Accounting
Lexington Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.) 1) Acquired $4,300 cash from issuing common stock. 2) Borrowed $2,850 from a bank. 3) Earned $3,750 of revenues. 4) Incurred $2,530 in expenses. 5) Paid dividends of $530.
$2,850 Only liability is borrowing from the bank
If Ballard Company reported assets of $500 and liabilities of $200, Ballard's stockholders' equity equals:
$300 500 = 200 + x
During Year 2, Packard engaged in the following transactions. (Assume all transactions are cash transactions.) 1) Issued an additional $625 of common stock. 2) Repaid $430 of its debt to the bank. 3) Earned revenues of $1,050 cash. 4) Incurred expenses of $480. 5) Paid dividends of $160. What is the net cash inflow from operating activities on Packard's statement of cash flows for Year 2?
$570 1050 - 480
Which of the following statements about liabilities is true?
All of the above -represent obligations to repay debts -may increase when assets increase -are found on the claims side of the accounting equation
Wing Company paid $5,000 cash to purchase land. What shows the impact of this transaction on Wing's accounting equation?
Assets: +/- Liabilities: n/a Equity: n/a
Robertson Company paid $1,850 cash for rent expense. As a result of this business event:
Both stockholders' equity and net cash flow for operating activities decreased
Use the following account numbers and corresponding account titles to answer the following question. Account NumberAccount Title (1)Cash (2)Merchandise inventory (3)Cost of goods sold (4)Transportation-out (5)Dividends (6)Common stock (7)Selling expense (8)Loss on the sale of land (9)Sales revenue Which accounts would affect the amount of net income shown on the income statement?
Cost of goods sold, transportation-out, selling expense, loss on the sale of land, sales revenue
Which resource providers lend financial resources to a business with the expectation of repayment with interest?
Creditors
A discount given to encourage prompt payment is called:
all of the above -a cash discount -a sales discount by the seller -a purchase discount by the buyer
Nelson Company experienced the following transactions during Year 1, its first year in operation. Issued $8,000 of common stock to stockholders Provided $4,300 of services on account Paid $2,100 cash for operating expenses Collected $2,900 of cash from accounts receivable Paid a $200 cash dividend to stockholders What is the total amount of assets shown on the balance sheet prepared as of December 31, Year 1?
$1,000 8,000+4,300-2,100-200
Jason Company paid $4,200 for one year's rent in advance beginning on October 1, Year 1. Jason's Year 1 income statement would report rent expense, and its statement of cash flows would report cash outflow for rent, respectively, of
$1,050; $4,200
Nelson Company experienced the following transactions during Year 1, its first year in operation. Issued $6,600 of common stock to stockholders Provided $2,900 of services on account Paid $1,750 cash for operating expenses Collected $2,200 of cash from accounts receivable Paid a $130 cash dividend to stockholders What is the net income that will be reported for Year 1?
$1,150 Net income = $2,900 revenue − $1,750 expenses = $1,150 Revenue
Revenue on account amounted to $5,000. Cash collections of accounts receivable amounted to $4,700. Cash paid for expenses was $3,500. The amount of employee salaries accrued at the end of the year was $1,300. What is the net cash flow from operating activities for the year?
$1,200 $4,700 collected from customers − $3,500 paid for expenses = $1,200
Revenue on account amounted to $6,000. Cash collections of accounts receivable amounted to $5,700. Cash paid for expenses was $4,000. The amount of employee salaries accrued at the end of the year was $1,800. What is the net cash flow from operating activities for the year?
$1,700 5,700-4,000
Sheldon Company began Year 1 with $1,100 in its supplies account. During the year, the company purchased $3,200 of supplies on account. The company paid $2,000 on accounts payable by year end. At the end of Year 1, Sheldon counted $1,700 of supplies on hand. Sheldon's financial statements for Year 1 would show:
$1,700 of supplies: $2,600 of a supplies expense explanation
Sanchez Company engaged in the following transactions during Year 2: The company paid cash to purchase $9,000 of inventory. The company sold inventory that cost $8,300 for $14,500 cash. Operating expenses incurred and paid during the year, $4,600. Note: Sanchez uses the perpetual inventory system. What is the amount of retained earnings as of December 31, Year 2?
