ACC 2301 HW and Quiz questions

What is the most probable name of the statement below? Assets: Cash 10,000 Land 100,000 Truck 30,000 Total Assets 140,000 Liabilities: Loan 50,000 Equity Common Stock 85,000 Retained earnings 5,000 Total Liabilities and Shareholders' Equity 140,000

B. Balance Sheet Balance Sheet Statement contains tree main groups of accounts (balance sheet accounts): Assets, Liabilities and Shareholders equity. Total assets should be equal to total liabilities and shareholders equity.

The company paid $1 mln cash for a building. As a result of transaction:

C. Total assets remained unchanged Company paid $1mln cash, so one type of asset (Cash) decreased. At the same time, the company received another type of asset -a building +1mln. So, -1mln +1mln=0, so there were no change in total asset amount.

A document that is evidence of ownership in a business (i.e. a claim to a business' assets) is called

Common stock A bank note is evidence that a creditor has a claim against a business' assets. A letter of credit is evidence that a creditor has a claim against a business' assets. A financial statement is a record of a business' financial position and financial performance.

If total liabilities increased by $69,000 during a period of time and stockholders' equity decreased by $27,000 during the same period, then the amount and direction (increase or decrease) of the period's change in total assets is a(n)

D. $42,000 increase. Solution: Assets=Liabilities+ Equity $69,000 - $27,000 = $42,000 increase

Which of the following is the most appropriate and modern definition of accounting?

The information system that identifies, records, and communicates the economic events of an organization to interested users.

What type of account is an accounts receivable account?

Asset

What type of accounts are prepaid accounts?

Asset

What is the accounting equation?

Assets = Liabilities + Stockholders' Equity

Write Facebook's accounting equation as of December 31, 2016

C. 64,961 = 5,767 + 59,194 Assets = Liabilities + Shareholders Equity 64,961 = 5,767 + 59,194

The name of Financial Statement #3 is most probably

D. Balance Sheet

Identify what line item flows from the statement of retained earnings to the balance sheet

D. Ending retained earnings

What financial statement is the Dividends account associated with?

D. Statement of Retained Earnings

The name of Financial Statement #4 is most probably

E. Statement of Cash flow

Which financial statement element is the common stock account associated with?

Equity Common stock is an equity account. Common stock represents the amount of ownership and/or claims the owners have to the business' assets.

The company issues stock. This is what type of cash flow activity?

Financing Cash transactions with owners are financing activities. The cash is used to finance the operations of the business.

Please, calculate Net income based on the information provided: Salary expense 21,200 Rent expense 5,400 Retained earnings 52,000 Cash 10,000 Advertisement expense 3,000 Service revenue 50,700

21,100 Net income is the bottom line of the Income Statement. If net income is positive, that means that the company was profitable during accounting period. Net Income=Total revenues-Total Expenses Total Revenue=50,700 Total Expenses= 21,200+5,400+ 3,000= 29,600 Net income= 50,700-29,600=21,100 Cash is an asset (appears on the Balance Sheet). Retained earnings is an Equity account (appears in Statement of Changes in Equity and Balance Sheet accounts)

Based on the following data, Accounts payable.............................................................. $62,000 Accounts receivable.......................................................... 100,000 Cash............................................................................... 30,000 Inventory......................................................................... 138,000 Land............................................................................... 160,000 Common Stock ................................................................ 200,000 Revenue......................................................................... 80,000 Dividends........................................................................ 56,000 Expenses........................................................................ 40,000 What is the amount of net income?

40,000 Net Income = Total Revenues - Total Expenses= 80,000 - 40,000 = 40,000. Please, do not OVERTHINK this question.

What is Stockholders Equity? Assets=75,000 Liabilities=25,000

50,000 : Balance Sheet equation (Accounting equation) is Assets = Liabilities + Stockholders??? Equity Therefore, Stockholder???s Equity is Assets-Liabilities=75,000-25,000=50,000

Which of the following financial statements will be the most useful in evaluating company profitability?

