Homework #1

Question 1

Sales of products or services are…

Answer 1

Revenues.

Question 2

Owners’ claim to resources is…

Answer 2

Stockholders’ equity.

Question 3

Distributions to stockholders are…

Answer 3

Dividends.

Question 4

Costs of selling products or services are…

Answer 4

Expenses.

Question 5

Resources of a company are called…

Answer 5

Assets.

Question 6

Amounts owed are…

Answer 6

Liabilities.

Question 7

Which financial statement involves a change in owners’ claims to resources?

Answer 7

Statement of stockholders’ equity

Question 8

Which financial statement involves the profitability of a company?

Answer 8

Income statement

Question 9

Which financial statement involves the change in cash as a result of operating, investing, and financing activities?

Answer 9

Statement of cash flows

Question 10

Which financial statement shows that resources equal creditors’ and owners’ claims to an organization’s resources?

Answer 10

Balance sheet

Question 11

Define revenues.

Answer 11

Sales of products or services

Question 12

Define stockholders’ equity.

Answer 12

Owners’ claim to resources

Question 13

Define dividends.

Answer 13

Distributions to stockholders

Question 14

Define expenses.

Answer 14

Costs of selling products or services

Question 15

Define assets.

Answer 15

Resources of a company

Question 16

Define liabilities.

Answer 16

Amounts owed

Question 17

Tell me about the statement of stockholders’ equity.

Answer 17

It’s a financial statement that involves a change in owners’ claims to resources.

Question 18

Tell me about the income statement.

Answer 18

It’s a financial statement that involves the profitability of a company.

Question 19

Tell me about the statement of cash flows.

Answer 19

It’s a financial statement that involves the change in cash as a result of operating, investing, and financing activities.

Question 20

Tell me about the balance sheet.

Answer 20

It’s a financial statement that shows that resources equal creditors’ and owners’ claims to an organization’s resources.

Question 21

What are the four main kinds of financial statements?

Answer 21

1. Income statement
2. Statement on stockholders’ equity
3. Balance Sheet
4. Statement of cash flows

Question 22

Tell me about the Securities and Exchange Commission.

Answer 22

It’s a group that has been given power by Congress to enforce the proper application of financial reporting rules for companies whose securities are publicly traded.

Question 23

Tell me about the Financial Accounting Standards Board.

Answer 23

It’s an independent, private-sector group that is primarily responsible for setting financial reporting standards in the United States.

Question 24

Tell me about auditors.

Answer 24

They’re independent intermediaries that help to ensure that management appropriately applies financial reporting rules in preparing the company’s financial statements.

Question 25

Tell me about the International Accounting Standards Board.

Answer 25

It's a body that is attempting to develop a single set of high-quality, understandable global accounting standards.

Question 26

What is a group that has been given power by Congress to enforce the proper application of financial reporting rules for companies whose securities are publicly traded?

Answer 26

Securities and Exchange Commission

Question 27

What is an independent, private-sector group that is primarily responsible for setting financial reporting standards in the United States?

Answer 27

Financial Accounting Standards Board

Question 28

What are independent intermediaries that help to ensure that management appropriately applies financial reporting rules in preparing the company’s financial statements?

Answer 28

Auditors

Question 29

What is a body that is attempting to develop a single set of high-quality, understandable global accounting standards?

Answer 29

International Accounting Standards Board

Question 30

What is the Accounting Equation?

Answer 30

Assets = Liabilities + Stockholders' Equity

Question 31

What is an asset?

Answer 31

Something you own (e.g. cash, supplies, computer, land)

Question 32

What is a liability?

Answer 32

Something you owe (e.g. bank loans, accounts payable)

Question 33

What is the difference between an asset and an expense?

Answer 33

Assets have future value; expenses are used up.

Question 34

For all assets, an equal amount of ___ exists.

Answer 34

equity

Question 35

Consider this transaction: Issue of 10,000 share of common stock in exchange for $32,000 in cash. What happens?

Answer 35

Assets and SE increase.

Question 36

Consider this transaction: Purchase land for $19,000. A note payable is signed for the full amount. What happens?

Answer 36

Assets increase, liabilities increase.

Question 37

Consider this transaction: Purchase of equipment for $8,000 in cash. What happens?

Answer 37

One asset goes up, another goes down.

Question 38

Consider this transaction: Hire three employees for $2,000 a month. What happens?

Answer 38

No transaction occurred.

Question 39

Consider this transaction: Receive cash of $12,000 in rental fees for the current month. What happens?

Answer 39

Assets and SE increase.

Question 40

Consider this transaction: Purchase office supplies for $2,000 on account. What happens?

Answer 40

Assets and liabilities increase.

Question 41

Consider this transaction: Pay employees $6,000 for their first-month salaries. What happens?

Answer 41

Assets and SE decrease.