Accounting Ch. 1-3 Exam Review
Costs of doing business
Expenses
Provides information for decision makers outside of the organizayion
Financial Accounting
Owned by stockholders whose liability is limited to the amount they have invested in the business
Corporation
Hudson Signs, Inc., needs funds, and Alley Hudson, the president, has asked you to consider investing in the business. Answer the following questions about the different ways that Hudson might organize the business. Explain each answer. What forms of organization will enable the owners of Hudson Signs, Inc., to limit their risk of loss to the amounts they have invested in the business? If ___________ fails and cannot pay its liabilities, creditors ______ force the owners to pay the business's debts from the owner's personal assets. Therefore, the _____ an investor can expect to lose on an investment in these businesses is the amount invested.
Corporations, limited partners of a Limited-liability partnership and Limited-liability company Any of these businesses; cannot; most
During the year, ChemDry Corporation has $290,000 in revenues, $155,000 in expenses, and $12,000 in dividend declarations and payments. Net income for the year was: A. $135,000 B. $147,000 C. $167,000 D. $290,000
$135,000
During February, assets increased by $88,000 and liabilities increased by $32,000. Equity must have: A. Decreased by $120,000 B. Decreased by $56,000 C. Increased by $120,000 D. Increased by $56,000
D. Increases by $56,000
Mulligan Corporation ended its fiscal year on September 30, 2021, with cash of $72 million, accounts receivable of $22 million, property and equipment of $32 million, and other long-term assets of $24 million. The company's liabilities consist of accounts payable of $38 million and long-term notes payable of $18 million. Mulligan Corporation has total stockholders' equity of $94 million; of this total, common stock is $32 million. Solve for the company's ending retained earnings and then prepare Mulligan Corporation's balance sheet at September 30, 2021. Use a proper heading on the balance sheet.
1. First find the company's retained earnings balance: 94 million (SE) - 32 (Common Stock) = 62 million 2. Create the balance sheet Mulligan Corporation Balance Sheet September 30, 2021 Assets: (in millions) Current Assets: Cash $ 72 Accounts Receivable 22 Total Current Assets: 94 Property and Equipment 32 Other Long-Term Assets. 24 Total Assets. $150 Liabilities (in millions) Current Liabilities: Accounts Payable $38 Total Current Liabilities 38 Long Term Notes Payable. 18 Total Liabilities. 56 Stockholder's Equity. (in millions) Common Stock $32 Retained Earnings 62 Total Stockholder's Equity 94 Total Stockholder's Equity & Liabilities $ 150
The following are the assets and liabilities of Donna O'Dell Realty Company, as of August 31, 2021. Also included are revenue, expense, and selected stockholders' equity figures for the year ended on that date (amounts in millions): Prepare an income statement (go to Math Lab to see the given attached balance sheet with this problem)
Donna O'Dell Realty Company Income Statement Year ended August 31, 2021 Revenue: (in millions) Total Revenue $25.7 Expenses: Interest Expense $0.5 Salary and other employee expenses. 13.4 Other expenses 6.1 Total Expenses $20 Net Income $5.7
The following are the assets and liabilities of Donna O'Dell Realty Company, as of August 31, 2021. Also included are revenue, expense, and selected stockholders' equity figures for the year ended on that date (amounts in millions): Requirement 2. What amount of dividends did Donna O'Dell declare during the year ended August 31, 2021? (Hint: Prepare a statement of retained earnings)
Donna O'Dell Realty Company Statement of Retained Earnings Year ended August 31, 2021 Retained Earnings, August 31 2020: $1.7 Add: Net Income for Period: 5.7 Subtotal: 7.4 Less: Dividends Declared (1.7) Retained Earnings, August 31 2021: 5.7
Identify the letter on the screenshot that refers to each of the following features on the screenshot of an Excel file:
E: Quick Access Tool bar B: file name H: ribbon tabs I: ribbon C: column headers L: formula bar D: insert function dialog box G: row headers J: active cell
Pandora's Music Genome Project makes music recommendations to a subscriber based on the subscriber's thumbs-up and thumbs-down ratings of songs, the songs that the subscriber listens to, and other factors. Pandora's Music Genome Project is an example of: A. Machine learning B. Robotic Process Automation C. Spreadsheets D. Data Analytics
A
The Cheesecake Factory Incorporated (NASDAQ: CAKE) was started by Evelyn Overton when she sold cheesecakes from her basement in Detroit in the 1940s. Its first restaurant opened in Beverly Hills, California in 1978. The Cheesecake Factory has been a publicly held corporation since 1993 and currently operates over 300 restaurants under The Cheesecake Factory as well as several other brand names, both in the United States and abroad. Its fiscal year end is the Tuesday closest to December 31 each year. To follow are Cheesecake Factory's four basic financial statements for its most recent year, the year ending December 31, 2019. How much in total resources does The Cheesecake Factory have to work with (in thousands)? (Look at Balance, Income, RE and Cash flow statement on My Math Lab) A. $2,840,593 B. $244, 515 C. $831,599 D. $58,416
