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ACCT 472.21 Ch 1

Black Keys Company began the year with stockholders’ equity of $185,000. During the year, the company recorded revenues of $250,000, expenses of $190,000, and paid dividends of $20,000. What was Black Keys’ stockholders’ equity at the end of the year?
$225,000
Ethics are the standards of conduct by which one’s actions are judged as
right or wrong, honest or dishonest, fair or unfair.
If the retained earnings account increases from the beginning of the year to the end of the year, then
net income is greater than dividends.
Stockholders’ equity is increased by
revenues.
Revenues are
gross increases in stockholders’ equity resulting from business activities
The amount of stockholders’ equity in a business is not affected by
A. The percentage of total assets held in cash
The ending retained earnings amount is shown on
both the balance sheet and the retained earnings statement
A balance sheet shows
assets, liabilities, and stockholders’ equity
Stockholders’ equity is decreased by all of the following except
A. sales of stock.
A business organized as a corporation
C. is owned by its stockholders.
If total liabilities increased by $8,000, then
C. assets must have increased by $8,000, or stockholders’ equity must have decreased by $8,000.
The accounting equation for Quattro Enterprises is as follows:
d
If services are rendered for credit, then
stockholders’ equity will increase.
The body of theory underlying accounting is not based on
physical laws of nature.
Which of the following is not an advantage of the corporate form of business organization?
Unlimited personal liability for stockholders
In order to increase comparability, in recent years, the FASB and IASB have made efforts to reduce the differences between U.S.GAAP and IFRS through a process known as
A. convergence
Collection of a $1,000 Accounts Receivable
A. increases an asset $1,000; decreases an asset $1,000.
If total liabilities increased by $17,000 during a period of time and stockholders’ equity decreased by $6,000 during the same period, then the amount and direction (increase or decrease) of the period’s change in total assets is a(n)
C. $11,000 increase
Owner’s equity is best depicted by the following
D. Assets – Liabilities.
The Duce Company has five plants nationwide that cost a total of $100 million. The current fair value of the plants is $500 million. The plants will be recorded and reported as assets at
A. $100 million
Which of the following will not cause a change in the stockholders’ equity of a business
A. An increase in prepaid expenses.
The accounting equation for Quattro Enterprises is as follows:
If Quattro purchases office equipment on account for $15,000, the accounting equation will change to
D. d
The common characteristic possessed by all assets is
D. future economic benefit.
The balance sheet is frequently referred to as
B. the statement of financial position.
John and Sam met at law school and decide to start a small law practice after graduation. They agree to split revenues and expenses evenly. The most common form of business organization for a business such as this would be a
B. partnership.
The cost of an asset and its fair value are
D. the same on the date of acquisition.
A small neighborhood barber shop that is operated by its owner would likely be organized as a
D. proprietorship.
If Quattro purchases office equipment on account for $15,000, the accounting equation will change to
D
All of the financial statements are for a period of time except the
C. balance sheet.
Which of the following is true regarding the corporate form of business organization?
C. The revenues of corporations are greater than the combined revenues of partnerships and proprietorships.
Mofro’s Computer Repair Shop started the year with total assets of $270,000 and total liabilities of $180,000. During the year, the business recorded $450,000 in computer repair revenues, $270,000 in expenses, and Mofro paid dividends of $45,000. The net income reported by Mofro’s Computer Repair Shop for the year was
C. $180,000.
The partnership form of business organization
B. is a common form of organization for service-type businesses.
Which of the following is not an advantage of the corporate form of business organization
C. Unlimited personal liability for stockholders
Liabilities
B. are existing debts and obligations.
A net loss will result during a time period when
C. expenses exceed revenues.
The basic accounting equation cannot be restated as
D. Assets + Liabilities = Stockholders’ Equity.
If supplies that have been purchased are used in the course of business, then
C. stockholders’ equity will decrease
Ted Leo is the proprietor (owner) of Ted’s, a retailer of golf apparel. When recording the financial transactions of Ted’s, Ted does not record an entry for a car he purchased for personal use. Ted took out a personal loan to pay for the car. What accounting concept guides Ted’s behavior in this situation?
B. Economic entity assumption
A dividend is
A. a distribution of the company’s earnings to its stockholders.
The final step in solving an ethical dilemma is to
C. identify the alternatives and weigh the impact of each alternative on stakeholders.
All of the following are steps in analyzing ethics cases in financial reporting except
B. contact law enforcement regarding any violations of corporate ethics codes

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