Connect Financial Accounting Chapter 1

Connect Financial Accounting Chapter 1

Q1. Determine the missing amount from each of the separate situations given below.

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Q2. Answer the following questions. (Hint: Use the accounting equation.)At the beginning of the year, Addison Company’s assets are

a. $273,000 and its equity is $204,750. During the year, assets increase $80,000 and liabilities increase $46,000. What is the equity at year-end?

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b. Office Store has assets equal to $247,000 and liabilities equal to $210,000 at year-end. What is the equity for Office Store at year-end?

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c. At the beginning of the year, Quaker Company’s liabilities equal $71,000. During the year, assets increase by $60,000, and at year-end assets equal $190,000. Liabilities decrease $6,000 during the year. What are the beginning and ending amounts of equity?

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Q3. On October 1, Ebony Ernst organized Ernst Consulting; on October 3, the owner contributed $83,110 in assets in exchange for its common stock to launch the business. On October 31, the company’s records show the following items and amounts.

Cash $ 14,550 Cash dividends $ 1,120
Accounts receivable 11,500 Consulting revenue 11,500
Office supplies 2,400 Rent expense 2,640
Land 45,860 Salaries expense 5,920
Office equipment 17,020 Telephone expense 800
Accounts payable 7,820 Miscellaneous expenses 620
Common Stock 83,110

Using the above information prepare an October income statement for the business.

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Q4. On October 1, Ebony Ernst organized Ernst Consulting; on October 3, the owner contributed $82,780 in assets in exchange for its common stock to launch the business. On October 31, the company’s records show the following items and amounts.

Cash $ 15,760 Cash dividends $ 640
Accounts receivable 10,600 Consulting revenue 10,600
Office supplies 1,960 Rent expense 2,270
Land 46,030 Salaries expense 5,450
Office equipment 16,580 Telephone expense 760
Accounts payable 7,250 Miscellaneous expenses 580
Common Stock 82,780

Using the above information prepare an October statement of retained earnings for Ernst Consulting.

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Q5. On October 1, Ebony Ernst organized Ernst Consulting; on October 3, the owner contributed $83,660 in assets in exchange for its common stock to launch the business. On October 31, the company’s records show the following items and amounts.

Cash $ 12,040 Cash dividends $ 1,760
Accounts receivable 13,800 Consulting revenue 13,800
Office supplies 2,990 Rent expense 3,210
Land 45,940 Salaries expense 6,690
Office equipment 17,710 Telephone expense 870
Accounts payable 8,230 Miscellaneous expenses 680
Common Stock 83,660

Using the above information prepare an October 31 balance sheet for Ernst Consulting.

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Connect Financial Accounting Chapter 1 Quiz

Q1. Cragmont has beginning equity of $277,000, net income of $63,000, dividends of $25,000 and no additional investments by stockholders during the period. Its ending equity is:

  • $365,000
  • $239,000
  • $189,000
  • $315,000
  • $277,000

Q2. A company’s balance sheet shows: cash $24,000, accounts receivable $30,000, equipment $50,000, and equity $72,000. What is the amount of liabilities?

  • $104,000
  • $76,000
  • $32,000
  • $68,000
  • $176,000

Q3. The Superior Company acquired a building for $500,000. The building was appraised at a value of $575,000. The seller had paid $300,000 for the building 6 years ago. Which accounting principle would require Superior to record the building on its records at $500,000?

  • Monetary unit assumption
  • Going-concern assumption
  • Measurement (cost) principle
  • Business entity assumption
  • Revenue recognition principle

Q4. The assets of a company total $700,000; the liabilities, $200,000. What are the net assets?

  • $900,000
  • $700,000
  • $500,000
  • $200,000
  • It is impossible to determine unless the amount of stockholder investment is known

Q5. Cage Company had income of $350 million and average invested assets of $2,000 million. Its return on assets (ROA) is:

  • 1.8%
  • 35%
  • 17.5%
  • 5.7%
  • 3.5%

Q6. If equity is $300,000 and liabilities are $192,000, then assets equal:

  • $108,000
  • $192,000
  • $300,000
  • $492,000
  • $792,000

Q7. The accounting equation for Ying Company shows a decrease in its assets and a decrease in its equity. Which of the following transactions could have caused that effect?

  • Cash was received from providing services to a customer.
  • The company paid an amount due on credit.
  • Equipment was purchased for cash.
  • A utility bill was received for the current month, to be paid in the following month.
  • Advertising expense for the month was paid in cash.

Q8. If assets are $99,000 and liabilities are $32,000, then equity equals:

  • $32,000
  • $67,000
  • $99,000
  • $131,000
  • $198,000

Q9. Which of the following accounting principles prescribes that a company record its expenses incurred to generate the revenue reported?

  • Going-concern assumption.
  • Expense recognition (Matching) principle.
  • Measurement (Cost) principle.
  • Business entity assumption
  • Consideration assumption.

Q10. Rushing had income of $150 million and average invested assets of $1,800 million. Its return on assets is:

  • 8.3%
  • 83.3%
  • 12%
  • 120%
  • 16.7%

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