$1,800 50- explanation
At March 31, Cummins Company had a balance in its cash account of $10,600. At the end of March, the company determined that it had outstanding checks of $1,145, deposits in transit of $710, a bank service charge of $40, and an NSF check from a customer for $225. The true cash balance at March 31 is:
$10,335 explanation- 43
At March 31, Cummins Company had a balance in its cash account of $10,900. At the end of March, the company determined that it had outstanding checks of $1,210, deposits in transit of $740, a bank service charge of $45, and an NSF check from a customer for $230. The true cash balance at March 31 is:
$10,625 $10,900 unadjusted book balance − $45 service charge − $230 NSF check = $10,625 true cash balance
On September 30, the bank statement of Fine Company showed a balance of $15,300. The following information was revealed by comparing the bank statement to the cash balance in Fine's accounting records: Deposits in transit amounted to $6,150 Outstanding checks amounted to $10,800 A $850 check was incorrectly drawn on Fine's account NSF checks returned by the bank were $1,450 Bank service charge was $49 Credit memo for $225 for the collection of one of the company's account receivable Based on the above information, the true cash balance was:
$11,500 explanation- 42
Yowell Company began operations on January 1, Year 1. During Year 1, the company engaged in the following cash transactions: 1) issued stock for $76,000 2) borrowed $43,000 from its bank 3) provided consulting services for $75,000 cash 4) paid back $33,000 of the bank loan 5) paid rent expense for $18,000 6) purchased equipment for $30,000 cash 7) paid $4,800 dividends to stockholders 8) paid employees' salaries of $39,000 What is Yowell's net income for Year 1?
$18,000 Net income = Revenues of $75,000 - rent expense of $18,000 - salaries expense of $39,000 = $18,000
Yowell Company began operations on January 1, Year 1. During Year 1, the company engaged in the following cash transactions: 1) issued stock for $80,000 2) borrowed $45,000 from its bank 3) provided consulting services for $79,000 cash 4) paid back $35,000 of the bank loan 5) paid rent expense for $19,000 6) purchased equipment for $32,000 cash 7) paid $5,000 dividends to stockholders 8) paid employees' salaries of $41,000 What is Yowell's net income for Year 1?
$19,000 revenue - expenses (79,000) - (19,000 + 41,000)
Revenue on account amounted to $6,600. Cash collections of accounts receivable amounted to $6,300. Cash paid for expenses was $4,300. The amount of employee salaries accrued at the end of the year was $2,100. What is the net cash flow from operating activities for the year?
$2,000 get explanation- 15
ABC Company ended Year 1 with the following account balances: Cash $600, Common Stock $400, and Retained Earnings $200. The following transactions occurred during Year 2: Issued common stock for $19,000 cash. ABC borrowed an additional $11,000 from Chris Bank. ABC earned $9,000 of revenue on account. ABC incurred $4,000 of operating expenses on account. Cash collections of accounts receivables were $6,000. ABC provided additional services to customers for $1,000 cash. ABC purchased land for $14,000. ABC used $3,000 in cash to make a partial payment on its accounts payable. ABC declared and paid a $200 dividend to the stockholders On December 31 ABC had accrued salaries of $4,000. What is the amount of retained earnings that will be shown on the balance sheet prepared at the end of Year 2?
$2,000 explanation - 23
Nelson Company experienced the following transactions during Year 1, its first year in operation. Issued $8,000 of common stock to stockholders Provided $4,300 of services on account Paid $2,100 cash for operating expenses Collected $2,900 of cash from accounts receivable Paid a $200 cash dividend to stockholders What is the net income that will be reported for Year 1?
$2,200 revenue - expenses 4,300-2,100
Lexington Company engaged in the following transactions during Year 2: 1) Acquired an additional $1,450 cash from the issue of common stock. 2) Repaid $1,965 of its debt to the bank. 3) Earned revenues, $5,450. 4) Incurred expenses of $3,130. 5) Paid dividends of $1,780. What is the net cash flow from financing activities on Lexington's statement of cash flows for Year 2?
