Chapter 1--The Role of Accounting in Business
Student: ___________________________________________________________________________
12. John Deere is a leading manufacturer of agricultural machinery in the world producing products that serve
unique market needs. Therefore, John Deere is an example of a company that uses a premium-price emphasis to
13. Companies using a low-cost emphasis provide products and services that compete on features other than
18. A liability is a legal obligation to repay the amount borrowed according to the terms of the borrowing
19. Accounting is thought to be the "language of business" because business information is communicated to
28. Under a premium-price emphasis, a business designs products that possess _____ for which customers are
30. An entity that is organized according to state or federal statutes and in which ownership is divided into
33. Motel 6, a company that helps customers find budget motels across the nation, is an example of a business
51. Cash collected from sales during the normal course of business would be an example of which type of
54. Cash investments made by the stockholders of the business are reported on the statement of cash flows in
56. Reporting the financial condition of a business at a point in time and the changes in the financial condition
59. Given the following list of accounts, calculate Total Assets:
Accounts Receivable
$ 5,000
Capital Stock
20,000
Cash
19,300
Equipment
15,400
Fees Earned
44,400
Miscellaneous Expense
18,200
Rent Expense
4,150
Retained Earnings
6,550
Wages Expense
13,900
61. Use the following information to determine Total Stockholders’ Equity:
Total Assets
$ 50,000
Total Liabilities
15,000
Total Stockholders’ Equity
x
Total Retained Earnings
13,000
65. If there was no beginning retained earnings, net income of $20,000, and ending retained earnings of $6,000,
66. During 2012, Smith Corporation had an increase in total assets of $70,000 and an increase in total liabilities
of $90,000. Assuming that capital stock increased by $5,000 and no dividends were paid, calculate Smith’s net
67. The financial statement that presents a summary of the revenues and expenses of a business for a specific
70. Gilbert, Inc. had the following account balances at September 30, 2010. What is Gilbert’s net income for the
month of September?
Accounts Payable
$ 5,000
Capital Stock
10,000
Cash
14,300
Equipment
15,400
Fees Earned
54,400
Miscellaneous Expense
18,200
Rent Expense
4,150
Retained Earnings
6,550
Wages Expense
13,900
71. Browning, Inc. had revenues of $234,000, expenses of $175,000, and dividends of $30,000 during 2012.
72. A summary of changes in the earnings retained by the corporation for a specific period of time is known as
73. Heedy Company had the following account balances in 2011 and 2012, respectively. Assuming dividends of
$20,000 were paid in 2012, how much was net income?
2012
2011
Capital Stock
$ 42,000
$ 40,000
Retained Earnings
x
210,000
Total Stockholders’ Equity
$ 314,000
$ 250,000
74. Including all relevant data a reader needs to understand the financial condition and performance of a
78. Expressing financial data as if a business will continue operating for an indefinite period time refers to
79. Due to various fraudulent business practices and accounting coverups in the early 2000s, Congress enacted
the Sarbanes-Oxley Act of 2002. The act was responsible for establishing a new oversight board for public
80. Name the three different types of businesses that operate for profit and their respective characteristics.
81. Name and describe the three forms of businesses and their advantages and disadvantages (if any).
82. For each of the following companies, identify whether it is a service, merchandising, or manufacturing
business.
83. How do businesses make money? What strategies can they use to gain a competitive advantage?
84. Describe business stakeholders. State the classification of business stakeholders.
85. Indicate whether each of the following activities would be reported on the statement of cash flows as an
operating activity, an investing activity, a financing activity, or does not appear on the statement of cash flows.
86. Define accounting and its role in business.
87. What is the basic accounting equation, and which financial statement is prepared from this equation?
88. Following are the financial statement data for Yevin Temporary Services at December 31, 2011. Prepare
Yevin’s income statement.
89. Fill in the missing amounts of the following balance sheet:
Bruce Company
Balance Sheet
December 31, 2010
Assets
Cash
$ 3,600
Accounts Receivable
2,700
90. Three different companies--A, B, and C--have the same balance sheet at the beginning and the end of a year.
These are summarized below:
Total Assets
Total Liabilities
Beginning of the year
$ 500,000
$250,000
End of the year
$1,200,000
$350,000
Given the data above and the additional information for each company below, determine the net income (loss) for each company.
Company A
No additional investment was made by stockholders, and no dividends were paid.
Company B
Stockholders invested an additional $200,000, and no dividends were paid.
Company C
Stockholders invested $450,000, and dividends of $50,000 were paid.