A. Income Statement Income Statement has information about the company???s revenues and expenses. The bottom line of the Income Statement is Net Income, which is Total Revenues minus Total Expenses. When Net income is positive or Revenues exceed Expenses, the company is profitable in the accounting period under analysis. Similarly, when net income is negative, the company is in loss.

Over what period of time was net income/net loss (presented in the financial statement) earned?

B. For the period from January 1, 2016 to December 31, 2016

The name of Financial Statement #2 is most probably

B. Statement of Retained Earnings

A corporation has which of the following set of characteristics?

C. Easier to transfer ownership and raise funds, no personal liability

Identify what line item flows from the income statement to the statement of retained earnings

C. Net income

The name of Financial Statement #1 is most probably

D. Income Statement

What type of account is the unearned revenue account?

Liabilities

The company pays cash for insurance. This is what type of cash flow activity?

Operating Cash transactions dealing with routine, day-to-day activities are operating activities. The company buys insurance as a normal course of operating the business.

Prepaid Insurance is an asset

True

Based on the following information, Cash $10,000 Inventory $31,000 Loan $26,000 Equipment $18,000 Revenue $103,000 Common Stock $143,000 Dividends $81,000 Expenses $46,000 Land $100,000 What are total assets?

159,000 In this example, there are the following assets accounts- cash, inventory, equipment and Land. Thus, 10,000+31,000+18,000+100,000=159,000. Loan is a Liability account. Temporary accounts, such as Revenues, Expenses and Dividends will eventually be closed into Retained Earnings account (Equity account).

Account Amount, $ Cash $10,000 Inventory $7,400 Accounts payable $59,400 Equipment $144,400 Revenue $79,400 Prepaid rent $3,600 Unearned revenue $35,400 Notes payable $59,400 Common Stock $119,400 Dividends $57,400 Expenses $22,400 Accounts receivable $31,400 Prepaid insurance $50,400 What are total assets ?

247,200 Assets are cash, inventory, equipment, accounts receivable (accrued revenue) and all of the prepayments (deferred expenses, e.g. prepaid insurance and prepaid rent). 10,000+7,400+144,400+3,600+31,400+50,400

A company has to provide ALL available accounting information in the summarized format to current or potential investors.

False FALSE. There is a big body of accounting information that is confidential and is not subject to public disclosure.A publicly traded company has to disclose the Balance Sheet, Income Statement, Statement of Changes in the Shareholders Equity and Statement of Cash Flows with notes. The structure of the mentioned financial statements is set up by the accounting standards. The company may choose to disclose extra information voluntarily.

A business is usually involved in two types of activity—financing and investing.

False False. Business is usually involved in three types of activity: financing, investing and operating

Investing activities involve collecting necessary funds from investors

False False. Investing activities includes buying and selling long-term assets (PPE and investments). Collecting money from investors will constitute financing activity. The most typical mistake some students make, please, do not be one of them.

The company pays cash for a building. This is what type of cash flow activity?

Investing Feedback: Cash transactions dealing with long-term assets such as buildings, land, etc., are investing activities.

In a study session, a classmate makes this statement "Dividends are listed as expenses on the income statement." What is your best response to this statement?

Dividends represent a portion of corporate profits that are paid to the shareholders. They belong on the retained earnings statement. Dividends are reported in the Retained Earnings Statement

The balance sheet for Raymond Company shows total assets of $4,000, liabilities of $1,500, and retained earnings of $1,200. Based on this information, the amount of common stock must be:

1,300 Assets=Liabilities+Equity, Equity section has two accounts Common Stock (CS) and Retained earnings (RE), thus accounting equation could be re-written as: Assets=Liability+ CS+RE $4,000=$1,500 + ($1,200 +RE ) $4,000 - $1,500 - $1,200 = $1,300=RE

Jackson Company recorded the following cash transactions for the year: Paid $135,000 for salaries. Paid $60,000 to purchase office equipment. Paid $15,000 for utilities. Paid $6,000 in dividends. Collected $275,000 from customers. What was Jackson's net cash provided by operating activities?

