Chapter 1, Financial Accounting Attempts
Jackson Company recorded the following cash transactions for the year: Paid $150,000 for salaries. Paid $45,000 to purchase office equipment. Paid $10,000 in dividends. Collected $275,000 from customers. What is the company's net cash from operating activities for the year? $125,000 $70,000 $115,000 $80,000 $275,000
$125,000 Business activities include financing activities, investing activities, and operating activities. After a company obtains financing from owners and creditors and after the company has invested in property, plant, and equipment, the company is ready for day-to-day operating activities. Examples of operating activities include buying and selling inventory, paying employees' wages, and other activities (e.g., paying for marketing).This company's net cash from its operating activities equals cash collected from customers minus payments for employee salaries (i.e., 275,000 - 150,000 = 125,000). Buying equipment is an investment activity. Paying a dividend is a financing activity.
If total assets decreased by $10,000 and total stockholders' equity increased by $5,000 during a period of time, then total liabilities must have changed by what amount and direction during that same period? $10,000 increase $15,000 decrease $15,000 increase $5,000 decrease $5,000 increase
$15,000 The accounting equation: Assets = Liabilities + Stockholders' EquityIf assets decreased by $10,000 then liabilities plus stockholders' equity decreased by $10,000. Since stockholders' increased by $5,000 then liabilities must have decreased by $15,000 [i.e., ($10,000) = ($15,000) + $5,000].
During the year, Langston Company recorded revenues of $800,000, recorded expenses of $620,000, issued an additional $90,000 of common stock, and paid dividends of $60,000. Its ending retained earnings is 500,000. What was the company beginning retained earnings? $390,000 $250,000 $270,000 $380,000 $620,000
$380,000 Ending retained earnings = Beginning retained earnings + Net income - DividendsReplace net income with revenue - expensesEnding retained earnings = Beginning retained earnings + Revenue - Expenses - DividendsRe-arranging to solve for beginning retained earnings:Beginning retained earnings = Ending retained earnings - Revenue + Expenses + DividendsBeginning retained earnings = 500,000 - 800,000 + 620,000 + 60,000Beginning retained earnings = 380,000
Marvin Services Corporation had the following accounts and balances: Accounts payable$4,000 Accounts receivable 8,000 Cash 9,000 Common stock 16,000 Equipment 45,000 Retained earnings, Not given Supplies 2,000 Unearned service revenue 4,000 What is the balance of the company's retained earnings account?
$40,000 Assets = Accounts receivable + cash + equipment + supplies = 8,000 + 9,000 + 45,000 + 2,000 = 64,000Liabilities = accounts payable + unearned revenue = 4,000 + 4,000 = 8,000Assets = liabilities + stockholders' equityStockholders' equity = assets - liabilities = 64,000 - 8,000 = 56,000Stockholder's equity = common stock + retained earnings Common stock = 56,000 - 16,000 = 40,000
The financial records for Harold Corporation included the following information: Accounts receivable, $60,000 Accounts payable, $25,000 Cash, $15,000 Common stock, $5,000 Dividends, $10,000 Insurance expense, $10,000 Sales revenue, $90,000 Salaries and wages expense, $25,000 Based on this information, how much was its net income? $65,000 $70,000 $55,000 $45,000 $80,000
$55,000 Net income equals the revenues earned during the year minus the expenses incurred during the year. Use the balances of the revenue and expense accounts to measure revenues and expenses.Net income = Revenue - expensesNet income = $90,000 - 25,000 - 10,000 = $55,000
Ending retained earnings is equal to which of the following? Beginning retained earnings - net income - dividends Net income + dividends Beginning retained earnings - net income + dividends Beginning retained earnings + net income + dividends Beginning retained earnings + net income - dividends
Beginning retained earnings + net income - dividends Stockholders' equity includes contributed capital (e.g., common stock) and retained earnings. Retained earnings is an equity account. It is generated from the company's net income since the company began operations minus dividends paid since it began operations. Beginning retained earnings plus net income minus dividends equals ending retained earnings.
Which of the following is an asset? Accounts payable Common stock Retained earnings Notes payable Cash
Cash Assets are the resources owned by a company. They are property. Examples include cash, accounts receivable, equipment, etc.
Which of the following is not one of the forms of business organization? Corporation These are all forms of business organization Company Partnership Sole proprietorship
Company Sole proprietorships, partnerships, and corporations are the three most well-known forms of business organization. Company is not a form of business organization.
Which statement about users of accounting information is correct? Management is considered an external user. Taxing authorities are considered internal users. Regulatory authorities are considered internal users. Labor unions are considered internal users. Creditors are considered external users.
Creditors are considered external users. Users of a company's accounting information include internal users and external users. Examples of internal users include the company's employees (e.g., management, human resource personnel, marketing personnel, and finance personnel). Examples of external users include the company's investors (i.e., owners), creditors, taxing authorities, customers, labor unions, and regulatory authorities.
Which of the following is also referred to as debt? Revenues Assets Expenses Lliabilities Stockholders' equity
Liabilities Liabilities are the amounts owed, such as the amounts that a company owes to its creditors. Example include accounts payable, notes payable, and unearned revenues.