$2,295 find explanation - 14
Warren Enterprises had the following events during Year 1: The business issued $38,000 of common stock to its stockholders. The business purchased land for $30,000 cash. Services were provided to customers for $34,000 cash. Services were provided to customers for $23,000 on account. The company borrowed $34,000 from the bank. Operating expenses of $30,000 were incurred and paid in cash. Salary expense of $2,600 was accrued. A dividend of $22,000 was paid to the stockholders of Warren Enterprises. Assuming the company began operations during Year 1, What is the amount of retained earnings as of December 31, Year 1?
$2,400 $0 beginning balance + $57,000 revenue − $32,600 expenses − $22,000 dividends = $2,400 ending balance
(13) Retained Earnings at the beginning and ending of the period were $1,250 and $2,600, respectively. If revenues were $4,900 and dividends paid to stockholders were $1,150, what was the amount of expenses for the period?
$2,400 *get explanation*
Revenue on account amounted to $5,400. Cash collections of accounts receivable amounted to $3,350. Expenses for the period were $2,800. The company paid dividends of $800. What was the amount of net income for the period?
$2,600 Revenue of $5,400 − Expenses of $2,800 = $2,600
Nelson Company experienced the following transactions during Year 1, its first year in operation. Issued $8,800 of common stock to stockholders Provided $5,100 of services on account Paid $2,300 cash for operating expenses Collected $3,300 of cash from accounts receivable Paid a $240 cash dividend to stockholders What is the of net cash flow from operating activities shown on the Year 1 statement of cash flows?
$3,300 cash collected from customers − $2,300 cash paid for expenses = $1,000 The issue of stock for cash and the payment of dividends are classified as a financing activities.
Sheldon Company began Year 1 with $2,000 in its supplies account. During the year, the company purchased $5,900 of supplies on account. The company paid $2,900 on accounts payable by year end. At the end of Year 1, Sheldon counted $3,500 of supplies on hand. Sheldon's financial statements for Year 1 would show:
$3,500 of supplies; $4,400 of supplies expense $3,500 of supplies on hand is the supplies asset on the balance sheet; $2,000 beginning balance + $5,900 of supplies purchased − $3,500 ending balance = $4,400 supplies expense
Gomez Company had beginning inventory of $1,700 and ending inventory of $1,300. The cost of goods sold was $4,100. Based on this information, what is the amount of inventory that was purchased by Gomez Company?
$3,700 $1,700 Beginning inventory − $1,300 Ending inventory = $4,100 Cost of goods sold; Purchases = $4,100 − $1,700 + $1,300 = $3,700
ABC Company ended Year 1 with the following account balances: Cash $600, Common Stock $400, and Retained Earnings $200. The following transactions occurred during Year 2: Issued common stock for $19,000 cash. ABC borrowed an additional $11,000 from Chris Bank. ABC earned $9,000 of revenue on account. ABC incurred $4,000 of operating expenses on account. Cash collections of accounts receivables were $6,000. ABC provided additional services to customers for $1,000 cash. ABC purchased land for $14,000. ABC used $3,000 in cash to make a partial payment on its accounts payable. ABC declared and paid a $200 dividend to the stockholders On December 31 ABC had accrued salaries of $4,000. What is the net cash flow from operating activities shown on the statement of cash flows for the year ending December 31, Year 2?
$4,000 Cash collections of accounts receivable of $6,000 + Cash from providing services of $1,000 − Cash payments on accounts payable of $3,000 = $4,000
Duke Company's unadjusted bank balance at March 31 is $4,510. The bank reconciliation revealed outstanding checks amounting to $670 and deposits in transit of $500. Based on this information, Duke's true cash balance is:
$4,340 $4,510 - $670 + $500 = 4,340
Revenue on account amounted to $3,400. Cash collections of accounts receivable amounted to $3,100. Cash paid for expenses was $2,700. The amount of employee salaries accrued at the end of the year was $500. What is the net cash flow from operating activities for the year?