A. $2,840,593 - find this value in the total assets section in the Balance Sheet
Identify the letter on the screenshot that refers to each of the following features on the screenshot of an Excel file:
A: Zoom Slider K: worksheet tabs F: insert sheet icon
Classify the following items as an asset (A), a liability (L), or stockholders' equity (S) for Target Corporation, a large retailer: Accounts Receivable
Asset
Classify the following items as an asset (A), a liability (L), or stockholders' equity (S) for Target Corporation, a large retailer: Equipment
Asset
Classify the following items as an asset (A), a liability (L), or stockholders' equity (S) for Target Corporation, a large retailer: Land
Asset
Classify the following items as an asset (A), a liability (L), or stockholders' equity (S) for Target Corporation, a large retailer: Merchandise Inventory
Asset
Classify the following items as an asset (A), a liability (L), or stockholders' equity (S) for Target Corporation, a large retailer: Prepaid Expenses
Asset
Classify the following items as an asset (A), a liability (L), or stockholders' equity (S) for Target Corporation, a large retailer: Supplies
Asset
Economic resources that are expected to produce a benefit in the future
Assets
Advanced Instruments had retained earnings of $370,000 at December 31, 2020. Net income for 2021 totaled $235,000, and dividends declared for 2021 were $80,000. How much retained earnings should Advanced report at December 31, 2021? A. $370,000 B. $525,000 C. $450,000 D. $605,000
B
Assets are usually reported at their A. Current market value B. Historical cost C. Appraised value D. None of the above
B
For each of the following questions, indicate which financial statement would most likely be used to provide the information. Use the following abbreviations: Income statement (I), Statement of retained earnings (R), Balance sheet (B), and Statement of cash flows (C). How much in total debt does the company have?
B
For each of the following questions, indicate which financial statement would most likely be used to provide the information. Use the following abbreviations: Income statement (I), Statement of retained earnings (R), Balance sheet (B), and Statement of cash flows (C). What assets does the company have?
B
For each of the following questions, indicate which financial statement would most likely be used to provide the information. Use the following abbreviations: Income statement (I), Statement of retained earnings (R), Balance sheet (B), and Statement of cash flows (C). What is the company's financial position at the end of the year?
B
Mason Corporation began the year with cash of $140,000 and land that cost $15,000. During the year Mason earned service revenue of $260,000 and had the following expenses: salaries, $159,000; rent, $85,000; and utilities, $21,000. At year-end Mason's cash balance was down to $23,000. How much net income (or net loss) did Mason experience for the year? A. $16,000 B. $(5,000) C. $(122,000) D. $101,000
B. $(5,000)
The Cheesecake Factory Incorporated (NASDAQ: CAKE) was started by Evelyn Overton when she sold cheesecakes from her basement in Detroit in the 1940s. Its first restaurant opened in Beverly Hills, California in 1978. The Cheesecake Factory has been a publicly held corporation since 1993 and currently operates over 300 restaurants under The Cheesecake Factory as well as several other brand names, both in the United States and abroad. Its fiscal year end is the Tuesday closest to December 31 each year. To follow are Cheesecake Factory's four basic financial statements for its most recent year, the year ending December 31, 2019. How much does The Cheesecake Factory owe to creditors (in thousands)? (Look at Balance Sheet of Cheesecake on My Math Lab because this is where you would find a company's liabilities and be able to determine its financial position in an exact period of time) A. $1,654,264 B. $2,268,851 C. $614,587 D. $2,840,593
B. $2,268,851 Add current and non current liabilities to get total liabilities
Which type of business organization provides the least amount of protection for bankers and other creditors of a company? A. Partnership B. Corporation C. Proprietorship D. Both a and c
B. corporation
Also called the statement of financial position
Balance sheet
1. Compute the missing amount for each company (Amounts are in millions)
Beginning RE for Emerald Corp: $30 Beginning Assets for Barry Inc: $18 Ending Assets for Emerald Corp: $85 Ending Common Stock for Lally Co.: $11 Ending RE for Lally Co: $26 Ending Liabilities for Barry, Inc: $6 Ending RE for Barry, Inc: $6 Net Income for Emerald Corp: $16 Revenues for Lally Co.: $168 Net Income for Lally Co: $22 Expenses for Barry Inc: $34 Net Income for Barry Inc: $6
For each of the following questions, indicate which financial statement would most likely be used to provide the information. Use the following abbreviations: Income statement (I), Statement of retained earnings (R), Balance sheet (B), and Statement of cash flows (C). How much cash did the company generate and spend during the year?
