ACC504 - CH.1
ABC Company had the following accounts and balances at the end of the year: accounts payable: 12,000 cash: 74,000 common stockL 21,000 cost of goods sold: 85,000 dividends 8,000 equipment 50,000 inventory 25,000 term debt 33,000 revenues 200,000 salaries expense 24,000 Total assets for ABC company at the end of the year were:
149,000
Balance Sheet
A= L+SE (has the entire equation) Assets: cash, supplies, land, accounts receivable, machines, TOTAL ASSETS Liabilities: Accounts payable, notes payable, TOTAL LIABILITIES Stockholders Equity: Common Stock + Ending Retained Earnings (get from the statement of retained earnings dont need to add the net income already did) , Total Liabilities, and stockholders equity (MUST BE EQUAL TO ASSETS) list of an entity's assets, liabilities, and owners' equity as of a specific date. Also called the statement of financial position
JetWest Airlines Ltd. began the year with total assets of $130,000 and total liabilities of $37,000. Net income for the year was $28,000, and dividends were zero. How much is stockholders' equity at the end of the year?
Assets - Liabilities = Stockholders' Equity 130,000 - 37,000 = 93,000 93,000+ 28,000[net income]=121,000
Emerald Inc. begans the year with total liabilities of $80,000 and total stockholders equity of $80,000. During the year, total assets increased by 25%. How much are total assets at the end of the year?
Assets = Liabilities + Stockholders Equity 160,000 = 80,000 + 80,000 160,000(1.25)=200,000
Another way to state the accounting equation is:
Assets= Liabilities + Paid - in capital + retained earnings
Accounting Equation
Assets= Liabilities + Stockholders equity Stockholders equity: commonstock+ retained earnings+ net income - dividends Net Income: Revenue - Expenses
Statement of Retained Earnings
Header: Name Company Statement of Retained Earnings Year Ended Month, Date, yr Beginning retained earnings: Net Income: Cash Dividends: Ending retained earnings: Beg+Net-Div From the Income statement you get the net income
Income Statement
Main parts Header: Name Company Income Statement Year Ended Month date, yr Revenue: Exenses: Net Income: R-E a financial statement listin an entity's revenues, expenses, and net income or net loss for a specific period also called the statement of operations
LLC
Members members are not personally liable
Which of the following is a true statement about International Finacncial Reporting Standards?
They are converging gradually with the U.S standards
Valor Corporation holds cash of $5,000 and owes $29,000 on accounts payable. Valor has accounts receivable of $40,000, inventory of $36,000, and land that cost $50,000. How much are Valor's total assets and liabilities? Total assets Total Liabilities a. $126,000 $29,000 b. $29,000 $131,000 c. $131,000 $29,000 d. $131,000 $84,000
Total assets Total Liabilities c. $131,000 $29,000 Total assets = $5,000+40,000+36,000+50,000
Long- term debt is a liability that is payable beyond one year from the date of the financial statement: T/F
True
During the year, ChemClean, Inc., has $140,000 in revenues, $75,000 in expenses, and $3,000 in dividend payments. Stockholders' equity changed by a.+62,000 b. +68,000 c.-62,000 d.+65,000
a. (140,000-75,000-3,000=62,000)
During the year, ChemClean, Inc., has $140,000 in revenues, $75,000 in expenses, and $3,000 in dividend payments. Stockholders' equity changed by a. +$62,000 b. +$68,000 c. -$62,000 d. -$68,000
a. +$62,000 $140,000-75,000-3,000
Suppose you manage a Pizza Parlor restaurant. Identity the missing amount for each situation: Total asserts = Total liabilities + StockEqu a. ? = 190,000 + 110,000 b. 280,000 = 130,000 + ? c. 180,000 = ? + 90,000
a. 300,000 b. 150,000 c.90,000
Identify each account or heading with the appropriate financial statements a. Dividends b. Salary Expense c. Inventory d. Sales revenue e Retained earnings f. net cash provided by operating activities g. Net income h. cash i. net cash used for financing activities j. accounts payable k. common stock l. Interest revenue m. long-term debt n. increase or decrease in cash
a. Statement of retained earnings and cash flows b. income statement c. balance sheet d. income statement e. statement of retained earnings and balance sheet f. statement of cash flow g. balance sheet, income statement, cash flows h. balance sheet, cash flows i. cash flows j. balance sheet k. balance sheet l. income statement m. balance sheet n. cashflows
Which of the following is a true statement about International Financial Reporting Standards? a. They are converging gradually with U.S. standards b. They are not needed for U.S. businesses since the United States already has the strongest accounting standards in the world c. They are more exact (contain more rules) than U.S. generally accepted accounting principles d. They are not being applied anywhere in the world yet, but soon they will be
a. They are converging gradually with U.S. standards
Classify as an Asset, Liability, or Stockholders Equity: a. Accounts payable b. Common Stock c. Supplies d. Retained Earnings e. Land f. Prepaid Expenses g. Accounts receivable h. Long-term debt i. Merchandise inventory j. Notes Payable k. Accrued expense payable i. Equipment
