Chad Jones is the sole owner and manager of Jones Glass Repair Shop. In 2009, Jones purchases a truck for $30,000 to be used in the business. Which of the following fundamentals requires Jones to...

Chad Jones is the sole owner and manager of Jones Glass Repair Shop. In 2009, Jones purchases
a truck for $30,000 to be used in the business. Which of the following fundamentals requires
Jones to record the truck at the price paid to buy it?

A. Separate-entity assumption

B. Revenue principle

C. Full disclosure

D. Historical cost principle
Question 2 2 points Save
Which of the following transactions would cause retained earnings to
increase?

A. Collection of payment on a customer's account

B. Loan from a bank

C. Sale of service to a customer on account

D. Wages owed to employees
Question 3 2 points Save
Michael Corporation received $200,000 cash invested by its owners. The
effect on the accounting equation was?

A. Stockholders' equity and revenues each increased by $200,000

B. Stockholders' equity and assets each increased by $200,000

C. Assets and revenues each increased by $200,000

D. Assets and liabilities each increased by $200,000
Question
4
2 points
Save
Solution a:
Assume a company's January 1, 2009, financial position was: Assets,
$150,000 and Liabilities, $60,000. During January 2009, the company
completed the following transactions: (A) paid on a note payable $10,000
(no interest was paid); (B) collected an accounts receivable, $9,000; (C)
paid an accounts payable, $5,000; and (D) purchased a truck, $5,000 cash,
and a $20,000 note payable from a bank.
a. What is the company's January 1, 2009 stockholders’ equity?
. What are the company’s January 31, 2009 assets, liabilities and
stockholders’ equity?


javascript:saveItem('_12732912_1','2')
javascript:saveItem('_12732913_1','3')
javascript:saveItem('_12732914_1','4')
Date Assets
=
Liabilitie
s + Equity
1st
Jan'2009 150000
=
60000 + 90000


Equity = Assets - Liabilities

= Equity =
90000
Solution b:
Date Assets = Liabilities + Equity
1st
Jan'2009 150000
=
60000 + 90000
A -10000 = -10000 +
B 9000 = +
-9000 = +
C -5000 = -5000 +
D -5000 = +
25000 = 20000 +
31st Jan 155000 = 65000 + 90000
Balance of Asset = $155000
Balance of Liabilities = $65000
Balance of Equity = $90000

Question 5 2 points Save
When a company buys equipment for $150,000 and pays for one third in
cash and the other two thirds is financed by a note payable, the following
are the effects on the accounting equation:

A. Cash decreases by $50,000

B. Equipment increases by $100,000
javascript:saveItem('_12732915_1','5')

C. Liabilities increase by $150,000

D. Total assets increase by $200,000
Question 6 2 points Save
The principle that requires us to record a transaction when we provide
service to a client and bill them is?

A. Historical cost principle

B. Cost principle

C. Full disclosure

D. Revenue recognition
Question 7 2 points Save
Which of the following activities will most likely result in a
eported gain on the income statement?

A. The sale of inventory to customers

B. The sale of old equipment

C. The wages and benefits paid to employees

D. The payment of dividends to stockholders
Question 8 2 points Save
A landlord received $5,000 cash for December 2011's rent but the tenant's
ent for December is $8,000. Which of the following is true for year
ended 2011?

A. $8,000 would be reported on the statement of cash flows

B. $8,000 would appear on the balance sheet as rent receivable

C. $8,000 would appear on the income statement as rent revenue
earned

D. $5,000 would appear on the balance sheet as prepaid rent
Question 9 2 points Save
On January 1, 2010, Denmark Inc., started the year with a $200,000 credit
alance in its retained earnings account. During 2010, the company
earned net income of $70,000 and declared and paid dividends of
$10,000. Also, the company received cash of $15,000 as an additional
investment by its owners. Therefore, the balance in retained earnings on
December 31, 2010, would be?
javascript:saveItem('_12732916_1','6')
javascript:saveItem('_12732917_1','7')
javascript:saveItem('_12732918_1','8')
javascript:saveItem('_12732919_1','9')

A. $200,000

B. $270,000

C. $245,000

D. $260,000
Beginning balance 200000
Add: Net income 70000
270000
Less: Dividend 10000
Ending balance 260000


Question 10 2 points Save
During 2010, Sensa Corporation incu
ed operating expenses amounting
to $100,000 of which $75,000 was paid in cash; the balance will be paid
in January 2011. Transaction analysis of operating expenses for 2010
should reflect only the following:

A. Decrease stockholders' equity, $75,000; decrease assets,
$75,000

B. Decrease assets, $100,000; decrease stockholders' equity,
$100,000

C. Decrease assets, $100,000; increase liabilities, $25,000;
decrease stockholders' equity, $100,000

D. Decrease stockholders' equity, $100,000; decrease assets,
$75,000; increase liabilities, $25,000
11 - Business Transactions and Financial Statement Preparation
While the majority of companies, and their accountants, follow the rules as stated in Generally
Accepted Accounting Principles (GAAP), there are always the exceptions that do not. Find an
example of a company that has run into trouble because their accounting data was not prepared
properly - either intentionally or unintentionally.
- (Post a link to any articles that you reference. In your post describe the issue at hand)
what caused this company to violate accounting principles?
javascript:saveItem('_12732920_1','10')

How did this affect the company?
How were others, outside the company, affected by the issues?
Solution:
Lehman Brothers was one of the companies which violated different accounting principles and
overstates its income so as to attract more and more investors which in turn affected the
company. The company also misrepresented its assets and liabilities which was again done to
attract more and more consumers.
Because of this, the company ran into huge losses and in the end resulted in bankruptcy.
This affected not only the management and the employees of the organization but also the
investors and the other stakeholders associated with the company. With the bankruptcy of the
Lehman
other the stock market was shaken and the index of the market fell down
tremendously.
Link:...