Accounting 201 Midterm

At December 31, Year 1, Lord of the Fries, Inc.'s assets were $60,000 and liabilities were $40,000. At December 31, Year 2, its assets are $130,000 and liabilities are $50,000. During the year, it did not issue new stock and did not declare or pay dividends. Calculate net income for Year 2.

60,000

At December 31, Year 1, Sea the World Cruises, Inc.'s assets were $60,000 and liabilities were $40,000. At December 31, Year 2, its assets are $130,000 and liabilities are $50,000. During the year, it did not issue new stock, and it declared and paid $100 dividend. Calculate net income for Year 2

60,000+100=60,100

Par for the Course pays $4,500 cash for T-shirts from a supplier. This transaction ______.

is an operating company

Costco is a ______. manufacturing company service firm merchandising company

merchandising company

Dividends are ______. (Select all that apply.) not an expense incurred to earn revenue company profits that are paid to shareholders required amounts owed to shareholders reported on the Income Statement amounts owed to creditor

not an expense incurred to earn revenue company profits that are paid to shareholders

Collecting cash from customers is a(n) ______. operating activity investing activity financing activity expense

operating activity

Financial statements can be prepared ______. (Select all that apply.) quarterly monthly only at the end of the calendar year annually

quarterly monthly annually

Morris Lest, Inc., purchased machinery for $10,000 cash. The effect of this transaction is to cause ______. total assets to increase total assets to remain the same total shareholders' equity to decrease total liabilities to increase total liabilities to decrease total shareholders' equity to increase

total assets to remain the same

What is the effect on total shareholders' equity when a company purchases a cash register for a cash payment of $1,200? Increase Decrease No effect

No effect

Cycle Path, Inc., sold 100 bikes to its customers at $400 each. The bikes cost $250. The entry to record this sale includes a ______. (Select all that apply.) $25,000 Inventory $15,000 Gross Profit $(25,000) Cost of Goods Sold $40,000 Sales Revenue $40,000 Cash $(25,000) Inventory $25,000 Cost of Goods Sold

$(25,000) Cost of Goods Sold $40,000 Sales Revenue $40,000 Cash $(25,000) Inventory

Annual, Inc., had beginning retained earnings of $126,000. During the year, Annual, Inc. had net income of $75,000 and declared and paid dividends of $44,000. What will be shown for ending retained earnings on Annual's year-end balance sheet?

$126,000 + $75,000 - $44,000 = $157,000

Whistler Company had retained earnings of $442,000 at the end of Year 1. During Year 2, Whistler had net income of $194,000. Retained earnings were $461,000 at December 31, Year 2. The amount of dividends for Year 2 must have been:

$442,000 + $194,000 - $461,000 = $175,000

Which of these would be reported in the financing activities section of the Statement of Cash Flows? (Select all that apply.) Cash paid to buy computers Cash paid to reduce the principal borrowed from banks Cash paid to buy land Cash borrowed from the bank Cash dividends paid to shareholders

-Cash paid to reduce the principal borrowed from bank -Cash borrowed from the bank -Cash dividends paid to shareholders

The statement of cash flows reports the ______.

-cash collected and cash paid during the period

A chart of accounts is a ______.

-list of account titles used by companies so that transaction items are consistently named

Identify the ways in which a business may be organized. (Select all that apply.) Unlimited Liability Corporation Sole Proprietorship Partnership Corporation Unlimited Entity

-sole proprietorship -partnership -corporation

How many of the following line items are on the Income Statement? Supplies Expense Retained Earnings Notes Payable Depreciation Expense Stock Equipment 4 3 2 1 None

2

How many of the following line items are on the Statement of Shareholders' Equity? Supplies Expense Beginning Retained Earnings Notes Payable Dividends Stock Issued Proceeds from Loans 3 4 2 1 None

3

Over Armour, Inc., sold 5 shirts that cost $6 each to its customer for $10 each. Over Armour should record a total of $______ as an expense for the cost of the goods sold.

5 shirts x $6 = 30

If a company's total assets equals $50,000 and its shareholders' equity equals $10,000, how much are the creditors' claims to the company's assets?

50,000-10,000=40,000

If a company's total assets equals $50,000 and its shareholders' equity equals $20,000, then its liabilities must equal $______.

50,000-20,000=30,000

The contra-asset account, ______, is used to record depreciation on equipment. Contra Depreciation Depreciation Expense Equipment Accumulated Depreciation Accumulated Expense Accumulated Accretion

Accumulated Depreciation

Match the definition with each of the elements of the accounting equation. Assets Liabilities Shareholders' Equity A. Economic resources that will provide future benefit B. Creditors' claims to economic resources C. Owners' claims to economic resources

Assets- A)Economic resources that will provide future benefit Liabilities- B)Creditors' claims to economic resources Shareholders' Equity- C)Owners' claims to economic resources

Jim's Jambs, Inc., recorded $150 of depreciation on its equipment for the month. Show the effect of this transaction on total Assets, Liabilities and/or Shareholders' Equity and the account titles. If no effect, select "$0 No Effect". Assets Liabilities Shareholders' Equity A. $(150) Cash B. $(150) Accumulated Depreciation C. $150 Notes Payable D. $0 No Effect E. $150 Cash F. $(150) Depreciation Expense G. $150 Accumulated Depreciation H. $150 Depreciation Expense

Assets- B)$(150) Accumulated Depreciation Liabilities- D)$0 No Effect Shareholders' Equity- F)$(150) Depreciation Expense

Match the definition with each element of the accounting equation. Assets Liabilities Shareholders' Equity Revenues Expenses A.)Creditors' claims to economic resources. B.)Owners' claims to economic resources. C.)Economic resources that will provide future benefit. D.)Amounts earned by selling goods and services. E.)Amounts used to generate profits.