C
For each of the following questions, indicate which financial statement would most likely be used to provide the information. Use the following abbreviations: Income statement (I), Statement of retained earnings (R), Balance sheet (B), and Statement of cash flows (C). How much cash was generated by operating activities?
C
Wilson had no stock transactions in 2021, so the change in stockholders' equity for 2021 was due to net income and dividends. If dividends were $80,000, how much was Wilson's net income for 2021? Use the accounting equation and the statement of retained earnings. A. $518,000 B. $438,000 C. $598,000 D. $678,000
C. $598,000 570,000 - 40,000 = 530,000 36,000 - 24,000 = 12,000 530,000 - 12,000 = 518,000 518,000 + 80,000 = $598,000
Which of the following is the most accurate statement regarding ethics as applied to decision making in accounting? A. It is impossible to learn ethical decision making, since it is just something you decide to do or not to do. B. Ethics has no place in accounting, because accounting deals purely with numbers. C. Ethics involves making difficult choices under pressure and should be kept in mind in making every decision, including those involving accounting. D. Ethics is becoming less and less important as a field of study in business
C. Ethics involves making difficult choices under pressure and should be kept in mind in making every decision, including those involving accounting.
To be useful, information must have which of the following fundamental qualitative characteristics? A. Expediency and relevance B. Faithful representation and diversity C. Faithful representation and relevance D. Timeliness and affordability
C. Faithful representation and relevance
Identify the accounting concept, assumption, or principle that best applies to each of the following situations: General Motors, wants to determine which division of the company—Chevrolet or Cadillac—is more profitable.
Entity Assumption
Classify the following items as an asset (A), a liability (L), or stockholders' equity (S) for Target Corporation, a large retailer: Retained Earnings
Equitt
Insider claims of a business
Equity
Responsibilities of the members of society to each other
Ethical duties
Identify the accounting concept, assumption, or principle that best applies to each of the following situations: Burger King, the restaurant chain, sold a store location to McDonald's. How can Burger King determine the sale price of the store—by a professional appraisal, Burger King's original cost, or the amount actually received from the sale?
Historical Cost Principle
Identify the accounting concept, assumption, or principle that best applies to each of the following situations: You get an especially good buy on a laptop, paying only $300 when it normally costs $800. What is your accounting value for this laptop?
Historical Cost Principle
States that assets should be recorded at their actual cost on the date of purchase
Historical cost principle
For each of the following questions, indicate which financial statement would most likely be used to provide the information. Use the following abbreviations: Income statement (I), Statement of retained earnings (R), Balance sheet (B), and Statement of cash flows (C). How well did the company perform during the year?
I
For each of the following questions, indicate which financial statement would most likely be used to provide the information. Use the following abbreviations: Income statement (I), Statement of retained earnings (R), Balance sheet (B), and Statement of cash flows (C). What were the company's net sales for the year?
I
Statement that answers the question "How well did the company perform during the period?"