a. liability b. stockholders equity c. asset d. stockholders equity e. asset f. asset g. asset h. liability i. asset j. liability k. liability i. asset
Dividends:
are distributions to stockholders of assets (usually cash) generated by net income
All of the following statements are true except one. Which statement is false? a. Bookkeeping is only a part of accounting b. A proprietorship is a business with several owners c. Professional accountants are held to a high standard of ethical conduct d. The organization that formulates generally accepted accounting principles in the United States is the Financial Accounting Standards Board
b. A proprietorship is a business with several owners
The accounting equation can be expressed as a. Assets + Liabilities = Owners' Equity b. Assets - Liabilities = Owners' Equity c. Owners' Equity - Assets = Liabilities d. Assets = Liabilities - Owners' Equity
b. Assets - Liabilities = Owners' Equity
An investor wishing to assess a company's overall financial posiotion at the end of the period would probably examine the:
balance sheet
where can you find common stock
balance sheet
where can you find current liabilities
balance sheet
where can you find income tax payable
balance sheet
where can you find long- term debt
balance sheet
where can you find total assets
balance sheet
Valor Corporation holds cash of $5,000 and owes $29,000 on accounts payable. Valor has accounts receivable of $40,000, inventory of $36,000 and land that costs $50,000. How much are Valors total assets and liabilities? total assets Liabilities a. 126,000 29,000 b. 29,000 131,000 c.131,000 29,000 d. 131,000 84,000
c. $131,000 $29,000
Hall Company had total assets of $360,000 and total stockholders' equity of $120,000 at the beginning of the year. During the year, assets increased by $60,000 and liabilities increased by $35,000. Stockholders' equity at the end of the year is a. $95,000 b. $150,000 c. $145,000 d. $155,000
c. $145,000 Assets = Liabilities + Equity Beginning $360,000 = $240,000 + $120,000 Increase 60,000 = 35,000 + 25,000 Ending 420,000 = 275,000 + 145,000
During the year, Diaz Company's stockholders' equity increased from $46,000 to $62,000. Diaz earned net income of $20,000. How much in dividends did Diaz declare during the year? a. $16,000 b. $5,000 c. $4,000 d. $-0-
c. $4,000 $46,000+20,000 net income -dividend
During the year, Diaz Companys' equity increased from $46,000 to $62,000. Diaz earned net income of $20,000. How much in dividends did Diaz declare during the year? a. 16,000 b.5,000 c. 4,000 d. 0
c. 46,000+ net income (20,000) - Dividends = 62,000; Dividends = 4,000
Which of the following is the most accurate statement regarding ethics as applied to decision making in accounting? a. Ethics has no place in accounting, since accounting deals purely with numbers b. It is impossible to learn ethical decision making, since it is just something you decide to do or not to do 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
An entity that myst pay its own income taxers is: a. limited-liability company b. proprietorship c. corporation d. partnership
c. corporation
An important fact to consider when determining how to organize a business is that: a. members of an LLC have unlimited liability and are taxed like members of a partnership b. the proprietor and the proprietorship are seperate legal entities c. for accounting purposes, a proprietorship is a distinct entity d. the records of a partnership can include the partner's personal finances
c. for accounting purposes, a proprietorship is a distinct entity
The valuation of assets on the balance sheet is generally based on a. current fair market value as established by independent appraisers b. what it would cost to replace the asset c. historical cost d. selling price
c. historical cost
The valuation of assets on the balance sheet is generally based on a. current fair market value as established by independent appraisers b. what it would cost to replace the asset c. historical cost d. selling price
c. historical price
To be useful, accounting information must have the fundamental qualitative characteristics of: a. faithful representation and timeliness b. materiality and understandability c. relevance and faithful represenation d. comparability and relevance
c. relevance and faithful representation
Regarding financial statement elements: a. assets must provide immediate benefits to the company b. stockholders' equity represents the "outsider claim" to the assets c. revenue are inflows of resources that increase retained earnings d. merchandise inventory and dividends are assets of a company
c. revenues are inflows of resources that increase the retained earnings
where can you find adjustments to reconcile net income to net cash provided by operations
cash flow
where can you find cash spent to acquire the building
cash flow
where can you find ending cash balance
cash flow, balance sheet
___ means that the accounting information for a company must be prepared in such a way as to be capable of being compared with information from other companies in the same period and consistent with similar information for that company in previous periods.
comparability
Which type of business organization provides the least amount of protection for bankers and other creditors of the company?