$400 $3,100 collected from customers - $2,700 for expenses = 400
Prior to closing the accounts, Syracuse Company's accounting records showed the following balances: Retained earnings$ 6,650 Service revenue7,950 Interest revenue950 Salaries expense4,800 Operating expense1,500 Interest expense650 Dividends1,250 After closing the accounts, Syracuse's retained earnings balance would be
$7,350 Add all revenues and subtract all the expenses and dividends
Prior to closing the accounts, Syracuse Company's accounting records showed the following balances: Retained earnings$ 7,250Service revenue8,350Interest revenue1,150Salaries expense5,200Operating expense1,700Interest expense850Dividends1,450 After closing the accounts, Syracuse's retained earnings balance would be
$7,550 $7,250 + $8,350 + $1,150 − $5,200 − $1,700 − $850 − $1,450 = $7,550
Assume the perpetual inventory method is used. Green Company purchased merchandise inventory that cost $16,400 under terms of 2/10, n/30 and FOB shipping point. The company paid freight cost of $640 to have the merchandise delivered. Payment was made to the supplier within 10 days. All of the merchandise was sold to customers for $24,300 cash and delivered under terms FOB shipping point with freight cost amounting to $440. What is Green Company's gross margin resulting from these transactions?
$7,588 $24,300 Sales revenue − [($16,400 × 0.98) + $640] Cost of goods sold = $7,588 Gross margin
Sullivan Company uses the periodic inventory method. The following balances were drawn from the accounts of Sullivan Company prior to the closing process: Sales revenue$ 16,500 Beginning inventory balance 4,100 Purchases8,900 Transportation-in850 Transportation-out1,050 Purchase discounts650 Ending inventory balance4,500 What is the gross margin that will be reported on the income statement?
$7,800 explanation - 38
Assume the perpetual inventory method is used. 1) The company purchased $12,200 of merchandise on account under terms 2/10, n/30. 2) The company returned $1,700 of merchandise to the supplier before payment was made. 3) The liability was paid within the discount period. 4) All of the merchandise purchased was sold for $18,400 cash. The amount of gross margin from the four transactions is:
$8,110 Sales revenue $18,400 − Cost of goods sold $10,290 = $8,110
Lexington Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.) 1) Acquired $4,500 cash from issuing common stock. 2) Borrowed $2,950 from a bank. 3) Earned $3,850 of revenues. 4) Incurred $2,550 in expenses. 5) Paid dividends of $550. The amount of total assets on Lexington's balance sheet at the end of Year 1 was
$8,200 $4,500 (cash) + $2,950 (cash) + $3,850 (cash) − $2,550 (cash) − $550 (cash) = $8,200
During Year 2, Packard engaged in the following transactions. (Assume all transactions are cash transactions.) 1) Issued an additional $1,175 of common stock. 2) Repaid $815 of its debt to the bank. 3) Earned revenues of $1,600 cash. 4) Incurred expenses of $700. 5) Paid dividends of $270. What is the net cash inflow from operating activities on Packard's statement of cash flows for Year 2?
$900 Net cash inflow from operating activities = revenue of $1,600 - $700 for expenses = inflow of $900
Jason Company paid $3,900 for one year's rent in advance beginning on October 1, Year 1. Jason's Year 1 income statement would report rent expense, and its statement of cash flows would report cash outflow for rent, respectively, of
$975; $3,900 $3,900 × 3/12 = $975 rent expense; $3,900 payment on 10/1/Year 1 is a cash outflow for rent
The balance sheet of the Algonquin Company reported assets of $50,000, liabilities of $22,000 and common stock of $15,000. Based on this information only, what is the amount of retained earnings?
13,000 assets = liabilities + common stock + retained earnings
Use the following account numbers and corresponding account titles to answer the following question. Account NumberAccount Title (1)Cash (2)Merchandise inventory (3)Cost of goods sold (4)Transportation-out (5)Dividends (6)Common stock (7)Selling expense (8)Loss on the sale of land( 9)Sales revenue Which accounts would affect operating income?
3, 4, 7, 9 Cost of goods sold, transportation-out, selling expense, and sales revenue
Assume the perpetual inventory method is used. Green Company purchased merchandise inventory that cost $17,000 under terms of 2/10, n/30 and FOB shipping point. The company paid freight cost of $700 to have the merchandise delivered. Payment was made to the supplier within 10 days. All of the merchandise was sold to customers for $25,500 cash and delivered under terms FOB shipping point with freight cost amounting to $500. What is Green Company's gross margin resulting from these transactions?
