241 Test 1

Lena Company has provided the following data: 2016 revenues were $99,000. 2016 expenses were $47,800. Dividends declared and paid during 2016 totaled $9,500. Total assets at December 31, 2016 were $177,000. Total liabilities at December 31, 2016 were $89,000. Common stock at December 31, 2016 was $28,000. 31) Compute 2016 net income. 32) Compute retained earnings as of Dec.31, 2016. 33) Compute retained earnings as of Jan.1., 2016.

31) 99,000-47,800 = 51,200 32) E=A-L E=177-89= 88 then E=CS+RE 88=28+RE RE=60,000 33) beg RE + 51.2 - 9.5 = 60 beginning RE = 18,300

If the accounts payable account is decreased, the cash account is always decreased at the same moment. a. true b. false

A

Which of the following accounts should not appear on a balance sheet? a. Maintenance Expense b. Wages and Salaries Payable c. Unearned revenue d. Prepaid Insurance e. Two of the above should not appear on a balance sheet

A

Which of the following is not one of the primary financial statements? a. Statement of Merger Activity b. Balance Sheet c. Statement of Stockholders' Equity d. Statement of Cash Flows

A

Which of the following is reset to zero (closed) at the end of every year? A) revenues, expenses, and dividends B) retained earnings C) both A and B

A

Lamont Company was started on January 1, 2013. During its first year (among other things) Lamont Company paid $42,000 for wages/salaries expense and also there was $4,000 of wages/salaries expense that was not yet paid. Which is not true for 2013 as a result of these transactions? A) Total assets decreased by $46,000. B) Retained earnings decreased by $46,000. C) A cash outflow of $42,000 is shown on the statement of cash flows.

A (assets only decrease by $42,000 because there is a liability/payable of $4000)

A company purchased supplies for cash, which will be consumed during future months. Which of the following does not correctly describe the impact on the financial statements when the supplies are used during future months? A. Total assets will remain unchanged. B. Total liabilities will be unaffected. C. Operating expenses will increase. D. Net income will decrease.

A. Assets (supplies) go down and expenses go up.

Atlantic Corporation reported the following amounts at the end of the first year of operations: Common stock $200,000 Total assets $600,000 Total liabilities $320,000 Service revenue $800,000 Dividends $40,000 What are the retained earnings of Atlantic at the end of the year, and what amount of expenses were incurred during the year? A. Retained earnings are $80,000 and expenses incurred totaled $680,000. B. Retained earnings are $80,000 and expenses incurred totaled $720,000. C. Retained earnings are $280,000 and expenses incurred totaled $480,000. D. Retained earnings are $280,000 and expenses incurred totaled $520,000.

A. E=600-320=280. RE=280-200 =80. 800 revenue- (expenses)-40 dividends=80. Expenses must equal 680.

During 2016, Canton Company's assets increased $95,500 and the liabilities decreased $17,300. Canton Company's stockholders' equity at December 31, 2016 was $211,500. What amount was stockholders' equity at January 1, 2016? A. $98,700. B. $324,300. C. $133,300. D. $289,700.

A. Equity increased by 112,800 during the year (95.5+17.3). You are solving for January 1.

Regarding the 4 financial statements, which is true: A. An income statement covers a period of time (the past year) B. The cash flow statement is a financial statement at a specific point in time. C. The balance sheet is a financial statement that covers a period of time (the past year) D. The statement of stockholders' equity is a financial statement at a specific point in time.

A. Only the balance sheet is as of a "specific point in time". The balance sheet is always dated 12/31 and contains cumulative information from the entire history of the company. The other 3 are reports for a period of one single year.

Roerig Company was started on January 2, 2013. During its first year of operations, Roerig Company provided $96,000 in consulting services to its clients on account and collected $79,000 of this amount. Which of the following statements is incorrect. A) Total assets increased by $79,000. B) Net income is $96,000. C) Retained earnings increased by $96,000. D) Cash increased by $79,000.

A; (cash = $79k and AR = $16k)

The following selected account balances were drawn from the financial statements of the XYZ Company: Cash $ 33,000 Accounts Receivable $ 38,000 Payroll Expense $ 30,000 Service Revenue $ 64,000 Dividends $ 6,800 Advertising Expense $ 4,800 Payroll Payable $ 27,000 Based on this information, the amount of net income is: A) $29,200. B) $31,200. C) $26,000. D) $64,000. E) $34,000

A; 64000-30000-4800) (note: "service revenue" is essentially the same thing as revenue...just means you provided a service).

