Chapter 1 Questions

How to Calculate Retained Earnings

Beginning Retained Earnings + Net Income - Dividends Paid

Under accrual-basis accounting A. revenue is recorded when cash is received. B. expenses are recorded when cash is paid. C. revenues are recorded when they are earned and expenses are recorded when they are incurred, regardless of when cash is paid or received. D. Both A and B.

C. revenues are recorded when they are earned and expenses are recorded when they are incurred, regardless of when cash is paid or received.

Which of the following accounts would Not appear on the income statement? A. service revenue B. sales C. accounts payable D. rent expense

C. Accounts Payable

which of the following accounts would NOT appear on the balance sheet? A. accounts payable B. Cash C. Dividends D. Common Stock

C. Dividends

Morreale Company buys a $12,000 van on credit. This transaction will result in an A. increase in assets and decrease in liabilities B. no change in total assets C. increase in assets and increase in stockholders' equity D. increase in assets and increase in liabilities

D. increase in assets and increase in liabilities

The private sector organization which currently sets generally accepted accounting principles (GAAP) is the

FASB (Financial Accounting Standards Board)

Who sets accounting standards?

FASB (financial accounting standards board)

The private sector organization which currently sets generally accepted accounting principles (GAAP) is the

Financial Accounting Standards Board (FASB)

What does GAAP stand for?

Generally Accepted Accounting Principles; aka the rules of accounting in the U.S.

The only accounts on the Income Statement are...

Revenues & Expenses

Mofro's Computer Repair Shop started the year with total assets of $300,000 and total liabilities of $200,000. During the year, the business recorded $500,000 in computer repair revenues, $350,000 in expenses, and Mofro paid dividends of $50,000. The net income reported by Mofro's Computer Repair Shop for the year was

Revenues - Expenses = Net Income $500,000 (repair revenue) - $350,000 (expenses) = $150,000 (Net Income) Dividends are not expenses!

Kennedy Company issued stock to Ed Kennedy in exchange for his investment of $75,000 cash in the business. The company recorded revenues of $525,000, expenses of $420,000, and had paid dividends of $30,000. What was Kennedy's net income for the year?

Revenues - Expenses = Net Income $525,000 - $420,000 =$105,000

Whenever an Expense is recorded, it decreases what account?

Stockholders Equity

If total assets equal $280,000 and total stockholders' equity equal $140,000, then total liabilities must equal

X Total Liabilities = $140,000 $280,000 = X + $140,000 assets = liabilities + stockholders equity

Anytime you see "services performed", this means...

a Revenue has been earned

Calculation for finding Stockholders Equity

common stock + retained earnings + (revenues - expenses) - dividends

At October 1, Arcade Fire Enterprises reported stockholders' equity of $70,000. During October, no stock was issued and the company earned net income of $18,000. If stockholders' equity at October 31 totals $78,000, what amount of dividends were paid during the month?

common stock + retained earnings + (revenues - expenses) - dividends = $10,000

TransAm Mail Service purchased equipment for $2,500. TransAm paid $400 in cash and signed a note for the balance. TransAm debited the Equipment account, credited Cash and

credited a liability account for $2,100

Anytime you see the word "paid", is cash decreasing or increasing?

decreasing

Collection of a $1,000 Accounts Receivable will:

increase assets (cash) and decrease accounts receivable (asset)

what type of account is Unearned Revenue?

liability

what type of account is wages payable?

liability

An Income Statement

presents the revenues & expenses for a specific period of time

what type of account is Sales?

revenue

what type of account is Service Revenue?

revenue

Under accrual-basis accounting

revenues are recorded when they are earned & expenses are recorded when they are incurred, regardless of when cash is paid or received

what type of account is retained earnings?

stockholders equity

Purchasing "on account" means using a line of credit & uses Accounts Payable instead of Cash (t/f)

true

Whenever a stockholder invests cash for stock Cash and Common Stock accounts are both Increasing (t/f)

true

The Duce Company has five plants nationwide that cost a total of $100 million. The current fair value of the plants is $500 million. The plants will be recorded and reported as assets at

$100 million (historical cost principal, does not gain value over time and stays at price bought)

Mofro's Computer Repair Shop started the year with total assets of $300,000 and total liabilities of $200,000. During the year, the business recorded $500,000 in computer repair revenues, $300,000 in expenses, and Mofro paid dividends of $50,000. Stockholders' equity at the end of the year was

$300,000 (starting assets) - $200,000 (starting liabilities) + $500,000 (revenue) - $300,000 (expenses) - $50,000 (paid dividends) = $250,000 (stockholders equity at end of year)

Barsuk Company began the year with stockholders' equity of $108,000. During the year, Barsuk issued stock for $147,000, recorded expenses of $420,000, and paid dividends of $28,000. If Barsuk's ending stockholders' equity was $290,000, what was the company's revenue for the year?

