Question 1

Define risk and return and discuss the relation between them.

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Question 2

Describe the three important guidelines for revenue recognition.

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Question 3

Identify the users and uses of accounting information.

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Question 4

Explain the accounting equation and define its terms.

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Question 5

What is the purpose of return on assets as an analytical tool?

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Question 6

The characteristics below apply to at least one of the forms of business organization.
a. Is a separate legal entity.
b. Is allowed to be owned by one person only.
c. Partners or sole proprietors are personally liable for debts of the business.
d. Is a separately taxable entity.
e. Is a business entity.
f. May have a contract specifying the division of profits among the partners.
g. Has an unlimited life
Use the following format to indicate (with a "yes" or "no") whether or not a characteristic applies to each type of business organization. $$\begin{array} { | l | l | l | l | } 
\hline & \underline{\text { Proprietorthip }} &\underline{ \text { Partnership }} & \underline{\text { Corporation} } \
\hline \text { a. } & & & \
\hline \text { b. } & & & \
\hline \text { c. } & & & \
\hline \text { d } & & & \
\hline \text { e. } & & & \
\hline \text { f. } & & & \
\hline \text { g. } & & & \
\hline
\end{array}$$

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Question 7

What distinguishes liabilities from equity?

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Question 8

Identify the three basic forms of business organizations and their key attributes.

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Question 9

How does the going-concern principle affect reporting asset values of a business?

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Question 10

Explain why ethics are an integral part of accounting.

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Question 11

Identify and describe the four basic financial statements:

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Question 12

The accounts of Odie Company with the increases or decreases that occurred during the past year are as follows:
$\begin{array}{llcc}
\text {Account  } &\text {  Increase} &\text { Decrease  } \
   \hline\text {Cash.................................  } &\$425,000\
 \text {Accounts receivable...........  } &&\$(5,000)\
 \text { Accounts payable.............. } &&(11,000)\
 \text { Notes payable................... } &16,000\
\end{array}$

Except for net income, an investment of $3,000 by the stockholder, and a dividend of $11,000 by the stockholder, no other items affected the stockholders' equity balance. Using the balance sheet equation, compute net income for the past year.

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Question 13

_________ are beliefs that separate right from wrong and are considered accepted standards of good and bad behavior.

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Question 14

The records of Roadmaster Auto Rentals, Inc. show the following information as of December 31. The owner, Rob Fletcher, the sole stockholder, received a dividend of $52,000 during the year.. Prepare a December income statement, a December statement of retained earnings, and a December 30 balance sheet.

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Question 15

Congress passed the ______________________ to help curb financial abuses at companies that issue their stock to the public.

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Question 16

Data for Kennedy Realty are as follows: $\begin{array}{llcc}
  \text { Total assets at January 1.................... } &\$100,000\
 \text {Total liabilities at January 1................  } &35,000\
 \text {Total revenues for the year..................  } &79,000\
 \text { Total expenses for the year................. } &47,000\
\end{array}$
 The owner, Finn Kennedy, received a dividend of $30,000 during the year. Using the above data, prepare Kennedy Realty's Statement of Retained Earnings for the year ended December 31.

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Question 17

______________ is the area of accounting aimed at serving external users by providing them with general-purpose financial statements.

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Question 18

Cornelia's Closet has the following account balances for the dates given:
$\begin{array}{c}
\begin{array}{lll}
\
 \text {Cash....................................}\
 \text {Accounts Receivable............}\
 \text {Accounts payable.................}
\end{array}
\begin{array}{rr}
\underline{\text { October 1} } &\underline{ \text { October31 }}\
\$ 40,000 & 60,000 \
40,000 & 38,000 \
6,000 & ? 
\end{array}
\end{array}$

Also, its net income, for October 1 through October 31 was $20,000 and there were no investments or withdrawals by the owner. Determine the equity at both October 1 and October 31.

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Question 19

Soo Lin, the sole stockholder, began an Internet Consulting practice organized as a corporation and completed these transactions during April of the current year:  $\begin{array}{llcc}
  \text { April } & \text {1\quad Invested $ \$ 100,000 $ of her personal savings into a checking  }\
& \text {\quad account opened in the name of the business. } &\ 
 &\text {2\quad Rented office space and paid $ \$ 1,200 $ cash for the month of  } &\
& \text {  September. } &\
& \text { 3\quad Purchased office equipment for $ \$ 30,000 $, paying $ \$ 8,000 $ cash } &\
& \text {  and agreeing to pay the balance in one year. } &\
& \text { 4\quad Purchased office supplies for $ \$ 750 $ cash. } &\
 &\text {8\quad Completed work for a client and immediately collected  } &\
& \text { $ \$ 2,700 $ cash for the services.  } &\
& \text { 15\quad Completed $ \$ 3,600 $ services for a client on credit. } &\
& \text {20\quad Received $ \$ 3,600 $ from a client for the work completed on  } &\
& \text { September 15 . } &\
 &\text {30\quad Paid the office secretary's monthly salary, $ \$ 3,000 $ cash.  } &\
& \text {  30\quad The corporation paid a $ \$ 2,000 $ dividend.} &\
\end{array}$
 Show the effects of the above transactions on the accounting equation of Soo Lin, Consultant. Use the following format for your answers. The first item is shown as an example.
Increase = I Decrease = D No effect = N $$\begin{array} { | c | c | c | c | } 
\hline \text { Date } & \text { Assets } & \text { Liabilities } & \text { Equity } \
\hline \text { Example: } & & & \
\hline \text { Apri 1 } & \text { I } & \text { N } & \text { I } \
\hline & & & \
\hline & & & \
\hline & & & \
\hline & & & \
\hline & & & \
\hline & & & \
\hline & & & \
\hline & & & \
\hline
\end{array}$$

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Question 20

The accountant of Action Adventure Games, Inc. prepared a balance sheet after every 10 day period. The only resources invested by the owner were at the start of the company on June 1. During June, the first month of operation, the following balance sheets were prepared:    Required:
 Describe the nature of each of the four transactions that took place between the balance sheet dates shown. Assume only one transaction affected each account. $\text {June}$
10 $\quad $$\underline{\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad}$
20 $\quad $$\underline{\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad}$
30 $\quad $$\underline{\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad}$
  $\quad $$\quad $$\underline{\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad}$

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Quiz 1: Accounting in Business