A customer paid money that they owed us from a previous transaction. This leads to: A. an increase in accounts receivable B. a decrease in accounts receivable C. an increase in accounts payable D. a decrease in accounts payable

B

Beginning means January 1 and Ending means December 31. Only 1 of the following 4 choices could possibly equal "supplies expense", which one? A) beginning supplies minus supplies used B) beginning supplies minus ending supplies C) supplies used minus ending supplies D) supplies used minus beginning supplies

B

On which of the following financial statements would you expect to find financing, operating, and investing activities? A) Balance sheet B) Statement of cash flows C) both of the above

B

Unearned Revenue and Payroll (Wages/Salaries) Payable a. are both assets b. are both liabilities c. neither A nor B is correct

B

Weaver company is a new company with the following account balances: Assets: $90 Notes Payable: $50 Common Stock: $40 What percentage of "the company" was funded by investors (owners)? A) 55.5% B) 44.4% C) 100% D) 0%

B

Smithers Company began its operations on March 1, 2013. The following information is from Smithers Company's accounting records for 2013. 1. Acquired $20,000 from the issuance of common stock 2. Provided $65,000 of services on account 3. Purchased $1600 of supplies on account 4. Collected $56,000 from accounts receivable 5. Paid $32,000 for salaries expense. 6. Adjusted the records to reflect the use of supplies. A physical count indicated that $350 of the supplies was still on hand on December 31, 2013. Which is true? A) Supplies expense is $350. B) Revenue is $65,000. C) both D) neither Ending cash balance is: A) $44,000 B) $53,000 C) $51,400 D) some other amount

B (supplies expense = 1600-350) A

The statement of (stockholders') equity explains the change in the retained earnings balance caused by stockholder investments and dividend payments. A. true B. false

B. Stockholder investments don't change RE. Stockholder investments ARE on the statement of equity, however (because they change CS).

What financial statement would you look at to determine the dividends paid by a business? A. Income statement. B. Statement of stockholders' equity. C. Statement of cash flows. D. Balance sheet.

B. is the most direct answer. However, you would see it on C as well depending on how C is formatted.....so we can't truly eliminate C as a possible answer.

Assume December 31 is a Wednesday, and the pay period started Monday December 29. Weekly payroll (for five days, Monday through Friday) amounts to $5,500. The company should make the following entry on December 31: a. Wages/Salaries Payable $5,500 and Wages/Salaries Expense $5,500 b. Wages/Salaries Payable $3,300 and Wages/Salaries Expense $3,300 c. Cash is reduced by $5,500 and Wages/Salaries Expense $5,500 d. no entry is necessary because the payroll has not been paid yet

B; (note: this one uses the language "wages/salaries", the same thing as "payroll")

As of December 31, 2013, Jamar Company had total cash of $150,000, notes payable of $85,000, and common stock of $53,000. During 2014, Jamar earned $40,000 of cash revenue, paid $20,000 for cash expenses, and paid a $3,000 cash dividend to the stockholders. Assuming no change in notes payable and common stock, determine the amount of retained earnings as of December 31, 2014. Hint: you must use the first sentence in some way. A) $17,000 B) $29,000 C) $20,000 D) $32,000

B; You have to solve for beginning RE, which is (150 = 85 + 53 + RE) so RE = 12

On September 1, Marley Company paid $18,000 to rent office space for one year. On its financial statements prepared on December 31, Marley would show: Rent Expense Prepaid Rent a. $18,000 $18,000 b. $ 6,000 $12,000 c. $0 $18,000 d. $18,000 $0 e. $4,500 $13,500

B; expense = $1500 per month x 4 months

If the supplies account is increased, the cash account is always decreased at the same moment. a. true b. false

B; if supplies are purchased on account, then accounts payable increases and cash is not involved

Account payable and expense are never involved/utilized in the same transaction a. true b. false

B; if you receive a bill for services you just used, you have AP and an expense

<chapter 1> If there is a revenue of $20 on March 10, 2017, and a revenue of $40 on October 6, 2017, then the company will begin 2018 with $60 of revenue. a. true b. false

B; revenue is zeroed out every December 31...it becomes retained earnings. Revenue is zero to start 2018.

