AACSB: Reflective Thinking AACSB: Communication AACSB: Ethics AICPA: BB Legal AICPA: FN Risk Analysis Blooms: Understand Level of Difficulty: 2 Medium Feedback: When working with ethical dilemmas, it is helpful to identify the opportunity, pressure and rationalization associated with that particular situation. 20. Discuss the importance of ethics in the accounting profession. Answer: Because the users of accounting information depend on that information for making decisions, auditors must be trustworthy and credible to render an opinion on the financial statements. The management of a business is ultimately responsible for the financial statements; therefore, the accounting personnel of the business must also conduct themselves in a highly ethical manner. Learning Objective: 02-10 Topic Area: Importance of Ethics AACSB: Communication AACSB: Ethics AICPA: BB Industry AICPA: FN Decision Making Blooms: Understand Level of Difficulty: 2 Medium Feedback: The high ethical standards required by the accounting profession state “a certified public accountant assumes an obligation of self-discipline above and beyond requirements of laws and regulations.” The AICPA Code of Professional Conduct and the IMA Standards of Ethical Conduct are among ethics regulations governing the accounting profession. Multiple Choice Questions 21. Bledsoe Company received $17,000 cash from the issue of stock on January 1, 2016. During 2016 Bledsoe earned $8,500 of revenue on account. The company collected $6,000 cash from accounts receivable and paid $5,400 cash for operating expenses. Based on this information alone, during 2016, A. Total assets increased by $20,100. B. Total assets increased by $600. C. Total assets increased by $26,100. D. Total assets did not change. Answer: A Learning Objective: 02-01 Topic Area: Accounting for accounts receivable AACSB: Analytical Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Blooms: Analyze Level of Difficulty:3 Hard Feedback: $17,000 (cash) + $8,500 (accounts receivable) + $6,000 (cash) - $6,000 (accounts receivable) - $5,400 (cash) = $20,100 increase
125. The following transactions to Kellogg Company. 1) Issued common stock for $20,000 cash 2) Provided services to customers for $38,000 on account 3) Purchased land for $15,000 cash 4) Incurred $29,000 of operating expenses on account 5) Collected $35,000 cash from customers for services provided in event #2 6) Paid $27,000 on accounts payable 7) Paid $2,000 dividends to stockholders Required: a) Identify the dollar amount effect on the Statement of Cash Flows, if any, for each of the above transactions. Precede a cash outflow amount with a minus sign. Enter NA for items not affected. b) Indicate whether each transaction involves operating, investing, or financing activities. Enter NA for items not affected. c) Classify the above accounting events into one of four types of transactions (asset source, asset use, asset exchange, claims exchange). Answer: Learning Objective: 02-01 Learning Objective: 02-02 Learning Objective: 02-09 Topic Area: Accounting for accounts receivable Topic Area: Accounting for accrued expense Topic Area: Transaction classification AACSB: Analytical Thinking AACSB: Knowledge Application AICPA: BB Critical Thinking AICPA: FN Measurement Blooms: Analyze Blooms: Level of Difficulty: 2 Medium
128. Jenna Fisk started her business by issuing $8,000 of common stock on January 1, 2016. Jenna performed $18,500 of service on account in 2016, and she collected $16,200 of this amount by year end. She paid operating expenses of $14,900 and paid a $600 dividend to the stockholders. Required: a) What is the amount of total assets at the end of 2016? b) What is the amount of cash on hand at the end of 2016? c) What is net income for 2016? d) Prepare a balance sheet for December 31, 2016. Answer: a) $8,000 + $18,500 - $14,900 - $600 = $11,000 Total assets b) $8,000 + $16,200 - $14,900 - $600 = $8,700 Cash balance c) $18,500 - $14,900 = $3,600 Net Income d) Learning Objective: 02-01 Learning Objective: 02-03 Topic Area: Accounting for accounts receivable Topic Area:Prepare financial statements Topic Area: Balance sheet AACSB: Knowledge Application AICPA: BB Critical Thinking AICPA: FN Measurement Blooms: Apply Level of Difficulty: 2 Medium