ACCT 2013 Chapter 1 Smart Book: A Framework for Financial Accounting

Rahls issues stock to investors for $20,000, and has $5,000 of net income in its first year of operations. During Year 2, Rahls earns $10,000 in net income and pays a dividend to stockholders of $4,000. What is the balance in stockholders' equity at the end of year 2?

$31,000

Which of the following appear on the statement of stockholders' equity

Beginning balance of retained earnings Dividends Net income

Gem Corporation is a new company and obtains financing by issuing common stock to investors for $30,000. During the year, Gem earns $8,000 in net income and pays stockholders a dividend of $5,000. What is the total stockholders' equity at the end of the year?

Reason: Beginning retained earnings + Common stock + Net income - Dividends = Ending retained earnings. 0 + $30,000 + $8,000 - $5,000 = $33,000.

Which of the following line items appear on an income statement?

Revenues Supplies expense

The four financial statements published to provide information to external users include which of the following

Statement of Stockholders' Equity Income Statement Statement of Cash Flows Balance Sheet

The heading of an income statement should include which of the following

The title of the financial statement The name of the business The accounting period covered by the statement

The system that maintains records of a company's operations and then communicates that information to decision makers is referred to as

accounting

The primary functions of accounting are to

communicate information to decision makers. measure a company's activities

The form of business organization where an entity is legally separate from its owners and issues shares of stock is a

corporation

________________ Statements represent a company's primary means of communicating information to external users

financial

The income statement is considered most useful for predicting

future profitability

Where is the time period covered by the income statement found

heading

Which financial statement reports revenues and expenses

income statement

if revenues are less than expenses, a company has

net loss

The two sources of stockholders' equity are amounts

paid in from shareholders earned by the corporation

The three most common forms of business organization are sole proprietorship

partnership and corporation

Undistributed profits that have accumulated in the company over time are called ________________ earnings

retained

An income statement reports

revenues and expenses and net income loss

the purpose of an income statement is to

summarize the profit-generating activities that occurred during a particular reporting period