corporation
During the year, ChemClean, Inc., has $140,000 in revenues, $75,000 in expenses, and $3,000 in dividend payments. a. net income of $62,000 b. net loss of $75,000 c. net income of $140,000 d. net income of $65,000
d. 65,000 140,000-75,000
Which item(s) is (are) reported on the balance sheet? a. Accounts payable b. Retained earnings c. Inventory d. All of the above
d. All of the above
Which financial statement covers a period of time? a. Balance sheet b. Income statement c. Statement of cash flows d. Both b and c
d. Both b and c
How would net income be most likely to affect the accounting equation? a. Increase liabilities and decrease stockholders' equity b. Increase assets and increase liabilities c. Decrease assets and decrease liabilities d. Increase assets and increase stockholders' equity
d. Increase assets and increase stockholders' equity
Decision makers who use accounting include: a. investors b. the SEC c. managers d. all of the above
d. all of the above
Which items are reported on the balance sheet? a. accounts payable b. retained earnings c. inventory d. all of the above
d. all of the above
which items are reported on a balance sheet? a. accounts payable b. retained earnings c. inventory d. all of the above
d. all of the above
The nature of an asset is best described as a. something owned by a business that has a ready market value b. something with physical form that's valued at cost in the accounting records c. an economic resource representing cash or the right to receive cash in the future d. an economic resource that's expected to benefit future operations
d. an economic resource that's expected to benefit future operations
The nature of an asset is best described as a. something owned by a business that has a ready market value b. something with physical form that's valued at cost in the accounting records c. an economic resource representing cash or the right to receive cash in the future d. an economic resource that's expected to benefit future operations
d. an economic resource that's expected to benefit future operations
Which financial statement covers a period of time? a. balance sheet b. income statement c. statement of cash flows d. both b and c
d. both b and c
Which type of business organization transacts the most business and is the largest in terms of assets, income, and number of employees? a. proprietorship b. partnership c. limites- liability company d. corporation
d. corporation
How would net income be most likely to affect the accounting equation? a. increase liabilities and decrease stockholder's equity b. increase assets and increase liabilities c.decrease assets and decrease liabilities d. increase assets and increase stockholders' equity
d. increase assets and increase stockholders' equity
Accounting: a. is often called the language of business b. measures business activities c. processes data into reports and communicates the data to decision makers d. is all of the above
d. is all of the above
ChemClean, Inc., in question 7 had a. net income of $62,000 b. net loss of $75,000 c. net income of $140,000 d. net income of $65,000
d. net income of $65,000 $140,000-75,000
General Motors wants to determine which division of the company -Chevrolet of GMC- is more profitable
enitity assumptions
The financial Accounting Standards Board is responsible for establishing:
generally accepted accounting principles
Wendy's, the restauraunt chain, sold a store location to Burger King, How can Wendy's determine the sale price of the store- by a professional appraisal, Wendy's cost, or the amount actually received from the sale?
historical cost
You get an especially good buy on a computer, paying only $500 when it normally costs $1,200. What is your accounting value for this computer?
historical cost
assets are usually reported at their a. current market value b. appraised value c. historical cost d. none of the above
historical cost
Characteristics of partnerships
income and loss of the partnership "flows through" to the partners
where can you find income tax expense
income statement
where can you find revenue
income statement
where can you find selling, general, and administrative expenses
income statement
A potential investor interested in evaluating a company's financial earning performance for the current period would probably examine which financial statements?
income statement only
where can you find net income
income statement, statement of retained earnings
On January 1, 2010, total assets for Liftoff Technologies were $125,000; on Decemeber 31,2010, total assets were $145,000. On Januaary 1, 2010, total liabilites were $110,000; on December 31, 2010, total liabilities were $115,000. What is the amount of the change and the direction of the change in Liftoff Technologies stockholders' equity for 2010?
increase of $15,000
Revenues are
increases in reatined earnings resulting from selling products or performing services
Verifiability means that the information:
must be capable of being checked for accuracy
Proprietorship
one owner proprietor is personally liable
historical cost principle
principle that states that assets and services should be recorded at their actual cost
transactions:
provide objective information about the financial impact on a company
Inflation has been around 5% for some time. Lake Carolina Realtors is considering measuring its land values in inflation-adjusted amounts.
stable monetary unit assumption
where can you find dividends
statement of retained earning, cash flow
Retained earnings appears on which of the following financial statements
statement of retained earnings and balance sheet
where can you find ending balance of retained earnings
statement of retained earnings and balance sheet,
Corporation
stockholders- generally many owners stockholders are not personally liable a corporation is a legal entity an "artificial person" in the eyes of the law
retained earnings
the amount of stockholders equity that the corporation has earned through profitable operation and has not given back to stockholders
When a company is purchasing long- term assets, this is a sign of growth. This information can be obtained by examining
the investing cash flows section of the statement of cash flows
The calculation of ending retained earnings considers beginning retained earnings, current net income or net loss, and dividends T/F
true
Partnership
two or more owners general partners are personally liable; limited partners are not