Consider a 3 year period, 2012,2013,2014. a. Retained earnings at the end of each year can be 55,64,80 (gradually increasing) b. Retained earnings at the end of each year can be 80,64,55 (gradually decreasing) c. both are possible

C

Which of the following errors causes net income to be overstated (too high)? a. Failure to record services provided on account b. Failure to record collection of an account receivable c. Failure to record advertising expense paid with cash d. Failure to record supplies purchased with cash e. None of the above

C

During the year 2010, we purchased $4000 of supplies. We had $1000 of supplies already on January 1, 2010. There are $800 of supplies on December 31, 2010. What is supplies expense for 2010? A. $800 B. $3200 C. $4200 D. $200 E. none of the above

C. $3200 seems like a good answer, but you have to remember that $1000+$4000 = $5000 of supplies. Then, you subtract $800 to get $4200 supplies expense.

Williams Company received $48,000 cash in advance for services to be performed over the one-year period from September 1, 2012 through August 31, 2013. What amount of unearned revenue will Williams Company report on its December 31, 2012 balance sheet, assuming the work is performed evenly throughout the one-year contract period? A) $0 B) $36,000 C) $32,000 D) $48,000

C; $4000 x 8 remaining months

KMR Company began the accounting period with $6,000 in its accounts receivable account. During the accounting period KMR provided services on account amounting to $19,000. The accounts receivable account at the end of the accounting period contained had an $8,000 balance. Based on this information alone, the cash collected from accounts receivable during the period is: a. $19,000 b. $5,000 c. $17,000 d. $8,000 e. cannot be determined

C; (6+19-8)

Which of the following is presented on the statement of (Stockholders') equity? a. Assets b. Liabilities c. Dividends d. All of the above.

C; Format is: (Beg CS + CS issued = End CS) and (Beg RE + net income - dividends - End RE)

The land that Blake Company purchased on April 15, 2013, for $120,000 cash had an appraised market value of $125,000 on December 31, 2013. How does this change in the market value of the land affect the accounting equation? A) Assets increase and liabilities increase by $5,000 B) Assets increase and equity increases by $5,000 C) Assets increase by $5,000 D) The accounting equation is not affected

D

Zane Company paid $14,000 cash in advance for a one year insurance policy on October 1, 2011. Assume that the company originally recorded this purchase as prepaid insurance. The appropriate adjusting entry on December 31, 2011 will have what effect? A) Decrease assets by $3,500 \ increase liabilities by $3,500. B) Increase net income by $3,500. C) Increase liabilities by $14,000 \ decrease equity by $14,000. D) Decrease assets by $3,500 \ decrease equity by $3,500.

D; ($1167 per month x 3 months) or ($14000 x 3/12)

James Company had a net decrease in cash from operating activities of $15,500 and a net increase in cash from investing activities of $17,100. If the beginning and ending cash balances for the company were $22,400 and $31,700, then net cash change from financing activities was: A) an outflow or decrease of $1,600. B) an inflow or increase of $7,800. C) an outflow or decrease of $7,700. D) an inflow or increase of $1,600. E) an inflow or increase of $7,700.

E

Which of the following accounts should not appear on a balance sheet? a. Retained earnings b. Dividends c. Common Stock d. Utilities expense e. Two of the above would not appear

E. Dividends and Utilities expense would not appear on a balance sheet. They are both retained earnings; they are both negative retained earnings to be specific.

Assume that Adelle Company has $7200 cash. Adelle Company pays the $7,200 cash to rent office space for a one-year period beginning on August 1, 2013. On December 31, 2013, Adelle Company would have: A) Total assets of $0 B) Total assets of $7200 C) Liabilities of $4200 D) Liabilities of $3000 E) none of the above

E; There would be 4200 ($600 x 7 months) of prepaid rent remaining, so assets would equal 4200

Solve for accounts receivable: Cash 21 Accounts payable 5 Common stock 14 Land 20 Retained earnings 30 Notes payable 12 Supplies 10 Accounts Receivable ???

E=44, L =17, thus A=61. Accounts Receivable must be 10.

Indicate whether the following event would increase, decrease, or have no effect on TOTAL LIABILITIES -Paid an account payable of $600.

decrease (decrease A, decrease L)

Jan 1: Retained Earnings = $42,000 Dec 31: Equity = $122,000 Dec 31: Retained Earnings = $69,000 Common stock of $10,000 was issued during the year No dividends were paid during the year What was common stock on January 1?

ending CS= $53,000, thus beginning CS was $10,000 less, or $43,000

Indicate whether the following event would increase, decrease, or have no effect on TOTAL ASSETS -Received electricity bill without paying it yet

no effect (increase L, decrease E)

A company had 50,000 of cash revenues, purchased land for 20,000 cash, paid 10,000 cash for advertising costs, and paid a dividend of 5,000. What are cash flows from financing activities?

operating: 40,000 (50,000-10,000), investing -20,000, financing -5000. Note that the answer is a negative number.