91. Classify the following as an asset, liability, revenue, or expense.
92. Match the following items with the appropriate financial statement:
93.
Review Coke-Cola’s financial statements and answer the following questions:
(1)
How are Coke’s numbers reported (in what denomination)?
(2)
What is Coke’s net operating revenue for 2008?
(3)
What is Coke’s cost of goods sold for 2008?
(4)
What is Coke’s net income 2008?
94.
Review Coke-Cola’s financial statements and answer the following questions:
(1)
What is Coke’s percent of current assets to total assets on its December 31, 2008 balance sheet?
(2)
What is Coke’s percentage of current liabilities to total stockholders’ equity on its December 31, 2008 balance sheet?
95. On May 31, 2012, Deana’s Services Company had account balances as follows:
Accounts payable
$ 9,900
Accounts receivable
26,950
Cash
11,390
Fees earned
70,800
Insurance expense
1,475
Land
74,400
Miscellaneous expense
1,510
Prepaid insurance
2,000
Rent expense
8,000
Salary expense
35,300
Dividends
15,100
Supplies
950
Supplies expense
825
Utilities expense
3,800
Capital stock
81,000
Retained earnings (beginning balance on May 1, 2012)
20,000
96. Match each statement with the appropriate accounting concept. (Some items may not be used. Others may
be used more than once.)
a.
Accounting period concept
b.
Adequate disclosure concept
c.
Business entity concept
d.
Cost concept
e.
Going concern concept
Chapter 1--The Role of Accounting in Business Key
12. John Deere is a leading manufacturer of agricultural machinery in the world producing products that serve
unique market needs. Therefore, John Deere is an example of a company that uses a premium-price emphasis to
13. Companies using a low-cost emphasis provide products and services that compete on features other than
18. A liability is a legal obligation to repay the amount borrowed according to the terms of the borrowing
19. Accounting is thought to be the "language of business" because business information is communicated to
28. Under a premium-price emphasis, a business designs products that possess _____ for which customers are
30. An entity that is organized according to state or federal statutes and in which ownership is divided into
33. Motel 6, a company that helps customers find budget motels across the nation, is an example of a business
51. Cash collected from sales during the normal course of business would be an example of which type of
54. Cash investments made by the stockholders of the business are reported on the statement of cash flows in
56. Reporting the financial condition of a business at a point in time and the changes in the financial condition
59. Given the following list of accounts, calculate Total Assets:
Accounts Receivable
$ 5,000
Capital Stock
20,000
Cash
19,300
Equipment
15,400
Fees Earned
44,400
Miscellaneous Expense
18,200
Rent Expense
4,150
Retained Earnings
6,550
Wages Expense
13,900
61. Use the following information to determine Total Stockholders’ Equity:
Total Assets
$ 50,000
Total Liabilities
15,000
Total Stockholders’ Equity
x
Total Retained Earnings
13,000
65. If there was no beginning retained earnings, net income of $20,000, and ending retained earnings of $6,000,
66. During 2012, Smith Corporation had an increase in total assets of $70,000 and an increase in total liabilities
of $90,000. Assuming that capital stock increased by $5,000 and no dividends were paid, calculate Smith’s net
67. The financial statement that presents a summary of the revenues and expenses of a business for a specific
70. Gilbert, Inc. had the following account balances at September 30, 2010. What is Gilbert’s net income for the
month of September?
Accounts Payable
$ 5,000
Capital Stock
10,000
Cash
14,300
Equipment
15,400
Fees Earned
54,400
Miscellaneous Expense
18,200
Rent Expense
4,150
Retained Earnings
6,550
Wages Expense
13,900
71. Browning, Inc. had revenues of $234,000, expenses of $175,000, and dividends of $30,000 during 2012.
72. A summary of changes in the earnings retained by the corporation for a specific period of time is known as
73. Heedy Company had the following account balances in 2011 and 2012, respectively. Assuming dividends of
$20,000 were paid in 2012, how much was net income?
2012
2011
Capital Stock
$ 42,000
$ 40,000
Retained Earnings
x
210,000
Total Stockholders’ Equity
$ 314,000
$ 250,000
74. Including all relevant data a reader needs to understand the financial condition and performance of a
78. Expressing financial data as if a business will continue operating for an indefinite period time refers to
79. Due to various fraudulent business practices and accounting coverups in the early 2000s, Congress enacted
the Sarbanes-Oxley Act of 2002. The act was responsible for establishing a new oversight board for public
80. Name the three different types of businesses that operate for profit and their respective characteristics.
81. Name and describe the three forms of businesses and their advantages and disadvantages (if any).
82. For each of the following companies, identify whether it is a service, merchandising, or manufacturing
business.
