ACIS 2115 Module 2

Which of the following is a financing activity?

Paying cash dividends

Net Income would not appear on which one of the following financial statements?

Balance Sheet

On which financial statement does the Notes Payable account appear?

Balance Sheet

Which one of the following financial statements is prepared as of a specific date, rather than for an entire accounting period?

Balance Sheet

During its first year of operation, Cade Company experienced the following events: 1. Issued common stock for $7,000 cash. 2. Earned $5,000 of cash revenue. 3. Paid $3,000 of cash expenses. 4. Paid cash dividends amounting to $1,000. Before closing on December 31, the balance in the Retained Earnings account would be:

$0 Correct! Since this is the first year of operation, the beginning balance in the Retained Earnings account is zero. Also, since the question specifies the BEFORE CLOSING balance, none of the Year 1 information from the temporary accounts has been transferred to the retained earnings account. Therefore, at this point, the Retained Earnings balance is zero.

At the beginning of Year 2 Clair Company had a $5,500 balance in its Retained Earnings account. During January of Year 2, Clair earned $2,000 of revenue and incurred $1,400 of expenses. Based on this information, the balance in the Retained Earnings account on January 31, Year 2 is:

$5,500 Correct! Since the accounting period is a year, the temporary accounts will not be closed to Retained Earnings until December 31, Year 2. Therefore, the revenues and expenses will not be transferred to Retained Earnings in January. The balance remains $5,500

Which of the following is normally shown first on the Statement of Cash Flows?

Cash flow from operating activities

Information in temporary accounts is transferred to the Common Stock account at the end of an account period.

False Temporary account balances are moved to the Retained Earnings account at the end of an accounting period.

The $8000 borrowed from State Bank would appear in which one of the following sections of the Statement of Cash Flows?

Financing Activities

The dividend would appear in which one of the following sections of the Statement of Cash Flows?

Financing Activities

On which financial statement does the Salary Expense account appear?

Income Statement

Explain the difference between net income and retained earnings.

Net income is the measure of benefits - costs in a single accounting period Retained Earnings is the amount of Net Income - Dividends paid out since the business was created (I am so tired goodness gracious)

The utility expense would appear in which one of the following sections of the Statement of Cash Flows?

Operating Activities

Which one of the following accounts is closed at the end of an accounting period?

Revenue Correct! Revenue, Expense and Dividend accounts are closed at the end of each accounting period.

The ending cash balance would appear on which of the following financial statements?

Statement of Cash Flows

Explain why different terminology is used to date the Income Statement than is used to date the Balance Sheet.

The income statement is dated with the term "for the year ended" because these temporary account balances reflect only those transactions that took place during the year. The balance sheet is dated with the term "as of" because it describes information at a specific point in time. The balance sheet contains permanent accounts, whose balances are the result of transactions that have taken place since the company came into existence.

The process of transferring information out of the temporary accounts at the end of an accounting period is called closing.

True

The Income Statement presents:

a comparison of the benefits and the sacrifices a company experiences from its operations.

The balance sheet presents:

a list of a company's assets and the sources of those assets.

The Statement of Changes in Stockholders' Equity presents:

an explanation of the changes in the beginning and ending balances of stockholders' equity.

The Statement of Cash Flows presents:

information in three categories including operating, investing, and financing activities.