Accounting Final Quizzes

(Ch.1) Orca Company recently ended the 2021 fiscal year, its first year of operations. Orca Company reports the following:($) at End of 2021 ($) at Beginning 2021 Total Assets $520,000 $0 Total Liabilities $275,000 $0 Total Revenues $321,000 $0 Total Expenses $186,000 $0 Dividends Paid $50,000 $0 What is the amount of Common Stock issued by Orca Company in 2021?

$ 85,000 (To solve: Equity=Common Stock (CS) + Ending Retained Earnings (ERE)... Use A=L+E to find equity (520,000=275,000+E... E= 245,000)... Then, ERE=BRE+ Net Income (NI)-Dividends (Div) (ERE=0+(321,000-186,000)-50,000= 85,000... Then, 245,000=CS+85,000.... COMMON STOCK= 160,000

(Ch.1) Write the "Fundamental Accounting Equation" from the Balance Sheet below:

Assets = Liabilities + Equity

(Ch.2) XYZ company provides cleaning services to customers. Recently, a customer paid XYZ $3,000 to clean their office building in the future. What are the effects from this transaction? A. Assets increase by $3,000 and Liabilities increase by $3,000 B. Assets increase by $3,000 and Revenues increase by $3,000 C. Assets decrease by $3,000 and Liabilities decrease by $3,000 D. Assets increase by $3,000 and Equity increase by $3,000 E. There is no net change to any account buckets

A

(Ch.3) On December 31st, Cougar Services wants to record its closing entries. Which of the following correctly lists the results of Cougar Services Revenue closing entry? A. Revenues will be closed with a debit and this increases Retained Earnings B. Revenues will be closed with a credit and this increases Retained Earnings C. Revenues will be closed with a debit and this decreases Retained Earnings D. Revenues will be closed with a credit and this decreases Retained Earnings E. None of the Above are Correct

A

(Ch.8) ABC Company had the following balances on December 31st, 2021: · Cash $100,000 · Inventory $25,000 · Accounts Receivables $15,000 · Supplies $5,000 · Short-Term Investments $20,000 · Total Current Liabilities $100,000 Which of the following is ABC Company's Acid Test Ratio? A. 1.35 B. 1.40 C. 1.45 D. 1.60 E. 1.65

A.

(Ch.6) Babbling Brooke recently purchased 1,000 units of inventory for $73 per unit. Later, Babbling sold that inventory on account for $130 per unit with terms 5/15, n/30. The customer paid Babbling Brooke 8 days after the sale. Record the Journal Entry for each of these transactions (i.e., the purchase of inventory, the sale, and the collection)

1. Inventory____$73,000 Cash____$73,000 2. Account Receivable____$130,000 Cost of Goods Sold____$73,000 Sales Revenue________$130,000 Inventory________$73,000 3. Cash__________$123,500 Sales Discount____$6,500 Accounts Receivable________$130,000

(Ch.7) Betty DeRose Inc. has four intangibles. Below are the value and registered life for each: Useful Life Value Trademark 10 $20,000 Goodwill indefinite $50,000 Patent 15 $30,000 Copyright 20 $80,000 Using straight-line amortization, how much amortization should be recorded in year 1? A. $4,000 B. $6,000 C. $8,000 D. $13,000 E. $20,000

B.

(Ch.7) Which of the following would be a capitalized cost for a company's fixed assets? A. Repair of a machine's broken piece B. Installation of an upgraded transmission in a truck C. Maintenance on a building's foundation D. Adding a sprinkler system to a plot of land E. None of the above are capitalized costs

B.

(Ch.7) XYZ Company recently purchased a new bulldozer for $40,000. The building is estimated to have a residual value of $3,000 and a 4-year useful life. XYZ chooses to depreciated using double-declining depreciation. How much depreciation expense should be recorded in year 4? A. $2,000 B. $2,500 C. $5,000 D. $10,000 E. $20,000

B.

