Financial Accounting Ch.4 Quiz

The Treasury Bank Corporation had retained earnings at the end of December 31, 2013 of $450,000. During 2014, the company had net income of $170,000 and declared dividends of $20,000. Retained earnings on the balance sheet as of December 31, 2014 will be: A. $430,000. B. $600,000. C. $620,000. D. $640,000.

B Response Feedback: Beg bal RE + NI - Dividends = end bal RE$450,000 + $170,000 - $20,000 = end bal RE$600,000 = end bal RE

Purrfect Pets has made all the year-end adjustments. Its expense accounts total $130,000, and its revenue accounts total $190,000. The closing entry to close the income statement accounts for the year will: A. debit its various expense accounts for a total of $130,000, debit retained earnings for $60,000, and credit its various revenue accounts for a total of $190,000. B. debit its various revenue accounts for a total of $190,000, credit its various expense accounts for a total of $130,000, and credit retained earnings for $60,000. C. debit its various expense accounts for a total of $130,000, credit its various revenue accounts for a total of $190,000, and credit retained earnings for $60,000. D. debit its various revenue accounts for a total of $190,000, debit retained earnings for $60,000, and credit its various expense accounts for a total of $130,000.

B Response Feedback: Expense accounts are credited and revenue accounts are debited in the closing process and retained earnings is debited or credited for the difference.

The accounting record for Katzen Company reported the following selected information: Operating Expenses-$ 270,000 Sales Returns and Allowances-78,000 Sales Discounts-36,000 Sales Revenue-1,050,000 Cost of Goods Sold-402,000 Determine Katzen Company's gross profit. A. $462,000 B. $534,000 C. $420,000 D. $498,000

B Response Feedback: Sales revenue - Sales returns and allowances - Sales discounts - Cost of goods sold X = $1,050,000 - $78,000 - $36,000 -$402,000X = $534,000

At the end of the accounting period: A. all accounts are closed. B. temporary accounts are closed; permanent accounts are not. C. permanent accounts are closed; temporary accounts are not. D. only accounts with a credit balance are closed.

B Response Feedback: The balance of the account, debit or credit, does not determine whether or not the account will be closed. Only temporary accounts, debit or credit balances, are closed.

Which of the following statements is true? A. Expenses are listed before revenues on the income statement. B. Operating income is listed before net income on the income statement. C. The income statement is prepared after the balance sheet. D. Dividends declared are listed on the income statement.

B Response Feedback: The income statement is prepared before the balance sheet. Revenues are listed before expenses and Net income is the bottom line on the income statement. Dividends are not reported on the income statement. They are reported on the statement of retained earnings.

A current asset is one that: A. the company has owned for over one year. B. the company has owned for over five years. C. the company will use up or convert into cash in less than one year. D. the company has updated to reflect its current value.

C Response Feedback: Classification of an asset as current is based on when it is going to be used up or turned into cash. Any asset which is going to be used up or turned into cash within the year is classified as a current asset.

Determine Sales Revenue for Mountain stone Company with the following data: Cost of Goods Sold-$1,680,000 Operating Expenses-420,000 Sales Discounts-30,000 Sales Returns and Allowances-195,000 Net Income-510,000 A. $2,385,000 B. $2,445,000 C. $2,835,000 D. $2,775,000

C Response Feedback: Sales revenue - Sales returns and allowances - Sales discounts - Cost of goods sold -Operating expenses = Net income X - $195,000 - $30,000 - $1,680,000 - $420,000 = $510,000X = $510,000 + $195,000 + $30,000 + $1,680,000 + $420,000X = $2,835,000

Melvin Company began operations on January 1, 2019, with an investment of $248,000 by each of its two stockholders, or a total of $496,000. Net income for its first year of business was $872,000. During the year, the company paid dividends of $120,000 each to its two stockholders. How much is the company's ending Stockholders' Equity on December 31, 2019? A. $1,112,000 B. $864,000 C. $992,000 D. $1,128,000

D Response Feedback: Ending Stockholders' equity = Beginning Stockholders' equity + Contributed capital + Net income - Dividends X = $0 + $496,000 + $872,000 - ($120,000 x 2)X = $1,128,000

A company reported total stockholders' equity of $580,000 on its Dec 31, 2018, balance sheet. The following information is available for the year ended 12/21/2019: No dividends were paid in 2019. Revenues---$1,240,000 Expenses---660,000 Liabilities, on December 31, 2019---288,000 What are the total assets of the company on December 31, 2019? A. $368,000 B. $76,000 C. $872,000 D. $1,448,000

D Response Feedback: Stockholders' equity 12/31/19 = Stockholders' equity 12/31/18 + NI - Div X = SE(1/1/2019) + Rev - Exp - DivX = $580,000 + $1,240,000 - $660,000X = $1,160,000A = L + SE = 288k + 1,160k = 1,448k

The primary components of the stockholders' equity section of a balance sheet for a corporation are: A. A capital amount for each stockholder in the corporation B. Net income and retained earnings C. Common stock and dividends D. Common stock and retained earnings

D Response Feedback: Stockholders' equity is the residual ownership interest in the assets of a business after its liabilities have been paid off, The stockholders; equity of a corporation is divided into two main categories: amounts invested by stockholders (common stock) and the cumulative net income of a business that has not yet been distributed to its stockholders as a dividend (retained earnings).

Before the closing entries are prepared, the retained earnings balance in the adjusted trial balance is equal to: A. the balance of retained earnings at the beginning of the year. B. the balance of retained earnings after adding revenues and subtracting expenses but before subtracting dividends. C. the balance of retained earnings at the end of the year. D. the balance of retained earnings at the beginning of the next year.

A Response Feedback: Retained earnings account will show the balance of the beginning of the year before closing entries are made to transfer the revenues and expenses and dividends to that account. It is only after the closing entries are made, that the RE a/c balance will reflect the balance at the end of the period.

Which of the following is a true statement about the nature of equipment? A. While equipment is an asset, its use (depreciation) is an expense. B. While equipment is an asset, its use (depreciation) is a liability. C. While equipment is an asset, its use (depreciation) affects contributed capital. D. Equipment and its use (depreciation) are both liabilities.

A Response Feedback: The deferral adjustment to recognize the use of this asset records Depreciation expense which is an expense, not a liability, and it does not affect contributed capital.

Which of the following is not shown in the statement of stockholder's equity? A. Unearned revenue B. Dividends C. Retained earnings D. Common stock

A Response Feedback: Unearned revenue is a liability that represents amounts collected in advance from customers. It is an obligation that must be satisfied with a future cash payment or delivery of goods or services.

On the balance sheet, accumulated depreciation is: A. added to property, plant and equipment. B. subtracted from property, plant and equipment. C. added to total liabilities. D. subtracted from total liabilities.

B Response Feedback: Accumulated depreciation is a contra-asset account, not a liability account, and is subtracted from property and equipment on the balance sheet.

Colorado Company has beginning equity of $900,000, net income of $150,000, dividends of $90,000 and investments by owners in exchange for stock of $30,000. Its ending equity is: A. $669,000 B. $720,000 C. $804,000 D. $990,000

D Response Feedback: Ending equity = Beginning equity + Net income (loss) - Dividends + Owner Investments X = $900,000 + 150,000 - $90,000 + $30,000X = $990,000