$483,000 Beginning Stockholders Equity ($108,000) + Issued Stock ($147,000) + Company Revenue - Expenses (X-$420,000) - Dividends ($28,000) = Ending Stockholders Equity ($290,000)

Carlson Computer Repair Shop started the year with total assets of $400,000 and total liabilities of $175,000. During the year, the business recorded $500,000 in computer repair revenues, $300,000 in expenses, and Carlson paid dividends of $50,000. The net income reported by Carlson Computer Repair Shop for the year was

$500,000 - $300,000 = $200,000 Revenues - Expenses = Net Income

On January 1, 2015, Cat Power Company reported stockholders' equity of $705,000. During the year, the company paid dividends of $30,000. At December 31, 2015, the amount of stockholders' equity was $825,000. What amount of net income or net loss would the company report for 2015?

$705,000 + X - $30,000 = $825,000 X = $150,000 (Net Income) Stockholders Equity (common stock) + Net Income/Loss (revenue - expenses) - Paid Dividends = Stockholders Equity

Black Keys Company began the year with stockholders' equity of $280,000. During the year, the company recorded revenues of $405,000, expenses of $285,000, and paid dividends of $30,000. What was Black Keys' stockholders' equity at the end of the year?

280,000 +405,000 -285,000 -30,000 =$370,000 (stockholders equity at end of year)

Mofro's Computer Repair Shop started the year with total assets of $300,000 and total liabilities of $200,000. During the year, the business recorded $500,000 in computer repair revenues, $300,000 in expenses, and Mofro paid dividends of $50,000. Mofro's stockholders' equity changed by what amount from the beginning of the year to the end of the year?

300,000 - 200,000 =100,000 +500,000 =600,000 -300,000 =300,000 -50,000 = $250,000 -100,000 = $150,00 (total amount changed)

Teamboo Company's stockholders' equity at the beginning of August 2015 was $750,000. During the month, the company earned net income of $175,000 and paid dividends of $100,000. At the end of August 2015, what is the amount of stockholders' equity?

750,000 +175,000 -100,000 =$825,000 (ending stockholders equity)

On Feb. 4, a company received a $2,000 payment from a previously billed customer. Which of the following statements is true? A. The Cash account would increase; Accounts Receivable would decrease. B. Accounts Receivable would increase; the Cash account would decrease. C. Accounts Receivable would increase; Service Revenue would also increase. D. The Cash account would increase; Service Revenue would also increase.

A. The Cash account would increase; Accounts Receivable would decrease.

equation for Quattro Enterprises is as follows: A: $120,000 = L: $60,000 + SE: $60,000. If Quattro Enterprises purchases office equipment on account for $25,000, the accounting equation will change to:

A=$145,000 L=$85,000 SE=$60,000

If total liabilities increased by $25,000 during a period of time and stockholders' equity decreased by $9,000 during the same period of time, then the amount and direction (increase or decrease) of the period's change in total assets is a(n)

Assets = +$25,000 -$9,000 = $16,000 Increase

If total liabilities decreased by $110,00 and stockholders' equity increased by $30,000 during a period of time, then total assets must change by what amount and direction during that same period?

Assets = -$110,000 + $30,000 = $80,000 Decrease

If total liabilities decreased by $30,000 and stockholders' equity increased by $20,000 during a period of time, then total assets must change by what amount and direction during that same period?

Assets = -$30,000 + $20,000 = $10,000 Decrease

If total liabilities decreased by $30,000 and stockholders' equity decreased by $20,000 during a period of time, then total assets must change by what amount and direction during that same period?

Assets = -$30,000 - $20,000 = $50,000 Decrease

Stahl Consulting started the year with total assets of $60,000 and total liabilities of $15,000. During the year, the business recorded $48,000 in catering revenues and $33,000 in expenses. Stahl issued stock of $9,000 and paid dividends of $15,000 during the year. The stockholders' equity at the end of the year was

Assets = liabilities - se assets - liabilities = se = $54,000