accounting exam 1

On January 1, Gucci Brothers Inc. started the year with a $696,000 balance in Retained Earnings and a $610,000 balance in common stock. During the year, the company reported net income of $109,000, paid a dividend of $14,300, and issued more common stock for $29,000. What is total stockholders' equity at the end of the year? a. $1,458,300 b. $1,306,000 c. $1,371,700 d. $1,429,700

$1,429,700

Stimpleton Company engages in the following cash payments: Purchase equipment$4,000 Pay rent 725 Repay loan to the bank 4,300 Pay workers' salaries 1,350 What is the total amount of cash paid for operating activities? Multiple Choice $8,300 $5,650 $2,075 $4,000

$2,075 (pay rent+ pay workers salaries)

Aikman Company paid dividends of $2,410, $0, $1,500 and $1,010 over the first four years of the company's existence, respectively. If Retained Earnings has an ending balance of $10,500 at the end of year four, what was the average annual amount of net income (loss) over the first four years for Aikman? (Round your answer to the nearest dollar amount.) a. $2,060 b. $3,855 c. $15,420 d. $1,230

$3,855

The ending Retained Earnings balance of Boomer Inc. decreased by $1.0 million from the beginning of the year. The company declared a dividend of $5.4 million during the year. What was the net income for the year? a. $7.5 million. b. $4.4 million. c. $6.4 million. d. $1.0 million.

$4.4 million.

Use the following appropriate amounts to calculate net income: Revenues, $11,700; Liabilities, $3,200; Expenses, $3,800; Assets, $17,300; Dividends, $1,500. a. $6,400 b. $14,100 c. $7,900 d. $5,950

$7,900 (salaries-expense)

Nina Corp. had the following net income (loss) for the first three years of operations, respectively: $6,600, ($1,000), and $3,900. If the Retained Earnings balance at the end of year three is $500, what was the total amount of dividends paid over these three years? a. $500 b. $0 c. $9,500 d. $9,000

$9,000

A company pays $850 of dividends to stockholders. Indicate the amount of increases and decreases in the accounting equation.

-850=0+-850

if the liabilities of a company increased by $55,000 during a month and the stockholders' equity decreased by $21,000 during that same month, did assets increase or decrease and by how much? a. $34,000 decrease. b. $34,000 increase. c. $55,000 increase. d. $76,000 increase.

34,000 increase

The following transactions occur for the Hamilton Manufacturers. (a) Provide services to customers on account for $4,400. (b) Purchase equipment by signing a note with the bank for $11,000. (c) Pay advertising of $1,800 for the current month. Analyze each transaction and indicate the amount of increases and decreases in the accounting equation.

4400=0+4400 11,000=11,000+0 -1800=0+-1800

A(n) _______________ summarizes all transactions related to a particular item over a period of time. a. Source document b. Debit c. Chart of accounts d. Account

Account

A trial balance can best be explained as a list of: a. The income statement accounts used to calculate net income. b. All accounts and their balances at a particular date. c. Revenue, expense, and dividend accounts used to show the balances of the components of retained earnings. d. The balance sheet accounts used to show the equality of the accounting equation.

All accounts and their balances at a particular date.

On September 10, MFP Co. paid employee salaries of $7,000 owed to its employees last month. What are the effects of this transaction on the accounting equation? a. Assets decrease and liabilities decrease. b. Expenses increase and liabilities increase. c. Assets decrease and expenses decrease. d. Expenses decrease and liabilities decrease.

Assets decrease and liabilities decrease.

The accounts that represent the resources of the company are called: a. Assets. b. Revenues. c. Expenses. d. Liabilities.

Assets.

which business form has the advantage of limited liability? A. partnership B. Corporation C. All business forms share equal limited liability. D. Sole proprietorship.

B. Corporation

Liabilities normally carry a _______ balance and are shown in the ______________. a. Debit; Balance sheet b. Credit; Balance sheet c. Debit; Income statement d. Debit; Statement of stockholders' equity

Credit; Balance sheet

When a company pays $2,500 dividends to its stockholders, the transaction should be recorded as: a. Debit Dividends; credit Accounts Payable. b. Debit Cash; credit Dividends. c. Debit Retained Earnings; credit Dividends. d. Debit Dividends; credit Cash.

Debit Dividends; credit Cash.

Schooner Inc. purchased equipment by signing a note payable. This transaction would be recorded as: a. Debit Equipment, credit Notes Payable. b. Debit Notes Payable, credit Equipment. c. Debit Equipment, credit Cash. d. Debit Cash, credit Notes Payable.

Debit Equipment, credit Notes Payable.

An increase to an asset account is shown with a ______________. An increase to a liability account is shown with a ______________. a. Credit; Credit b. Debit; Credit c. Credit; Debit d. Debit; Debit

Debit; Credit

Dividends normally carry a _______ balance and are shown in the ______________. a. Credit; Balance sheet b. Debit; Balance sheet c. Debit; Statement of stockholders' equity d. Debit; Income statement

Debit; Statement of stockholders' equity

Receiving cash from customers before services are performed results in: a. Service Revenue. b. Prepaid Assets. c. Deferred Revenues. d. Accounts Receivable.

Deferred revenues

The assumption that the assets and liabilities of the business are accounted for on the books of the company but not included in the records of the owner is the: a. Economic entity assumption. b. Periodicity assumption. c. Monetary unit assumption. d. Going concern assumption.

Economic entity assumption.

The costs of providing goods and services to customers are referred to as: a. Liabilities. b. Assets. c. Revenues. d. Expenses.

Expenses.

Transactions of a company involving external sources of funding are referred to as: a. Financing activities. b. Operating activities. c. External activities. d. Investing activities.

