ACG201 Chapter 1 LearnSmart

Given that Jacob's Chocolates Company had beginning retained earnings of $4,000; net income during the period of $10,000; and dividends of $300 calculate the ending balance in the retained earnings account.

$13,700

What accounts would appear on a balance sheet?

Accounts Payable, Retained Earnings, Cash, Equipment, Supplies, Common Stock

Expanded Accounting Equation

Assets = Liabilities + Common Stock + Revenues - Expenses - Dividends

Accounting Equation

Assets = Liabilities + Equity

A corporation's equity has two main parts. Identify these two parts.

Contributed capital, retained earnings

Describe the order in which a company prepares financial statements.

Income Statement, Statement of Retained Earnings, Balance Sheet, Statement of Cash Flows

The principle that states that accounting information is based on the actual cost

Measurement/Cost Principle

Dividends

Outflow of resources to stockholders.

Melton's Door Company pays rent on the building facilities of $5,000 on May 1. Show how to record this transaction in the accounting equation of Melton's Door Company.

Rent Expense will be increased

Assets

Something of value that a business owns or controls

The correct definition of a balance sheet includes which of the following statements?

The statement reports the equality of the accounting equation at a point in time. The statement reports assets, liabilities and equity at a point in time. The statement reports the financial position of a company at a point in time.

Dividends cause a(n) __________ in equity and are recorded directly in the ____________.

decrease; dividends

Jackson Company purchased office equipment costing $3,000 for his business and paid immediately. Record this transaction in the accounting equation by:

decreasing Cash; increasing Equipment

The statement of retained earnings explains changes in equity from net income (or loss) and from any ______ over a period of time.

dividends

The revenue recognition principle states that revenue is recognized when:

goods or services are provided to customers

The _____ is the first financial statement to be prepared.

income statement

Russell's Consulting Services Company provided $1,000 of services to the local college and immediately collected $700, but the college wants to pay the rest next month. Record this transaction in the accounting equation for Russell's Consulting Service by:

increasing both Cash and Accounts Receivable; and increasing Revenues

Buying and selling of long-term assets such as land and equipment would be included in the ________ activities section of the Statement of Cash Flows.

investing

Net income is calculated using the following formula: ________ - ________ = Net income.

revenues - expenses

Assets include...

Cash, Building, Supplies, Accounts Receivable, Land

Smith Company purchased $100 of supplies for her business and paid immediately. She would record this transaction in the accounting equation by which of the following?

Decrease cash, Increase supplies

Johna's Plant Nursery Company pays the salaries of its two employees. How will this transaction affect the accounting equation?

Equity will be decreased. Salaries expense will be increased.

Jack Pickle decided to start a small business as a corporation. His initial investment was $4,000 cash in exchange for common stock. Demonstrate how to record this transaction in the accounting equation.

Increase Cash by $4,000; Increase Common Stock by $4,000.

Bob's Bakery receives its utility bill of $800 for the month and pays it immediately. Record this transaction in the accounting equation.

Increase Expenses and decrease Cash.

Identify which of the following lists of accounts would belong on the statement of retained earnings

Retained earnings and Dividends

The three factors that must exist for a person to commit fraud are...

opportunity, pressure, rationalization

ABC Co. performs $200 of services for a customer, but does not get paid right away. Demonstrate how ABC Co. would record this transaction in the accounting equation by completing the following sentence.

increase Accounts Receivable, increase Revenue

A company pays monthly office rent of $1,500 in cash. Demonstrate how to use the accounting equation to record the transaction by completing the following sentence:

increase expenses; decrease assets

On May 1, Mary's Morsels Company provided catering services at a wedding. The bride is billed $4,000 and will pay during the following month. Record this transaction on May 1 in the accounting equation of Mary's Morsels by:

increasing Accounts Receivable and increasing Revenue