Chapter 1 Interactive Presentations Homework

Chapter 1 Interactive Presentations Homework 1. Why is accounting important? Accounting information impacts all of us 2. Identify the type of activity by choosing the best answer for each question. Select each item listed below as being an identifying, recording, or a communicating activity. 1 Preparing and entering a list of checks 2 Using a cash register to enter sales 3 Entering a list of the sales invoices, including the prices and quantities, for the company’s recordkeeper 4 Interpreting information from financial 5 Preparing financial statements for creditors 3. Select the correct term for the following types of users: RECORDING RECORDING IDENTIFYING COMMUNICATING COMMUNICATING ITEMS USERS TERMS 1 Customers EXTERNAL INFORMATION USER 2 Board of Directors EXTERNAL INFORMATION USER 3 Purchasing Manager INTERNAL INFORMATION USER 4 Marketing Manager INTERNAL INFORMATION USER 5 Suppliers EXTERNAL INFORMATION USER 6 Labor Union EXTERNAL INFORMATION USER 4. The organization that is primarily responsible for developing GAAP for the use by all U.S. companies is the: FASB 5. Identify the correct principle for each of the following activities using the drop-down list. ITEMS 1 PRINCIPLE ACTIVITIES A company records the expenses incurred to generate EXPENSE RECOGNITION the revenue reported. PRINCIPLE 2 Revenue is recognized when goods are provided to the REVENUE RECOGNITION customer at the amount expected to be received. PRINCIPLE 3 A company reports the details behind financial FULL-DISCLOSURE statements that would impact user’s decisions. PRINCIPLE 4 Accounting information is based on actual cost. MEASUREMENT PRINCIPLE 6. Identify the correct assumption for each of the following activities using the drop-down list. ITEM S 1 2 3 4 ASSUMPTION ACTIVITIES Presumes that the business will continue operating in the future. A business is accounted for separately from other business entities and its owner. Transactions and events are expressed in units of money. The life of the company can be divided into specific time periods. GOING-CONCERN ASSUMPTION BUSINESS ENTITY ASSUMPTION MONETARY UNIT ASSUMPTION TIME PERIOD ASSUMPTION 7. If equity is $30,000 and liabilities are $19,000, then assets must equal: $49,000 8. During its first year of operations, Mario Lupo formed Lupo Company as a corporation and personally invested $15,000 in the business in exchange for common stock. Lupo Company also paid dividends of $2,000. The company earned $35,000 of revenues and incurred $23,000 of expenses. At the end of the year, the company’s equity totaled: $25,000 9. Classify the following business activities using the drop-down list. 10. 11. 12. 13. 14. 15. ITEM ACTIVITIES S 1 Happenings that affect the accounting equation EVENTS 2 Exchanges of value between two entities EXTERNAL TRANSACTIONS 3 Exchanges within and entity INTERNAL TRANSACTIONS Analyze the following transaction and select the best answer. Tyler invests $2,000 cash in exchange for common stock, to begin a new company, Tyler’s Tailoring. This transaction will: Increase equity by $2,000 On January 31, Jean Consulting Company receives a bill for that month’s utilities in the amount of $500. Jean sets it aside because she does not plan to pay the bill until its due date of February 15. What effect, if any, does this event have on the company’s accounting equation as of January 31? The business must record this event, which would increase liabilities and decrease equity on January 31. The four basic financial statements are: Income Statement, Statement of Retained Earnings, Balance Sheet, and Statement of Cash Flows Identify which item belongs on the income statement. Revenue, Expenses, and Net Income Identify which items belong on the statement of retained earnings. Dividends, Beginning Retained Earnings, Ending Retained Earnings Identify which items belong on the balance sheet. Cash, Accounts Receivable, and Common Stock