8,140 explanation- 48
What do the credit terms, 2/15, n/30, mean?
A 2% discount can be deducted if the invoice is paid before the 15th day following the date of the sale.
Which of the following is not a procedure to maintain internal controls over cash payments?
A receipt should be provided to each cash customer
Which of the following statements concerning internal controls is true?
A system of internal controls is designed to prevent or detect errors and fraud
Which of the following is considered a period cost?
Advertising expense for the current month
On March 5, Gibbs Company purchases $5,000 of merchandise from a supplier for cash and records that transaction by increasing its inventory account. On March 30, the company records a $400 decrease in its inventory account. We can assume the company uses the:
All of the above perpetual inventory method and $400 may represent a -purchase return -cost of goods sold -purchase allowance
Which of the following is (are) source(s) of assets to a business?
All of the above -creditors -investors -operations
Recognition of revenue may be accompanied by which of the following?
An increase in an asset or a decrease in a liability
Jackson Company had a net increase in cash from operating activities of $10,500 and a net decrease in cash from financing activities of $2,800. If the beginning and ending cash balances for the company were $4,200 and $11,600, respectively, what is the net cash change from investing activities?
An outflow or decrease of $300 Beginning cash balance + Increase from operating activities − Decrease from financing activities +/− Increase or decrease from investing activities = Ending cash balance$4,200 + $10,500 − $2,800 +/− Increase or decrease from investing activities = $11,600$300 = Decrease from investing activities
What is the accurate depiction of the accounting equation?
Assets = Liabilities + Common stock + retained earnings
Assume the perpetual inventory method is used. The company purchased $14,000 of merchandise on account under terms 2/10, n/30. The company returned $3,500 of merchandise to the supplier before payment was made. The liability was paid within the discount period. All of the merchandise purchased was sold for $22,000 cash. What effect will the return of merchandise to the supplier have on the accounting equation?
Assets and liabilities are decreased by $3,500
Hazeltine Company issued common stock for $200,000 cash. As a result of this event:
Assets, claims, and stockholders' equity all increased
Wyatt Company was formed on January 1, Year 1, when it acquired $50,000 cash from issuing common stock. Which of the following shows the impact of this transaction on Wyatt's accounting equation?
Assets: + Liabilities: n/a Equity: +
Which of the following shows how paying cash to lease office space for one year affects the company's financial statements?
Assets: +/- All others: n/a
Which of the following shows how paying cash to lease office space for one year affects the company's financial statements?
Assets: +/- Liabilities: n/a Equity: n/a Revenue: n/a Expense: n/a Net income: n/a
Jantzen Company recorded employee salaries earned but not yet paid. Which of the following represents the effect of this transaction on the financial statements?
Assets: n/a Liabilities: + Equity: - Revenue: n/a Expense: + Net Income: -
Which of the following answer choices accurately reflects how the recording of accrued salary expense at the end of the year affects the financial statements of a business?
Assets: n/a Liabilities: + Equity: - Revenue: n/a Expense: + Net Income: -
Based on common-sized income statements, which of the companies spent, relative to sales, the least on operating expenses?
Calculate by doing operating expenses/sales
The transaction, "provided services for cash," affects which two accounts?
Cash and Revenue
During Year 2, Chico Company earned $1,400 of cash revenue, paid $750 of cash expenses, and paid a $250 cash dividend to its stockholders. Based on this information alone, which of the following statements is not true?
Cash outflow from financing activities was $400 Cash from operating activities increased by $650 (or ($1,400 − $750). Revenue of $1,400 minus Expenses of $750 = Net income of = $650). Total assets increased by $400 (or $1,400 − $750 − $250). Cash from financing activities decreased by $250.
Which of the following financial statement elements is closed at the end of an accounting cycle?
Dividends
Which of the following is not one of the purposes of an internal control system?
Ensuring that the company is using the most effective marketing plan
What types of accounts are "matched" when the matching concept is used in a discussion of accrual accounting?
