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Exam 1: Accounting in Business

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Question 111

True/False

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The conceptual framework summarizes the qualitative characteristics and supportive building blocks that are required to prepare financial information.

A) True
B) False

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Question 112

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Under which one of the following situations can a company recognize revenue under Generally Accepted Accounting Principles?

A) A customer signs a contract to purchase goods to be delivered in two weeks.
B) A company completes production of a customer order to be delivered in two weeks.
C) A company ships the goods for which it received a deposit two weeks ago.
D) A company receives a cash deposit from a customer to deliver goods in two weeks.
E) A company purchased raw materials to complete production of a customer order.

F) B) and E)
G) D) and E)

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Question 113

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You are the accountant for Klemmer Corporation. At the company's year end, December 31, 2020, you discover there is an amount of $30,000 that has been earned by Klemmer but not yet billed to its customers by the year end. Laura Klemmer, the owner, tells you not to bill the customers as it is company policy not to bill customers until February 2020, well after the Christmas holidays. Klemmer has sales staff that are paid a bonus at year end on sales revenue billed. -Describe the relationship between sales (or revenues), expenses, and profit.

A partnership requires no special legal requirements to start, other than to register the business name and obtain a business licence.

Why should assets be recorded at historical cost?

The accounting equation can be restated as assets - equity = liabilities.

Describe three measurement methods based on current values.

If the liabilities of a business increased $8,000 during a period of time and equity in the business decreased $4,000 during the same period, the assets of the business must have

If equity is $30,000 and liabilities are $73,000, then assets equal

Equity is increased by owner investments, profit and withdrawals.

Unlimited liability is an advantage for both a proprietorship and a partnership.

On November 1, 2020, Jill Luckovich began Jill Luckovich Interior Design Co. with an initial investment of $6,725, and on November 30 her records showed the following (alphabetically arranged) account balances: -From the information given in reference, prepare a statement of changes in equity for November.

Ethics and laws often differ.

A statement of profit and loss is another name for

The rule that (1) requires revenue to be recognized at the time it is earned, (2) allows the inflow of assets associated with revenue to be in a form other than cash, and (3) measures revenue as the amount of cash plus the cash equivalent value of any noncash assets received from customers in exchange for goods or services is called the

The assets of a business total $20,000; the liabilities, $8,000. The claims of the owners are

List the three main differences between the sole proprietorship and the corporate form of business.

On November 1, 2020, Jill Luckovich began Jill Luckovich Interior Design Co. with an initial investment of $6,725, and on November 30 her records showed the following (alphabetically arranged) account balances: -From the information given in reference, prepare a November 30 balance sheet.

External users of accounting information include

The financial statement that shows the beginning balance of equity, the changes in equity that resulted from new investments by the owner, Profit (or net loss) , withdrawals, and the ending balance of equity is the