Chapter 1: The Financial Statements - Learning Objectives Review Videos

Assume that beginning retained earnings is $100. Revenues for the year total $75 while expenses total $50. The company paid out dividends during the year totaling $10. What is ending retained earnings?

$115 Ending retained earnings = beginning retained earnings + Net income - Dividends ? = $100 + $25* - $10 *Net income of $75 revenues - $50 expenses

If assets are $500, and liabilities are $200, what is equity?

$300 Assets = Liabilities + Equity $500 = $200 + Equity $500 - $200 = Equity $300 = Equity

If assets are $1,000, and equity is $400, what are the liabilities?

$600 Assets = Liabilities + Equity $1,000 = Liabilities + $400 $1,000 - $400 = Liabilities $600 = Liabilities

The accounting equation consists of all of the following types of accounts EXCEPT: A. Revenues B. Assets C. Liabilities D. Stockholders' equity

A. Revenues The accounig equation is assets = liabilities + equity. The only term that is listed that is not a component of the accounting equation then is revenues.

Choose all of the accounts that would be listed on the income statement: A. Revenues B. Losses C. Assets D. Liabilities E. Expenses F. Stockholders' equity G. Gains

A. Revenues B. Losses E. Expenses G. Gains The other options (assets, liabilities, and stockholders' equity) would all be found on the balance sheet, not the income statement.

Which of the following accounts are ASSETS? (Select all that apply.) A. Accounts Payable B. Cash C. Retained Earnings D. Accounts Receivable E. Common Stock F. Land G. Bonds Payable H. Investments

B. Cash D. Accounts Receivable F. Land H. Investments Remember that assets are resources that are expected to produce a benefit in the future. Accounts payable is a liability, as is bonds payable. Retained earnings and common stock are part of stockholders' equity.

All business owners are personally liable for the debts of their businesses. A. True B. False

B. False Only an owner of a sole proprietorship or a partner in a partnership is personally liable. Corporations and LLCs limit liabilities for owners and investors to the amount they have invested in the business.

You get an especially good buy on a laptop for your business, paying only $300 when it normally costs $800. What accounting concept or principle will govern what is recorded as the accounting value for this laptop? A. Entity Assumption B. Historical cost principle C. Stable-monetary unit

B. Historical cost principle The historical cost principle states that an item should be recorded at the actual cost paid for the item.

Choose all of the accounts that would be listed on the balance sheet: A. Revenues B. Losses C. Assets D. Liabilities E. Expenses F. Stockholders' equity G. Gains

C. Assets D. Liabilities F. Stockholders' equity Remember that the balance sheet is a representation of the accounting equation, which is assets = liability + equity. By the way, all of the other accounts listed here (revenues, losses, expenses, and gains) are all found on the income statement.

Which statement reports assets, liabilities, and equity at the end of the year? A. Income statement B. Statement of retained earnings C. Balance sheet D. Statement of Cash Flows

C. Balance Sheet The balance sheet is the only statement that reports balances as of one particular date. The other three statements each cover a period of time such as a year or a quarter.

Which statement is the only statement that is as of ONE date (rather than for a period of time)? A. Income statement B. Statement of retained earnings C. Balance sheet D. Statement of cash flows

C. Balance Sheet The rest of the financial statements (income statement, statement of retained earnings, and statement of cash flows) all cover a period of time and have a date line that began "for period ending".

Which statement(s) include the ending balance of cash ans cash equivalents? A. Income statement B. Statement of retained earnings C. Balance sheet D. Statement of cash flows

C. Balance sheet D. Statement of cash flows

Advantages of a corporation include: A. A single owner B. The double taxation of distributed profits C. Limited liability of the stockholders D. Mutual agency

C. Limited liability of the stockholders Within a corporation, an investors liability is limited to the amount they have already invested in the business. The other options are not correct because a corporation can have many owners, its distributed profits are double taxed, and there is no mutual agency in a corporation.

Which of the following entities use financial accounting information? A. Investors B. Creditors C. Regulatory Bodies D. All of the Above

D. All of the Above Investors & Creditors provide money to finance entities so that financial accounting information is used for credit or investment decisions. Regulatory bodies would use the financial information for many reasons including tax assessments and compliance determination.

Assume that beginning retained earnings is $100. Revenues for the year total $75 while expenses total $50. The company paid out dividends during the year totaling $10. What is net income?

$25 Net Income = Revenues - Expenses ? = $75 - $50 $25 = $75 - $50 Note that dividends is not used and is never part of the net income calculation.