Assets- C)Economic resources that will provide future benefit. Liabilities- A)Creditors' claims to economic resources. Shareholders' Equity- B)Owners' claims to economic resources. Revenues- D)Amounts earned by selling goods and services. Expenses- E)Amounts used to generate profits.

Hot Diggity Dog, Inc., paid $10 of May's interest on the note payable, plus it paid off the $2,000 note payable. Show the effect of this transaction on total Assets, Liabilities, Stock and/or Retained Earnings and the account titles. If no effect, select "$0 No Effect". Assets Liabilities Stock Retained Earnings A. $(10) Cash B. $(2,010) Note Payable C. $(1,990) Note Payable D. $(2,000) Note Payable E. 4(10) Interest Expense F. $(2,010) Cash G. $0 No Effect H. $(2,000) Cash

Assets- F) $(2,010) Cash Liabilities- D) $(2,000) Note Payable Stock- G) $0 No Effect Retained earnings- E) 4(10) interest Expense

Total assets appears on the ______. Income Statement Statement of Shareholders' Equity Statement of Cash Flows Balance Sheet More than one of these statements

Balance Sheet

For which organization(s) are the personal assets of the owners at risk? Sole Proprietorship Partnership Corporation Both Sole Proprietorship and Partnership

Both sole proprietorship and partnership

Match each item below with the appropriate description using each one only once. Income statement Statement of shareholders' equity Statement of cash flows Balance sheet Notes (or footnotes) A. Reports additional information needed to better understand the financial statements B. Reports a summary of all revenues minus all expenses during a period C. Reports the changes that took place in the amount of the owners' investment during a period D. Reports a summary of cash collected and cash paid during a period E. Reports the assets, liabilities and shareholders' equity of a company at a specific point in time

Income statement -B)Reports a summary of all revenues minus all expenses during a period Statement of shareholders' equity-C)Reports the changes that took place in the amount of the owners' investment during a period Statement of cash flows-D)Reports a summary of cash collected and cash paid during a period Balance sheet-E)Reports the assets, liabilities and shareholders' equity of a company at a specific point in time Notes (or footnotes)- A)Reports additional information needed to better understand the financial statements

Identify what a company gives and gets when it invests in equipment by paying cash and signing a two-year note. (Select all that apply.) It gives shares. It gives cash. It gets equipment. It gets cash. It gives equipment. It gets shares. It gets a promissory note. It gives a promissory note.

It gives cash It gets equipment It gives a promissory note

______ purchase goods that are primarily in completed form.

Merchandising companies

Retained Earnings Equation year 2 problem

Retained earning at December 31, year 1 + Net income for year ended at December 31,year 2

Which financial statement reports how much is left to sell at the end of the period? Income Statement Statement of Shareholders' Equity Statement of Cash Flows Balance Shee

Statement of Cash Flows

Pete Zah invested $30,000 in Last Piece, Inc., in exchange for its stock. Last Piece now has ______. Investments a liability Stock Net Income

Stock

Match the financial statement that reports each of the following. Supplies Supplies Expense Cash paid for supplies A. Balance Sheet B. Statement of Cash Flows C. Income Statement

Supplies- A)Balance sheet Supplies Expense- C)Income statement Cash Paid for supplies- B)Statement of Cash flows

What is the effect on total liabilities when a company buys land in exchange for a 20-year note payable? There will be no effect. Total liabilities will increase. Total shareholders' equity decreases. Total liabilities will decrease.

Total liabilities will increase

Interest Expense on Notes Payable is recorded with an increase to Interest Expense, which decreases Shareholders' Equity, and ______. (Select all that are true.) a decrease to Interest Expense, a liability, if the interest is owed an increase to Cash, an asset, if the interest is owed an increase to Interest Payable, a liability, if the interest is owed an increase to Interest Payable, which decreases shareholders' equity, if the interest is paid a decrease to Cash, an asset, if the interest is paid

an increase to Interest Payable, a liability, if the interest is owed a decrease to Cash, an asset, if the interest is paid

The expensing of a long-term asset, such as Equipment, over its useful life causes a(n) ______. (Select all that apply.) increase in Shareholders' Equity decrease in Shareholders' Equity decrease in total Assets increase in total Assets decrease in Liabilities increase in liabilities

decrease in Shareholders' Equity decrease in total Asset

An accounting system provides ______. (Select all that apply.) information about a company's future plans assurance that a company cannot fail financial information needed to report results to outsiders financial information needed to manage a company

financial information needed to report results to outsiders

Paying a cash dividend to shareholders is a(n) ______. operating activity investing activity financing activity expense

financing activity

The adjusting entry for the amount of interest owed on Notes Payable causes a(n) ________. increase in one Asset and decrease in another Asset decrease in total Assets and Liabilities increase in total Assets and Shareholders' Equity decrease in total Assets and decrease in total Shareholder's Equity increase in total Liabilities and decrease in total Shareholders' Equity

increase in total liabilities and decrease in total shareholders' equity