acct 201 final

Which of the following accounts is not reported in the stockholders' equity section of the balance sheet?

Sales Revenue.

if no cash was exchanged in the purchase of equipment financed entirely with a note payable, we represent this as both an investing activity and a financing activity in the statement of cash flows.

false

Preferred stock is "preferred" to common stock two ways: (1) preferred stockholders have first rights to dividends, and (2) in the event the company is dissolved, preferred stockholders receive preference over common stockholders in the distribution of assets.

true

The balance in Retained Earnings is increased by net income and is decreased by dividends.

true

The balance in retained earnings equals all net income, less all dividends, since the company began operations.

true

The long-term assets section of the balance sheet is the place to look for investing activities.

true

A decrease in accounts payable results in a subtraction in calculating operating cash flows.

true

Depreciation expense is added back to net income in calculating operating cash flows.

true

Dividends paid are allocated according to the percentage of shares owned by each stockholder.

true

When treasury stock is sold for more than the company originally paid to purchase the shares, the difference :

Increases stockholders' equity.

Which of the following stages of equity financing comes last in the traditional order of progression?

Initial public offering (IPO).

Transactions that do not increase or decrease cash, but that result in significant investing and financing activities, are reported either directly after the cash flow statement or in a separate note to the financial statements as noncash activities.

true

Transactions that result in significant investing and financing activities but that do not involve cash are reported either directly after the statement of cash flows or in a note to the financial statements.

true

Under the indirect method, the operating activities section of the cash flow statement begins with net income.

true

We can find most financing activities by examining changes in long-term liabilities and stockholders' equity accounts.

true

We report the actual amount of cash proceeds received from the sale of land as a cash inflow from investing activities.

true

When comparing the typical sole proprietorship and corporation, the form of business having higher assets and earnings is the corporation.

true

Inventory records for Marvin Company revealed the following: DateTransactionNumber of UnitsUnit CostMar.1Beginning Inventory1,000$7.20 Mar.10Purchase600 7.25 Mar.16Purchase800 7.30 Mar.23Purchase600 7.35 Marvin sold 2,300 units of inventory during the month. Ending inventory assuming LIFO would be:

$5,040. explanation: Ending inventory = 700 × $7.20 = $5,040.

A company issued 1,000 shares of $1 par value preferred stock for $5 per share. What is true about the journal entry to record the issuance?

Credit Additional Paid-In Capital $4,000. explanation: Explanation The journal entry would be: Cash 5,000 Preferred Stock 1,000 Additional Paid-in Capital 4,000

The par value of common stock represents:

The legal capital per share of stock assigned when the corporation was first established.

The indirect method and the direct method affect only the ______ section of the statement of cash flows.

operating activities

Which of the following dates associated with dividends does not require an entry to be recorded?

record date

The total net cash flows from operating activities are identical under both the indirect and direct methods.

true

The total of the cash flows from operating, investing, and financing activities equals the net increase or decrease in cash for the period.

true

The following information was taken from a company's bank reconciliation at the end of the year: Bank balance$8,500Checks outstanding$8,900Note collected by the bank$1,100Service fee$35Deposits outstanding$5,900NSF check$430 What is the correct cash balance that should be reported in the company's balance sheet at the end of the year?

$5,500. explanation: Bank balance ($8,500) + deposits outstanding ($5,900) − checks outstanding ($8,900) = $5,500.

Which of the following has the lowest expected return to the investor?

Bonds.

On February 22, Brett Corporation acquired 200 shares of its $5 par value common stock for $25 each. On March 15, the company resold 70 shares for $30 each. What is true of the entry for reselling the shares?

Credit Additional Paid in Capital $350.

On December 2, Coley Corp. acquired 1,000 shares of its $2 par value common stock for $27 each.On December 20, Coley Corp. resold 400 shares for $15 each. Which of the following is correct regarding the journal entry for the resold shares?

Credit Treasury Stock $10,800. explanation: The journal entry for the resold shares would be: Cash (400 × $15) 6,000 Additional Paid-in Capital 4,800 Treasury Stock (400 ×$27) 10,800

If a company issues 1,000 shares of $1 par value common stock for $20 per share, what would be the effect on the accounting equation?

Increase assets and increase stockholders' equity. explanation: Cash20,000 Common Stock 1,000Additional Paid-in Capital 19,000

Receiving cash from an account receivable:

Increases one asset and decreases another asset.

An adjusted trial balance:

Is a list of all accounts and their balances after adjusting entries.

