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Exam 1: Introduction to Accounting and Business

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Question 21

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Gomez Service Company paid its first installment on a note payable of $2,000. How will this transaction affect the accounting equation?

A) increase in liabilities (Notes Payable) and decrease in assets (Cash)
B) decrease in assets (Cash) and decrease in owner's equity (Note Payable Expense)
C) decrease in assets (Cash) and decrease in assets (Notes Receivable)
D) decrease in assets (Cash) and decrease in liabilities (Notes Payable)

E) All of the above
F) A) and B)

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Question 22

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Which of the following is a manufacturing business?

A) General Motors
B) Facebook
C) American Airlines
D) Target

E) B) and D)
F) A) and B)

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Question 23

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Abbie Marson is the sole owner and operator of Great Plains Company. As of the end of its accounting period, December 31, Year 1, Great Plains Company has assets of $940,000 and liabilities of $300,000. During Year 2, Marson invested an additional $73,000 and withdrew $33,000 from the business. What is the amount of net income during Year 2, assuming that as of December 31, Year 2, assets were $995,000 and liabilities were $270,000?

For each of the following companies, identify whether they are a service, merchandising, or manufacturing business. $\begin{array} { | l | l | } \hline \text { A. } & \text { Dillard's } \\\hline \text { B. } & \text { Time Warner Cable } \\\hline \text { C. } & \text { General Motors } \\\hline \text { D. } & \text { Blockbuster } \\\hline \text { E. } & \text { Applebee's } \\\hline \text { F. } & \text { Sony } \\\hline \text { G. } & \text { Best Buy } \\\hline \text { H. } & \text { Banana Republic } \\\hline \text { I. } & \text { H\&R Block } \\\hline\end{array}$

From the following list of items taken from Lamar's accounting records, identify those that would appear on the income statement. (a)Rent expense (b)Land (c)Capital (d)Fees earned (e)Withdrawal (f)Wages expense (g)Investment

(a) A vacant lot acquired for $83,000 cash is sold for $127,000 in cash. What is the effect of the sale on thetotal amount of the seller's (1) assets, (2) liabilities, and (3) owner's equity?? (b) Assume that the seller owes $52,000 for the land. After receiving the $127,000 cash in (a), the seller pays the $52,000 owed. What is the effect of the payment on the total amount of the seller's (1) assets, (2) liabilities, and (3) owner's equity?

Donner Company is selling a piece of land adjacent to its business premises. An appraisal reported the market value of the land to be $220,000. Focus Company initially offered to buy the land for $177,000. The companies settled on a purchase price of $212,000. On the same day, another piece of land on the same block sold for $232,000. Under the cost concept, at what amount should the land be recorded in the accounting records of Focus Company?

Match the following business types with each business listed below. Each may be used more than once. -A modular homebuilder

Given the following:? Beginning capital $58,000 Ending capital 30,000 Owner withdrawal 25,000? Calculate net income or net loss.

Proprietorships are owned by one owner and provide only services to their customers.

Match each transaction with its effect on the accounting equation. Each letter may be used more than once. -Cash withdrawal by owner

Simpson Auto Body Repair purchased $20,000 of machinery. The company paid $8,000 in cash at the time of the purchase and signed a promissory note for the remainder to be paid in four monthly installments.? (a) How will the purchase affect the accounting equation? (b) How will the payment of the first monthly installment affect the accounting equation (ignore interest)?

Assets are

What information does the income statement give to business users?

Name and describe the four primary financial statements for a proprietorship.

The unit of measurement concept requires that economic data be recorded in dollars.

Which of the following is not a certification for accountants?

The primary role of accounting is to determine the amount of taxes a business will be required to pay to taxing entities.

Determine the missing amount designated with an "X" for each of the following: $\begin{array}{|cc|c|c|}\hline & \text { Assets } & \text { Liabilities } & \text { Owner's Equity } \\\hline \text { (a) } & \$ 78,500 & \$ 37,600 & \mathrm{X} \\\hline \text { (b) } & \mathrm{X} & 53,280 & \$ 145,000 \\\hline \text { (c) } & 49,500 & \mathrm{X} & 34,000 \\\hline\end{array}$

The assets and liabilities of Rocky's Day Spa at December 31 and its expenses for the year are listed below. The capital of the owner was $68,000 at January 1. The owner invested an additional $10,000 during the year. Net income for the year is $45,625.? $\begin{array} { | l | r | l | r | } \hline \text { Accounts payable } & \$ 4,375 & \text { Spa operating expense } & \$ 23,760 \\\hline \text { Accounts receivable } & 8,490 & \text { Office expense } & 2,470 \\\hline \text { Cash } & 13,980 & \text { Spa supplies } & 9,230 \\\hline \text { Fees earned } & ? ? ? & \text { Wages expense } & 26,580 \\\hline \text { Spa furniture and equipment } & 56,000 & \text { Drawing } & 38,170 \\\hline \text { Computers } & 2,130 & & \\\hline\end{array}$ Prepare an income statement for the current year ended December 31.