Reference no: EM133305806
Introduction to Accounting
Learning Objective 1: Explain what accounting is.
Learning Objective 2: Identify the users and uses of accounting.
Learning Objective 3: Explain accounting standards and measurement principles.
Learning Objective 4: Explain the monetary unit assumption and the economic entity assumption.
Learning Objective 5: Explain the career opportunities in accounting.
Learning Objective 6: State the accounting equation, and define its components.
Learning Objective 7: Analyze effects of business transactions on the accounting equation.
Learning Objective 8: Understand the four FS's and how they are prepared.
Question #1
The historical cost principle states that:
a. Assets should be initially recorded at cost and adjusted when the fair value changes.
b. Activities of an entity are to be kept separate and distinct from its owner.
c. Assets should be recorded at their cost.
d. Only transaction data capable of being expressed in terms of money be included in the accounting records.
Indicate whether each of the following statements presented
below is true or false.
1. Convergence refers to efforts to reduce differences between IFRS and U.S. GAAP.
2. The primary accounting standard-setting body headquartered in London is the International Accounting Standards Board (IASB).
3. The historical cost principle dictates that companies record assets at their cost. In later periods, however, the fair value of the asset must be used if fair value is higher than its cost.
4. Relevance means that financial information matches what really happened; the information is factual.
5. A business owner's personal expenses must be separated from expenses of the business to comply with accounting's economic entity assumption.
Question #2
Net income will result during a time period when:
a. assets exceed liabilities.
b. assets exceed revenues.
c. expenses exceed revenues.
d. revenues exceed expenses.
Question #3
The financial statement that reports assets, liabilities, and equity is the:
a. Income Statement.
b. Retained Earnings Statement.
c. Statement of Financial Position.
d. Statement of Cash Flows.
Presented below is selected information related to Flanagan Company at December 31, 2014. Flanagan reports financial information monthly.
Equipment £10,000 Utilities Expense £ 4,000
Cash 8,000 Accounts Receivable 9,000
Service Revenue 36,000 Salaries and Wages Expense 7,000
Rent Expense 11,000 Notes Payable 16,500
Accounts Payable
Required: 2,000 Dividends 5,000
(a) Determine the total assets of Flanagan at December 31, 2014.
(b) Determine the net income that Flanagan reported for December 2014.
(c) Determine the equity of Flanagan at December 31, 2014.