125,000 Solution: Cash from operating activities includes revenue and expense related items: Cash collected from customers (revenue related)- cash paid for salary-cash paid for utility =$275,000 - $135,000 - $15,000 = $125,000

The motivation for an investor to provide resources to a business is:

. To gain on share appreciation and/or potentially receive a portion of the Income of the company in the future

Cash $10,000 Inventory $7,400 Accounts payable $59,400 Equipment $144,400 Revenue $79,400 Prepaid rent $3,600 Unearned revenue $35,400 Notes payable $59,400 Common Stock $119,400 Dividends $57,400 Expenses $22,400 Accounts receivable $31,400 Prepaid insurance $50,400 What are total liabilities?

154,200 Liabilities are all the payables (e.g. notes payables and accounts payables) and unearned revenues. Accounts payable is deferred expense and unearned revenue is deferred revenue.

A company's retained earnings at the beginning and ending of the accounting period were $100,000 and $120,000, respectively. Common stock at the end of the year was $90,000. If the company had dividends of $3,000 and revenues of $280,000, the amount of expenses must have been?

257,000 R/E end =R/E beg+Revenue-Expenses-Dividends R/E end =Retained Earnings at the end of the period R/E beg =Retained Earnings at the begining of the period So, by plugging the numbers we have: 120,000=100,000+280,000-Expenses-3,000 Expenses=100,000+280,000-3,000-120,000=257,000 While Common Stock stands for the amount invested by owners, the Retained earnings represent earned capital for investors. Naturally, earned capital increases when the company is profitable (net income is positive, which in turns means that revenues are bigger than expenses). Also, each time the company shares the profits with owners in form of Dividends, there is less earned capital left within the company, thus Retained earnings go down. In sum, at this point, we cover only three types accounts that may effect Retained Earnings: revenues (make Retained Earnings go up), expenses (make Retained Earnings go down) and dividends (make Retained Earnings go down).

Based on the following data, Accounts payable.............................................................. $62,000 Accounts receivable.......................................................... 100,000 Cash............................................................................... 30,000 Inventory......................................................................... 138,000 Land............................................................................... 160,000 Common Stock ................................................................ 200,000 Revenue......................................................................... 80,000 Dividends........................................................................ 56,000 Expenses........................................................................ 40,000 what is the amount of total assets?

428,000 Assets accounts from the list: Cash, Accounts receivable, Inventory, Land 30,000 + 100,000 +138,000 + 160,000 = 428,000 Revenue is not an asset account!

Dawson Corporation has the following information available for 2011: (in millions) Issued common stock $45 Paid dividends $75 Net income $130 Beginning Common Stock balance $575 Beginning Retained Earnings balance $425 Based on this information, what is Dawson's Retained Earnings balance at the end of the year?

480 End RE = Beg RE + Net Income - Dividends End RE =$425 + $130 - $75 = $480

What is Assets? Liabilities=20,000 Common Stock=15,000 Retained Earnings=23,500

58,500 Balance Sheet equation (Accounting equation) is Assets = Liabilities + Stockholders??? Equity Further, Stockholder???s Equity has two components- Common Stock and Retained Earnings, thus Assets=Liabilities+Common Stock and Retained Earnings=20,000+15,000+23,500=58,500

Which account is associated with the LIABILITIES financial statement element.

A. "Payable" accounts There are several "payable" accounts (e.g. Accounts Payable, Salaries Payable, Notes Payable, etc), Payable accounts are liability accounts that are associated with the liabilities financial statement element. Cost of Goods Sold is an expense account associated with the Income Statement. Prepaid Rent and Inventory are both asset accounts.