Income statement
Entities that provide money to finance a company's operations
Investors and creditors
A debt payable to an outsider
Liability
Classify the following items as an asset (A), a liability (L), or stockholders' equity (S) for Target Corporation, a large retailer: Accounts Payable
Liability
Classify the following items as an asset (A), a liability (L), or stockholders' equity (S) for Target Corporation, a large retailer: Accrued Expenses Payable
Liability
Classify the following items as an asset (A), a liability (L), or stockholders' equity (S) for Target Corporation, a large retailer: Long Term debt
Liability
Classify the following items as an asset (A), a liability (L), or stockholders' equity (S) for Target Corporation, a large retailer: Notes Payable
Liability
The following are the assets and liabilities of Mary Burke Realty Company, as of January 31, 2021. Also included are revenue, expense, and selected stockholders' equity figures for the year ended on that date (amounts in millions):
Mary Burke Realty Company Balance Sheet January 31, 2021 Assets: (in millions) Current Assets: Cash $ 57.5 Accounts Receivable 0.9 Total Current Assets: 58.4 Property and Equipment 1.4 Investment Assets. 79.3 Other Long-Term Assets. 9.5 Total Assets. $148.6 Liabilities (in millions) Current Liabilities: $1.7 Long Term Liabilities: 102.4 Total Liabilities. 104.1 Stockholder's Equity. (in millions) Common Stock $39.8 Retained Earnings 4.7 (Total Assets - Liabilities - Stock = RE) Total Stockholder's Equity 53.8 Total Stockholder's Equity & Liabilities $ 148.6
Total Revenues less Total Expenses
Net Income
Which line flows from the income statement to the statement of retained earnings?
Net income
A business organization form with two or more owners who are each personally liable for all of the business's debts
Partnership
Hudson Signs, Inc., needs funds, and Alley Hudson, the president, has asked you to consider investing in the business. Answer the following questions about the different ways that Hudson might organize the business. Explain each answer. What form of organization will give creditors the maximum protection in the event that Hudson Signs, Inc., fails and cannot pay its debts? If a __________ fails and cannot pay its liabilities, creditors __________________ to pay the businesses debts from their personal assets. This type of organization affords more protection for creditors than a ___________________.
Partnership Partnership; can force the partners; proprietorship because there are two or more owners to share this liability
A business organization form with a single owner who is personally liable for all of the business's debts
Propreitorship
For each of the following questions, indicate which financial statement would most likely be used to provide the information. Use the following abbreviations: Income statement (I), Statement of retained earnings (R), Balance sheet (B), and Statement of cash flows (C). Did the company declare a dividend during the year?
R
For each of the following questions, indicate which financial statement would most likely be used to provide the information. Use the following abbreviations: Income statement (I), Statement of retained earnings (R), Balance sheet (B), and Statement of cash flows (C). Why did the company's retained earnings change during the year?
R
Inflows of resources resulting from delivering goods or services to customers
Revenues
Hudson Signs, Inc., needs funds, and Alley Hudson, the president, has asked you to consider investing in the business. Answer the following questions about the different ways that Hudson might organize the business. Explain each answer. What forms of business organizations will give Alley Hudson the most freedom to manage the business as she wishes? This type of organization offers the most freedom because _________.
Sole proprietorship There is a single owner, so the owner has absolute control over the business
Identify the accounting concept, assumption, or principle that best applies to each of the following situations: Inflation has been abound 2.5% for some time. Village Realtors is considering measuring its land values in inflation-adjusted amounts
Stable Monetary Unit Assumption
Reports cash flows from operating, investing and financing activities during the period
Statement of cash flows
Classify the following items as an asset (A), a liability (L), or stockholders' equity (S) for Target Corporation, a large retailer: Common Stock
Stockholders Equity
Identify the missing amount for each of the following situations: Total Assets = Total Liabilities + Stockholder's Equity 1. X = $260,000 + $410,000 2. $100,000 = $80,000 + X 3. $410,000 = X + $290,000
Total Assets = $670,000 Stockholder's Equity: $20,000 Total Liabilities: $120,000
What are the three questions that are important to consider when making an ethical decision?
Who will be affected by this decision? Is the action legal? How will the decision make me feel afterward?
Mechanical part of accounting
bookkeeping
Provides information for managers of the organization
managerial accounting
Good business and accounting principles require the exercise of good judgment. How should ethics be incorporated into making accounting judgments? Why is ethics important? Ethics is a factor that __________________. Ideally, for each decision,_____________________.
should be included in every business and accounting decision, beyond the potential economic and legal consequnces honesty and truthfulness should prevail, considering the rights of others.