Expenses and Revenues
Ashton Company uses the perpetual method. The company's inventory account had a $6,600 balance as of December 31, Year 1. A physical count of inventory shows only $5,900 of merchandise in stock at December 31, Year 1. How does the related adjusting entry affect the financial statements?
Expenses increase
Under a periodic inventory system, which of the following accounts are not used by the buyer when recording transactions related to inventory during the accounting period?
Inventory
A review of the bank statement and accounting records of the Blake Company revealed the following items: Item NumberDescription 1)Three outstanding checks 2)A debit memo showing a bank service charge 3)A deposit in transit 4)An NSF check written by one of Blake's customers 5)A certified check written by Blake 6)A credit memo reflecting interest revenue earned by Blake Which of the item(s) would be added to the unadjusted bank balance to determine the true cash balance?
Item 3 A deposit in transit
If total assets decrease, then which of the following is true?
Liabilities, common stock, or retained earnings must decrease
If total assets decrease, then which of the following statements is true?
Liabilities, common stock, or retained earnings must decrease
Net income percentage is equal to:
Net income divided by net sales
Jackson Company had a net increase in cash from operating activities of $10,500 and a net decrease in cash from financing activities of $3,850. If the beginning and ending cash balances for the company were $4,900 and $10,500, respectively, what is the net cash change from investing activities?
Outflow of $1,050 explanation
Which of the following is not an asset use transaction?
Paying cash to purchase land
Which of the following is not a component of the fraud triangle?
Reliance
Rushmore Company provided services for $42,000 cash during Year 1. Rushmore incurred $30,000 expenses on account during Year 1, and by the end of the year, $12,000 of that amount had been paid with cash. Assuming that these are the only accounting events that affected Rushmore during Year 1, which of the following statements is true?
The amount of net income shown on the income statement is $12,000
Middleton Company uses the perpetual inventory method. The company purchased an item of inventory for $105 and sold the item to a customer for $180. What effect will the sale have on the company's inventory account?
The inventory account will decrease by $105 The sale will cause the inventory account to decrease by $105, the cost of the item sold.
Middleton Company uses the perpetual inventory method. The company purchased an item of inventory for $85 and sold the item to a customer for $140. What effect will the sale have on the company's inventory account?
The inventory account will decrease by $85
Galaxy Company sold merchandise costing $3,800 for $6,600 cash. The merchandise was later returned by the customer for a refund. If the perpetual inventory method is used, what effect will the sales return have on the accounting equation?
Total assets and total equity decrease by $2,800
How does the purchase of inventory on account under the perpetual inventory method affect the financial statements?
Total assets and total liabilities both increase
Galaxy Company sold merchandise costing $3,400 for $5,800 cash. The merchandise was later returned by the customer for a refund. If the perpetual inventory method is used, what effect will the sales return have on the accounting equation?
Total assets and total stockholders' equity decrease by $2,400 5,800 - 3,400
Mayberry Company paid $30,000 cash to purchase land. As a result of this business event:
Total assets and total stockholders' equity were not affected, and net cash flow from investing activities decreased
Li Company paid cash to purchase land. As a result of this accounting event:
Total assets are unaffected
Yi Company provided services to a customer for $5,500 cash. As a result of this event:
Total assets increased and net income increased
In the reconciliation of the June bank statement, a deposit made on June 30 did not appear on the June bank statement. In preparing the bank reconciliation, this deposit in transit should be:
added to the unadjusted bank balance
Effective internal controls for cash include:
all of the above disbursements made by prenumbered check, cash deposited on a timely basis, written cash receipts given to customers as evidence of payment
In preparing the April bank reconciliation for Oscar Company, it was discovered that on April 10 a check was written to pay delivery expense of $45 but the check was erroneously recorded as $54 in the company's books. The correction the error of this error would increase:
cash and decrease delivery expense by $9
In a bank reconciliation, a customer's NSF check included with the bank statement is:
deducted from the company's cash balance to get the true cash balance
What is the chief advantage of the periodic system
efficiency and ease of recording
In a company's bank reconciliation, an outstanding check is a check that:
has been issued by the company but has not presented to the bank for payment
Yi Company provided services to a customer for $5,500 cash. As a result of this event:
total assets increase and net income increases