Financing activities.

Transactions of a company that include the purchase and sale of long-term assets are referred to as: a. Investing activities. b. Expenditure activities. c. Operating activities. d. Financing activities.

Investing activities.

FlintCo purchases additional office equipment to better serves its customers. This cash purchase is reported in the statement of cash flows as what type of activity? a. Financing activity. b. Investing activity. c. Operating activity. d. Company activity.

Investing activity.

The accounts that represent resources owed to creditors are called: a. Assets. b. Liabilities. c. Dividends. d. Stockholders' equity.

Liabilities.

Amounts owed to suppliers for supplies purchased on account are defined as a(n): a. Expense. b. Asset. c. Liability. d. Revenue.

Liability.

What is the primary purpose of financial accounting? a. Measure business activities and communicate those measures to external users to make decisions. b. Communicate business activities to internal management. c. Measure the profitability of the company in order to assist employees with making decisions. d. Determine the amount of tax liability owed to the government.

Measure business activities and communicate those measures to external users to make decisions

Which definition below best describes financial accounting? a. Measuring business activities and communicating them to external parties. b. Process of measuring income taxes owed to the government. c. System of maintaining communication with a company's customers and suppliers. d. Procedures designed to enhance the company's image to potential investors.

Measuring business activities and communicating them to external parties.

Which of the following items is reported in the statement of stockholders' equity? a. Total expenses. b. Total assets. c. Operating cash flows. d. Net income.

Net income.

The conceptual framework's qualitative characteristic of relevance includes: a. Neutrality. b. Completeness. c. Verifiability. d. Predictive value.

Predictive value.

The term "cooking the books" refers to: a. Preparing internal budgets to plan for expenditures in the following year. b. Hiring an auditor to provide independent verification of the fairness of financial statements. c. Filing all tax-related statements by the required deadline. d. Purposely providing misleading financial information to investors and creditors.

Purposely providing misleading financial information to investors and creditors.

Which statement below best describes the accounting equation? a. The change in retained earnings equals net income less dividends. b. Equality of revenue and expense transactions over time. c. Resources of the company equal creditors' and owners' claims to those resources. d. Financing activities equal investing and operating activities.

Resources of the company equal creditors' and owners' claims to those resources

The equation best describing the income statement is: a. Assets = Revenues − Expenses. b. Assets = Liabilities + Stockholders' Equity. c. Revenues + Expenses = Net Income. d. Revenues − Expenses = Net Income.

Revenues − Expenses = Net Income.

Consider the following list of accounts: Cash Service Revenue Salaries Expense Accounts Payable Equipment Retained Earnings Utilities Expense Accounts Receivable Common Stock Dividends How many of these accounts have a normal debit balance? A. Four. B. Seven. C. Five. D. Six.

Six. Cash, Salaries expense, equipment, utilities expense, accounts receivable, dividends

When a company pays employees' salaries for the current period, how will the basic accounting equation be affected? a. Expenses decrease. b. Revenues decrease. c. Stockholders' equity decreases. d. Liabilities decrease.

Stockholders' equity decreases.

Which of the following accounts represents a resource of the company? a. Supplies. b. Common stock. c. Service revenue. d. Salaries expense.

Supplies.

Which of the following best explains the meaning of total stockholders' equity? a. The amount of common stock less dividends over the life of the company. b. The difference between total revenues and total expenses, less dividends for the year. c. The amount of capital invested by stockholders plus profits retained over the life of the company. d. All revenues, expenses, and dividends over the life of the company.

The amount of capital invested by stockholders plus profits retained over the life of the company.

How many of the following transactions are operating activities? Borrow $50,000 from the bank. Purchase $12,000 in supplies. Provide services to customers for $27,000. Pay the utility bill of $750. Purchase a delivery truck for $12,000. Receive $25,000 from issuing common stock. a. Two. b. One. c. Three. d. Four.

Three Purchased $12,000 in supplies Provide services to customers for $27,000 Paid the utility bill of $750

Posting transactions to T-accounts involves: a. Preparing a chronological record of all transactions affecting the company. b. Transferring debit and credit information from the journal to the accounts in the general ledger. c. Analyzing source documents to determine the effects of transactions on the company's accounts. d. Listing all accounts and their balances at a particular date to ensure that debits equal credits.

Transferring debit and credit information from the journal to the accounts in the general ledger.

How many of the following events would require an expense to be recorded? Ordering office supplies. Hiring a receptionist. Paying employees' salaries for the current month. Receiving, but not paying, a current utility bill. Paying for insurance in advance. a. Three. b. One. c. Four. d. Two.

Two.

When a payment is made on an account payable: a. Assets and expenses decrease. b. Assets and liabilities decrease. c. Liabilities and revenues decrease. d. Assets and stockholders' equity decrease.

assets and liabilities decrease

Which of the following financial statements reports a company's retained earnings? a. All of the other answers are statements that report retained earnings. b. Income statement. c. Balance sheet. d. Statement of cash flows.

balance sheet

A company purchases equipment for $11,000 cash. Record the transaction.

equipment debit:$11,000 cash Credit: $11,000

Emmitt had the following final balances after the first year of operations: assets, $36,900; stockholders' equity, $14,200; dividends, $2,700; and net income, $10,800. What is the amount of Emmitt's liabilities? a.$36,900 b. $22,700 c. $9,200 d. $25,300

liabilities = assets -stockholders equity $22,700

A company pays $7,000 for maintenance in the current period. Record the transaction.

maintenance expense debit:7000 cash credit: 7000

Which of the following groups is not among the external users for whom financial statements are prepared? a. Regulators. b. Investors. c. Managers. d. Creditors.

managers

void

void