Marina, Inc., acquires 1 million shares of its own $1 par value common stock at $70 per share. It later resells the 1 million shares of treasury stock for $75. We record the $5 difference per share as a:

credit to Additional Paid-in Capital

Delta Corporation acquires 10,000 shares of its own $0.01 par value common stock at $10 per share. It later resells the 10,000 shares of treasury stock for $12. The entry to record this transaction will involve a:

credit to Additional Paid-in Capital for $20,000

Almond Corporation acquires 10,000 shares of its own $1 par value common stock at $10 per share. The journal entry for this transaction includes a:

debit to Treasury Stock for $100,000

When a corporation acquires shares of its own common stock, it records a:

debit to Treasury Stock for cost

An increase in a current asset account, other than cash, results in an addition in calculating operating cash flows.

false

Companies usually rely on angel investors and venture capital firms following an initial public offering.

false

If losses exceed income since the company began operations, Retained Earnings will have a credit balance.

false

Nearly all major companies in the United States use the direct method to prepare the statement of cash flows.

false

Nonoperating items that increase net income, such as gains on the sale of fixed assets, must be added in calculating operating cash flows.

false

The Common Stock account increases when treasury stock is resold for more than its original cost.

false

The general public is entitled to invest in a privately held corporation.

false

The inflow of cash received from issuing common stock is reported as an investing activity.

false

The statement of cash flows reports business activities on an accrual basis.

false

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What is the net effect of a dividend declaration and payment?

reduction in both stockholders' equity and assets

For the current year, Davis Corporation's statement of cash flows reveals the following information: Net cash flows from operating activities:$48,000 Net cash flows from investing activities:$12,000 Net cash flows from financing activities:$30,000 Cash at the end of the year:$210,000 What was the company's cash balance at the beginning of the year?

$120,000

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Deferred revenues refer to:

Customers paying cash in advance of the good or service to be provided.

Given the information below, what was the amount of Dividends in the current period? Beginning Retained Earnings = $150,000. Increase in Cash = $40,000. Ending Retained Earnings = $200,000. Issuance of Common Stock = $50,000. Net Income = $160,000.

$110,000. explanation: Beginning RE + Net income − Dividends = Ending RE. $150,000 + $160,000 − $X = $200,000. Dividends = $110,000.

Innovative Media issues 1,000 shares of 8%, $50 par value preferred stock for $60 per share. Which of the following will be recorded at the time of the issue?

A credit to Additional Paid-in Capital for $10,000

A list of all accounts and their balances after posting closing entries is referred to as:

A post-closing trial balance.

Monterey Corporation reports net income of $260,000 that includes depreciation expense of $30,000 and amortization expense of $20,000. What is the company's cash inflows from operating activities?

$310,000

Which of the following is a possible closing entry?

Debit Service Revenue, credit Retained Earnings.

LeGrand Corporation reported the following amounts in its income statement: Sales revenue$440,000 Advertising expense 60,000 Interest expense 10,000 Salaries expense 55,000 Utilities expense 25,000 Income tax expense 45,000 Cost of goods sold 180,000 What was LeGrand's gross profit?

$260,000. explanation; Gross profit = $440,000 − $180,000 = $260,000.

Fallon Corporation reports net income of $370,000. Accounts Receivable balances at the beginning and end of the year were $40,000 and $48,000, respectively. Beginning and ending Inventory balances were $60,000 and $54,000, respectively. What is the company's cash inflows from operating activities?

$368,000

Frederick Corporation reports net income of $410,000. Accounts Payable balances at the beginning and end of the year were $50,000 and $39,000, respectively. Interest Payable balances at the beginning and end of the year were $27,000 and $30,000, respectively. What is the company's cash inflows from operating activities?

$402,000

Phillips Corporation reports net income of $480,000 that includes a gain on the sale of land of $8,000 and a loss on the sale of equipment of $2,000. What is the company's cash inflows from operating activities?

$474,000

Kansas Enterprises purchased equipment for $60,000 on January 1, 2021. The equipment is expected to have a five-year service life, with a residual value of $5,000 at the end of five years. Using the straight-line method, the book value at December 31, 2021, would be:

$49,000. explanation: Depreciation expense = (($60,000 − $5,000) / 5 years) = $11,000. Book value = $60,000 − $11,000 = $49,000.

The Surf's Up issues 1,000 shares of 6%, $100 par value preferred stock at the beginning of 2020. All remaining shares are common stock. The company was not able to pay dividends in 2020, but plans to pay dividends of $18,000 in 2021.Assuming the preferred stock is noncumulative, how much of the $18,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders in 2021?

$6,000 to preferred stockholders and $12,000 to common stockholders.