Which financial statement should be prepared first and why? Users of financial statements need it sooner than the other financial statements. The balance sheet should be prepared first because it determines the retained earnings and that information must be reported on other financial statements. The income statement does not have to be prepared first. The financial statements can be prepared in any order. The retained earnings statement should be prepared first because it provides data to compute net income. Net income from the income statement must be reported on the retained earnings statement and the ending retained earnings balance must be reported on the balance sheet.
Net income from the income statement must be reported on the retained earnings statement and the ending retained earnings balance must be reported on the balance sheet. The financial statements are prepared in the following order: income statement, retained earnings statement, and balance sheet. This is because net income (from the income statement) is a required input for the statement of stockholders' equity, ending retained earnings (from the statement of stockholders' equity) is a required input for the balance sheet.
Which of the following statements is true regarding the Sarbanes-Oxley Act (SOX)? None of these SOX eliminated the requirement that company management certify the accuracy of the company's financial statements. All of these SOX required increased independence of the certified public accountants hired to audit a company's financial statements. SOX decreased penalties for financial fraud by management. Penalties no longer include the possibility of imprisonment.
SOX required increased independence of the certifies public accountants hired to audit a company's financial statements. SOX was created by Congress and signed into law by the President to reduce unethical corporate behavior and to decrease the likelihood of future corporate scandals. The following summarizes the effects of SOX. Top management must certify the financial statements for their company. SOX also increased the independence of outside auditors who review the accuracy of corporate financial statements, it increased the oversight role of boards of directors, and it increased the penalties for fraudulent certifications of financial statements.
Which of the following best describes stockholders' equity? Stockholders' equity are the economic resources of the firm. Stockholders' equity are the claims of creditors. Stockholders' equity is the cash collected from owners. Stockholders' equity are the claims of owners. Stockholders' equity is the difference between revenues and expenses.
Stockholders' equity are the claim of owners. Stockholders' equity represents claims of owners. Assets are the resources owned by the firm and liabilities are the claims of creditors against the firm's assets.
Which of the following is true with regard to the auditor's report that is included in the annual report given to shareholders? The auditor's report states the auditor's opinion as to the fairness of the financial position and results of operations and their conformance with accounting rules. None of these The auditor's report is prepared by the company's internal auditors who are employees of the company. The auditor's report guarantees that the company followed correct accounting rules in all of its transactions. All of these
The auditor's report states the auditor's opinion as to the fairness of the financial position and results of operations and their conformance with accounting rules. The segment of the annual report that presents an opinion regarding the fairness of the presentation of the financial position and results of operations is in the auditor's opinion.
Which of the following best defines accounting? The interconnected network of financial information used to track the cash flows of a business organization. The system of electronic collection, organization, and communication of valuation information. The processing system and regulatory rules for determining the fair market value of a business organization. The procedures for collecting information about the production of merchandise and services for sale to customers. The information system that identifies, measures, and communicates the economic events of an organization to interested users.
The information system that identifies, measures, and communicates the economic events of an organization to interested users.
Which of the following would appear on a balance sheet? Net income Interest expense Net cash flows fromfinancing activities Unearned revenue Dividends
Unearned revenue The balance sheet reports all of a company's assets (e.g., cash, accounts receivable, prepaid rent, equipment, etc.), liabilities (e.g., accounts payable, notes payable, unearned revenues, etc.) ,and equities (common stock, retained earnings, etc.).
The payment of dividends is an example of a merchandising activity. a financing activity. an investing activity. an operating activity. a delivery activity.
a financing activity The payment of dividends is an example of a financing activity. Financing activities include cash inflows from selling (i.e., issuing stock to owners) and borrowing from creditors, and cash outflows for financing activities paying cash to stockholders to repurchase stock, paying dividends to stockholders, and paying creditors the amounts borrowed.
The right to receive money in the future is called a(n) account receivable. liability. unearned revenue. account payable. revenue.
account receivable If a company sells goods or services to customers and does not collect the customer's cash payment immediately then the company has a right to collect payment from the customer in the near future. The right to receive money in the future is called an account receivable.
The annual report provided to shareholders includes an auditor's report. The auditor's report includes an opinion about the fairness of the financial statements. The party expressing that opinion is the company's Chief Operating Officer. the company's internal auditor. an independent auditor who is a member of the Government Auditing Accountants. the Internal Revenue Service. an independent auditor who is a Certified Public Accountant.
an independent auditor who is a Certified Public Accountant. The segment of the annual report that presents an opinion regarding the fairness of the presentation of the financial position and results of operations is in the auditor's opinion. The party ex-pressing that opinion is an independent auditor who is a Certified Public Accountant.
To show how successfully your business performed during a period of time, you would report its revenues and expenses in the statement of cash flows. income statement. sources and uses statement. balance sheet. statement of stockholders' equity.
income statement The income statement summarizes all of the revenues and expenses for a given period of time, such as a year. Net income equals revenues minus expenses. Net income results when revenues exceed expenses. A net loss results when expenses exceed revenues.