Which ACCOUNT is associated with the EQUITY financial statement element. Note: Equity is also presented as Stockholders' Equity or Owners' Equity on the financial statements.

A. Retained earnings Notes payable is an account associated with the liabilities financial statement element. Revenue is an account AND a financial statement element on the income statement. It flows through equity (i.e. retained earnings) but it is not an equity account. Cash is associated with the asset financial statement element.

Liabilities are:

A. claims of creditors Liabilities are amounts owed to creditors in the form of debt and other obligations. The owner's interest or claims of investors (B and C are absolute synonymous) is represented by Equity.

Generally accepted accounting principles (GAAP) are measurement rules for

B. financial accounting. GAAP are the rules for financial reporting. Reporting that is provided for the external parties (creditors, investors, potential investors). Managerial accounting (e.g. budgets, forecasts) is guided by specifications set up by each company management and vary greatly from company to company. Tax rules (e.g. Tax code) shape tax accounting.

Jack and Jill form a partnership. Jack runs the business in New York, while Jill vacations in Hawaii. During the time Jill is away from the business, Jack increases the debts of the business by $20,000. Which of the following statements is true regarding this debt?

C. Both Jack and Jill are personally liable for the business debt.

Which account is associated with the ASSET financial statement element.

Cash Notes payable and salaries payable are associated with the liabilities financial statement element Retained earnings is associated with the stockholders' equity (also called owners' equity or equity) financial statement element.

At the beginning of the year BobCat Inc. assets were $650,000, liabilities were $110,000, and common stock was $90,000. Net income for the year was 280,000. Dividends of $220,000 were paid during the year. What is the ending balance for retained earnings in 2012?

D. $510,000 End RE = Beg. RE + Net Income - Dividends RE ending-? Are all of the components provided? No, RE beginning is not directly stated in the problems. So, we need to find RE beg. first from the accounting equation. Beg. Assets .=beg. Liabilities +beg. CS.+beg.RE Beg. RE: $650,000 = $110,000 + ($90,000+RE beg) so Beg RE = $450,000 End RE = Beg. RE + Net Income - Dividends =450,000 + $280,000 - $220,000 = $510,000

Which of the following is an asset?

D. Accounts Receivable Assets are resources owned by a business, that will bring future benefits to the company. Please, know the names of the assets accounts and what they represent. Accounts Receivable is an asset represent the amount that customers own to the business for the services or goods that were already provided to the customers. The business will receive cash (=benefit) in the future from customers. Service Revenue is an Income statement account. Notes Payable is a liability account. All payables (e.g. salary payable, interest payable, tax payable etc.) are liability accounts. Liabilities lead to benefits outflow from the company in the future. E.g. Company has to pay cash to the bank (notes payable) or to the employees (salary payable) in the future. Supplies Expense is an Income statement account. If you see "revenue" or "expense" in the name of the account, it is a signal that it is an income statement account (thus not Assets, Liability or Equity, that are represented in the Balance Sheet).

An income statement

D. presents the revenues and expenses for a specific period of time. The income statement reports a company's revenues and expenses and resulting net income or loss for a period of time. The changes in retained earnings for a specific period of time is summarized in the Statement of Retained earnings. Balance Sheet reports the assets, liabilities, and stockholders' equity at a specific date. Please, know the structure (components) of each of four financial statements

Pick FALSE statement

E. Dividends paid will decrease revenue accounts Dividends are not an expense. Dividends will not decrease revenue accounts (Revenues only goes down when they transferred into Retained earnings). The only statements where you can see dividends for the year is Statement of Retained earnings. Statement of Cash flow can also have "dividends paid" in the financing activity section (that amount represent cash paid for dividends).

Which account is associated with the ASSET financial statement element.

Land Expenses and net income are accounts AND are financial statement elements that are on the income statement. Accounts payable is an account associated with the liabilities financial statement element.