The following table contains financial information for Trumpter Inc. before closing entries: Cash $ 12,200 Supplies 4,600 Prepaid Rent 3,500 Salaries Expense 4,900 Equipment 66,100 Service Revenue 29,100 Miscellaneous Expenses 20,500 Dividends 3,000 Accounts Payable 4,000 Common Stock 67,100 Retained Earnings 14,600 What is the amount of Trumpter's total assets?

$86,400 explanation: Assets include Cash ($12,200), Supplies ($4,600), Prepaid Rent ($3,500), and Equipment (66,100).

The following financial information is from Cook Company: Accounts Payable$55,000Land$90,000Inventory$10,500Accounts Receivable$7,500Equipment$8,000Deferred Revenue$58,500Short-Term Investments$20,000Notes Receivable (due in 8 months)$45,500Interest Payable$2,000Patents$75,000 What is the total amount of property, plant, and equipment assuming the accounts above reflect normal activity?

$98,000. explanation: $90,000 + $8,000 = $98,000.

If total change in cash = $44,000, net operating cash flows = $22,000, and net investing cash flows = ($13,000); then net financing cash flows =

35,000 explanation: Total change in cash ($44,000) = net operating cash flows ($22,000) + net investing cash flows (−$13,000) + net financing cash flows ($35,000).

The Retained Earnings balance reported in the balance sheet typically is affected by:

All of the other answer choices are correct.

Hayes Corporation issues 100 shares of its $1 par value common stock for $15 per share. The entry to record the issuance will not include a:

All of the other answer choices are correct. explanation: Cash 1,500 Common Stock 100 Additional Paid-in Capital 1,400

Daniel Dino Restaurant owes employees' salaries of $15,000. This would be recorded as:

Debit Salaries Expense, credit Salaries Payable.

The first step involved in preparing the statement of cash flows is:

Determine net cash flows from operating activities

Which of the following statements regarding the corporate form of business is correct?

Disadvantages are that the business is subject to government regulations and double taxation on its income.

Cash flows from financing activities include:

Dividends paid.

The purchase of land is classified in the statement of cash flows as a(n):

Investing activity.

The cash collection from the sale of a good or service is classified in the statement of cash flows as a(n):

Operating activity.

Of the following, the most important objective for financial accounting is to provide information useful for:

Predicting cash flows.

Which of the following is an example of a noncash activity?

Purchase of long-term assets by issuing debt

Examples of adjusting entries could include all of the following except:

Recording the purchase of office supplies.

Which financial statement separates business activities into operating, investing, and financing activities?

Statement of Cash Flows

The balance of Retained Earning at the end of the year represents:

Total earnings less payments to owners over the life of the company.

Posting is the process of:

Transferring the debit and credit information from the journal to individual accounts in the general ledger.

The information necessary for preparing year-end adjusting entries appears below. The company's fiscal year-end is December 31. Utilities for the month of December are $6,100 but won't be paid until January of the following year. On April 1, the company collected $16,000 from customers for services to be provided over the next 12 months. At that time, the amount was credited to Deferred Revenue. By the end of the year, nine months of those services have been provided. On October 1, $12,000 was paid to rent space over the next nine months. At that time, the amount was debited to Prepaid Rent. On December 1, the company agrees to provide services for a three-month period and to receive payment of $6,000 at the end of that period. By the end of the year, one month of services have been provided.

Utilities Expense6,100 Utilities Payable6,1002 (b)Deferred Revenue12,000 Service Revenue12,0003 (c)Rent Expense4,000 Prepaid Rent4,0004 (d)Accounts Receivable2,000 Service Revenue2,000

A corporation's officers are appointed by the:

board of directors

On the date of declaration of the dividend, we _____.

debit Dividends

All privately held corporations are regulated by the Securities and Exchange Commission.

false

There is a direct relationship between the par value and market value of common stock: stocks with a low par value have a low market value, while stocks with a high par value have a high market value.

false

We report the cash payment of dividends as a cash outflow from investing activities.

false

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Fairfield Corporation issues 100,000 shares of $1 par value common stock for $10 per share. This transaction:

increases assets and increases stockholders' equity.

When a corporation issues stock to the general public for the first time, it is known as a(n):

initial public offering

Which of the following groups is not among the external users for whom financial statements are prepared?

managers

All of the following are components of stockholders' equity, except ____________.

notes payable

Earnings not distributed as dividends to stockholders is known as:

retained earnings

Net cash flows from operating activities uses information from all of the following sources, except the _____.

stockholders' equity section of the balance sheet

How many of the following transactions are operating activities?Borrow $50,000 from the bank.Purchase $12,000 in supplies.Provide services to customers for $27,000.Pay the utility bill of $750.Purchase a delivery truck for $12,000.Receive $25,000 from issuing common stock.

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