (h) Service revenue = not a liability (i) Rent expense = not a liability Match each of the following forms of business organization with a set of characteristics: sole proprietorship, partnership, corporation. (a) ______ = Shared control, tax advantages, increased skills and resources. (b)______ = Simple to set up and maintains control with owner. (c)______ = Easier to transfer ownership and raise funds, no personal liability. - ANS (a) partnership (b) sole propriership (c) corporation Match each of the following types of evaluation with one of the listed users of accounting information. Investor in common stock - ANS Tries to determine whether the company's net income will affect the stock price to increase. Match each of the following types of evaluation with one of the listed users of accounting information. Marketing managers - ANS Tries to determine whether an advertising proposal is cost effective. Match each of the following types of evaluation with one of the listed users of accounting information. Creditors. - ANS Tries to determine whether a company can pay their obligations (debts to creditor) Match each of the following types of evaluation with one of the listed users of accounting information. Chief Financial Officer - ANS Tries to determine whether the company should employ debt or equity financing Match each of the following types of evaluation with one of the listed users of accounting information. Internal Revenue Services (IRS) - ANS Determine whether a company followed tax laws