A.
Dillards
B.
Time Warner Cable
C.
Kohl’s
D.
Ford Motor Co.
E.
Applebee’s
F.
Sylvania
G.
Best Buy
83. How do businesses make money? What strategies can they use to gain a competitive advantage?
Businesses have the objective of making money by generating more revenues than costs. Businesses can seek
competitive advantage by using a premium-price strategy or by using a low-cost strategy. A premium-price
strategy tries to meet a unique market need based on quality, reliability, image, or design, allowing it to charge a
higher price. A low-cost strategy focuses on efficiency in product design and production to offer a lower price
due to lower costs.
84. Describe business stakeholders. State the classification of business stakeholders.
Business stakeholders are persons or entities that have an interest in the economic performance of a company.
(1)
Capital market stakeholder
(2)
Product or service market stakeholder
(3)
Government stakeholder
(4)
Internal stakeholder
85. Indicate whether each of the following activities would be reported on the statement of cash flows as an
operating activity, an investing activity, a financing activity, or does not appear on the statement of cash flows.
(a)
Cash paid for building
(b)
Cash paid to suppliers
(c)
Cash paid for dividends
(d)
Cash received from customers
86. Define accounting and its role in business.
Accounting provides information for managers that can be used in operations of a business. Accounting
provides information to external stakeholders to use in assessing the economic performance and condition of the
business.
87. What is the basic accounting equation, and which financial statement is prepared from this equation?
Assets = Liabilities + Stockholders' Equity; the balance sheet is prepared from this equation.
88. Following are the financial statement data for Yevin Temporary Services at December 31, 2011. Prepare
Yevin’s income statement.
Accounts Payable
$ 610
Accounts Receivable
600
Cash
300
Common Stock
625
Dividends
100
Insurance Expense
60
Office Equipment
1,000
Retained Earnings, January 1, 2011
300
Salaries Expense
550
Notes Payable
35
Service Revenue
1,500
89. Fill in the missing amounts of the following balance sheet:
Bruce Company
Balance Sheet
December 31, 2010
Assets
Cash
$ 3,600
Accounts Receivable
2,700
a) $2,000
b) $6,600
c) $7,300
d) $30,100
90. Three different companies--A, B, and C--have the same balance sheet at the beginning and the end of a year.
These are summarized below:
Total Assets
Total Liabilities
Beginning of the year
$ 500,000
$250,000
End of the year
$1,200,000
$350,000
91. Classify the following as an asset, liability, revenue, or expense.
(1)
Unearned revenue
(2)
Office equipment
(3)
Wages payable
(4)
Salary expense
(5)
Dividends payable
(6)
Art fees earned
(7)
Prepaid rent
(8)
Accounts receivable
(9)
Income tax expense
(10)
Office supplies
92. Match the following items with the appropriate financial statement:
93.
Review Coke-Cola’s financial statements and answer the following questions:
(1)
How are Coke’s numbers reported (in what denomination)?
(2)
What is Coke’s net operating revenue for 2008?
(3)
What is Coke’s cost of goods sold for 2008?
94.
Review Coke-Cola’s financial statements and answer the following questions:
(1)
What is Coke’s percent of current assets to total assets on its December 31, 2008 balance sheet?
(2)
What is Coke’s percentage of current liabilities to total stockholders’ equity on its December 31, 2008 balance sheet?
(3)
What is the percentage increase in cash and cash equivalents from 2007 to 2008?
(4)
What percentage did total assets decrease from 2007 to 2008?
95. On May 31, 2012, Deana’s Services Company had account balances as follows:
Accounts payable
$ 9,900
Accounts receivable
26,950
Cash
11,390
Fees earned
70,800
Insurance expense
1,475
Land
74,400
Miscellaneous expense
1,510
Prepaid insurance
2,000
Rent expense
8,000
Salary expense
35,300
Dividends
15,100
Supplies
950
Supplies expense
825
Utilities expense
3,800
Capital stock
81,000
Retained earnings (beginning balance on May 1, 2012)
20,000
Present, in good form, (a) an income statement for May, (b) a statement of retained earnings for May, and (c) a balance sheet as of May 31.
96. Match each statement with the appropriate accounting concept. (Some items may not be used. Others may
be used more than once.)
a.
Accounting period concept
b.
Adequate disclosure concept
c.
Business entity concept
d.
Cost concept
e.
Going concern concept
f.
Matching concept
g.
Objectivity concept
h.
Unit of measure concept
(1)
Owners’ transactions are separate from business transactions.