Accountants
establish measurement and reporting rules that business people use to
facilitate communication of financial information. The financial
accounting measurement rules used in the United States are referred to
as
Generally accepted accounting principles
Explanation
Generally accepted accounting principles (GAAP) are currently
established by the Financial Accounting Standards Board (FASB).
Financial reports issued to the public must follow GAAP.
The
information reported in financial statements is organized into
categories known as elements. Which of the following categories is not a financial statement element?
Explanation
The accounting equation is defined as
Assets = Liabilities + Equity
Explanation
The accounting equation is stated as Assets = Liabilities + Equity.
The
land that Birmingham Company purchased on April 15, 2016, for $120,000
cash had an appraised market value of $135,000 on December 31, 2016. How
does this change in the market value of the land affect the accounting
equation?
Explanation
The historical cost concept requires that most assets be reported at the
amount paid for them regardless of increases in market value. The
historical cost is a verifiable fact (reliable), whereas the appraised
value is an opinion (not reliable).
Suarez Company purchased land for $115,000 cash. Which of the following best describes this transaction type?
Explanation
This asset exchange transaction reduces the asset account Cash and
increases the asset account Land. The amount of total assets is not
affected.
On which of the following financial statements would you expect to find financing, operating, and investing activities?
Explanation
Closing
is the process of transferring the temporary account balances to the
Retained Earnings account at the end of the accounting period. Which of
the following are temporary accounts?
Explanation
Buccaneer
Corporation paid $6,000 in cash dividends to its owners. Which of the
following answers in this horizontal financial statements model reflects
how this payment of cash dividends would affect Buccaneer Corporation's
financial statements?
| Assets | = | Liab. | + | Equity | Rev. | – | Exp. | = | Net Inc. | Cash Flow | ||||
| Cash | N. Pay | + | C. Stk. | + | Ret. Ear. | |||||||||
| (6,000) | = | n/a | + | (6,000) | + | n/a | n/a | – | n/a | = | n/a | (6,000) FA | ||
The payment of cash dividends represents a transfer of a company's
earnings to its owners. The asset Cash decreases. The dividend is
recorded in the Dividends account, and then transferred as a decrease to
Retained Earnings during the closing process. Cash dividends are
reported as a cash flow for financing activity on the statement of cash
flows. Because assets distributed to stockholders are not used for the
purpose of generating revenue, dividends are not expenses.
Moore
Company provided services to customers for $8,000 cash. Which of the
following answers in this horizontal financial statements model reflects
how this event would affect Moore Company's financial statements?
| Assets | = | Liab. | + | Equity | Rev. | – | Exp. | = | Net Inc. | Cash Flow | ||||
| Cash | N. Pay | + | C. Stk. | + | Ret. Ear. | |||||||||
| 8,000 | = | n/a | + | n/a | + | 8,000 | n/a | – | n/a | = | n/a | 8,000 FA | ||
The year-end balance sheet for Omega Corp. is presented below:
Based on this information, what percentage of total assets was provided by investors?
| Omega Corp. | ||
| Balance Sheet | ||
| As of December 31, 2016 | ||
| Assets | $48,550 | |
| | ||
| Liabilities | $19,000 | |
| Stockholders' equity | ||
| Common stock | $17,000 | |
| Retained earnings | 12,550 | |
| | ||
| Total stockholders' equity | 29,550 | |
| | ||
| Total liabilities and stockholders' equity | $48,550 | |
| | ||
Based on this information, what percentage of total assets was provided by investors?
.
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