Accounting Chapter 1

The Matisse Co. reported the following information at year-end: Total Assets $200,000 Total Expense $60,000 Total Liabilities $70,000 Common Stock (Contributed Capital) $40,000 Total Dividends $5,000 Total Revenues $90,000 Based on the information provided, Net Income would be:

$30,000 (Revenues $90,000 - Expenses $60,000 = Net Income $30,000. We know this is net income (a profit) because revenues are greater than expenses.)

The Matisse Co. reported the following information at year-end: Total Assets $200,000 Total Expense $60,000 Total Liabilities $70,000 Common Stock (Contributed Capital) $40,000 Total Dividends $5,000 Total Revenues $90,000 Based on the information provided, the change in retained earnings would be:

An increase of $25,000 Net Income $30,000 (Revenues $90,000 - Expenses $60,000) Minus Dividends $5,000 = Increase of $25,000

Assets, liabilities, retained earnings and contributed capital would be reported on the:

Balance Sheet

GAAP (Generally Accepted Accounting Principles) require profitable companies to distribute some of their earnings to their stockholders.

False

Sales revenue and retained earnings are both revenue accounts reported on the Income Statement.

False

Revenue accounts and expense accounts are the:

Income Statement

Note payable is a liability account reported on the balance sheet and common stock is a stockholders' equity account reported on the balance sheet.

True

Stockholders' equity is the difference between a company's assets and its liabilities.

True

Supplies, cash and equipment are all asset accounts reported on the balance sheet.

True

The Income Statement reports net income or net loss for the year and includes all revenue accounts and all expense accounts.

True

The Matisse Co. reported the following information at the end of the year: Account Name, Ending Balance Cash $10,000 Service Revenue $13,000 Accounts Payable $4,000 Rent Expense $5,000 Dividends $1,000 Based on the information above, the Matisse Co. would report net income of $8,000.

True

Which of the following can have 1 owner? a) Partnership b) Sole proprietorship and a corporation c) Sole proprietorship d) Corporation

b) Sole proprietorship and a corporation

The format of the Income Statement includes: a) Assets - Liabilities = Stockholders' Equity b) Retained Earnings + Net Income - Dividends c) Revenues - Expenses - Dividends d) None of the above

d) None of the above

Which of the following is not a characteristic of a corporation? a) A corporation pays tax on income. b) Owners of a corporation are not personally liable for debts of the business. c) Ownership in a corporation is acquired by purchasing shares of stock from the business. d) None of the above

d) none of the above

Which of the following would be classified as an asset account? a) Retained Earnings b) Contributed Capital c) Accounts Payable d) Dividends e) Equipment

e) equipment

Accounts Receivable is an asset account reported on the balance sheet and accounts payable is a liability account reported on the balance sheet.

True

Cash is an asset accounts reported on the Balance Sheet.

True

If a company takes out a loan of $100,000 at the local bank, this loan is considered a liability and will be reported on the Balance Sheet.

True

Which of the following is false? a) Wage Expense, Accounts Payable, Interest Expense and Service Revenue are reported on the Income Statement. b) Cash, Accounts Receivable, Accounts Payable and Contributed Capital are reported on the Balance Sheet. c) Retained Earnings, Common Stock, Land, and Note Payable are reported on the Balance Sheet. d) Dividends, Beginning Retained Earnings and Ending Retained Earnings are reported on the Statement of Retained Earnings.

a) Wage Expense, Accounts Payable, Interest Expense and Service Revenue are reported on the Income Statement. (Accounts Payable is a liability on the Balance Sheet NOT on the Income Statement. The Income Statement includes all revenue accounts and all expense accounts.)

The Matisse Co. reported the following information at year-end: Total Assets $200,000 Total Expense $60,000 Total Liabilities $70,000 Common Stock (Contributed Capital) $40,000 Total Dividends $5,000 Total Revenues $90,000 Based on the information provided, ending Retained Earnings would be: a) $130,000 b) $30,000 c) $90,000 d) $25,000

c) $90,000