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ACT Exam 1 with complete solutions

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Basic Accounting Equation Assets = Liabilities + Owner's Equity •The liabilities of Platt Company are $90,000. Owner's capital is $150,000; drawings are $40,000; revenues, $450,000; and expens ... es, $340,000. What is the amount of Platt Company's total assets? $310,000 00:51 01:13 •The total assets of Sierra Company are $57,000. Owner's capital is $35,000; drawings are $7,000; revenues, $52,000; and expenses, $35,000. What is the amount of the company's total liabilities? $12,000 •The total assets of Birch Co. are $660,000 and its liabilities are equal to two-thirds of its total assets. What is the amount of Birch Co.'s owner's equity? $220,000 Ethics standards of conduct by which actions are judged as right or wrong, honest or dishonest, fair or not fair. Historic Cost Principle Dictates that companies record assets at their cost Fair Value Principle States that assets & liabilities should be reported at fair value (only used when an asset is actively traded). Relevance Financial information that is capable of making a difference in a decision. Faithful Representation Number & descriptions match what really existed or happened. Monetary Unit Assumption Transactions that can be expressed in terms of money. Economic Entity Assumption Requires that the activity of the entity be kept separate & distinct from activities of its owners & all other economic entities. Sole Proprietorship -Doesn't require much capital to start business -personally liable for all debts [Show More]

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