(Ch.8) Which of the following is the correct interpretation of a current ratio of 2.00? A. A company has twice as many current assets as long-term assets B. For every $1.00 of current liabilities, a company has $2.00 of current assets available C. Should a company be called upon to pay all its debts immediately, it has $2.00 in cash available for each $1.00 of debt D. For every $1.00 of current assets, a company has $2.00 of long-term assets E. None of the Above are the correct interpretation

B.

(Ch.5) ABC Company decided to utilize the aging method for calculating its 2021 Bad Debt Expense and Allowance for Uncollectible Accounts. The schedule ABC Company developed based on its historical precedent is found below: Schedule Balance (%) Current (not beyond due date) 80,000 2% 1 - 30 days past due 22,000 4% 31 - 60 days past due 9,000 8% 61 - 90 days past due 5,000 25% 90+ days past due 8,000 75% Assuming ABC Company began the year with a $3,000 debit balance in the Allowance for Uncollectible Accounts, what is the correct journal entry to record 2021 bad debt?

Bad Debt Expense _____ 13,450 Allowance for Uncollectible Accounts____ 13,450

(Ch.7) Buckeye Company recently purchased a lakefront property to use for company retreats. Included in the purchase were a boat, land, a building, and a truck. The following are the market value of the various fixed assets: · Boat = $90,000 · Land = $140,000 · Building = $120,000 · Truck = $50,000 If Buckeye paid $360,000 for the fixed assets above, what is the value of the building? A. $45,000 B. $81,000 C. $108,000 D. $120,000 E. $126,000

C.

(Ch.8) Veruca Salts takes out a loan of $800,000 on April 1st, 2021 with an interest rate of 5%. What is the amount of interest expense Veruca will have to record in 2031 when the loan payment is made? A. $40,000 B. $30,000 C. $10,000 D. $400,000 E. $800,000

C.

(Ch.8) Which of the following is (are) not included in employees' salaries? A. Employee Contributions to an optional 401K or other retirement account B. Wages withheld by the employer to be paid as income tax C. The employee portion of the unemployment tax D. The employee portion of the FICA tax E. All of the Above are included in employees' salaries

C.

(Ch.1) MT Glass recently decided to start a business. MT wants total control over the functions of the business and is not worried about liabilities concerns; moreover, MT is sure it will be profitable and wants to start as quickly as possible with the fewest regulation and least amount of taxes. Which business organization should MT use? A. Partnership B. Limited Liability Corporation C. Corporation D. Sole Proprietorship E. A Good Company

D

(Ch.1) XYZ Company reported Revenues of $150,000 during 2021 and Expenses of $115,000 during 2021. If XYZ Company began operations in 2021, paid $0 in Dividends, and sold Common Stock for $240,000 in 2021, What is XYZ Company's Total Equity in 2021? A. $ 35,000 B. $ 240,000 C. $ 265,000 D. $ 275,000 E. $ 290,000

D

(Ch.2) XYZ Company pays out $5,000 of dividends to its corporate shareholders. Which of the following is the correct adjustments to the Balance Sheet? A. Assets increase by $5,000 and Equity increase by $5,000 B. Assets decrease by $5,000 and Liabilities decrease by $5,000 C. No Net Change D. Assets decreased by $5,000 and Equity decrease by $5,000 E. Assets increase by $5,000 and Liabilities increase by $5,000

D

(Ch.3) ABC Company paid $4,000 for supplies to use in February. On February 28th, only $1,750 of supplies remained. What adjusting entry must ABC record? A. Debit - Supplies, $4,000 and Credit - Supplies Payable, $4,000 B. Debit - Supplies Expense, $1,750 and Credit - Supplies, $1,750 C. Debit - Supplies Payable, $2,250 and Credit - Supplies, $2,250 D. Debit - Supplies Expense, $2,250 and Credit - Supplies, $2,250 E. Debit - Supplies Payable, $1,750 and Credit - Supplies, $1,750

D

(Ch.3) On December 31st, Cougar Services has the following Revenues and Expenses 12/31/2022 Service Revenue $ 365,000 Interest Revenue $ 42,000 Advertising Expense $62,000 Salaries Expense $179,000 Rent Expenses $50,000 Utilities Expense $12,500 Which of the following represents the change to Retained Earnings? A. Retained Earnings has no net change B. Increase by 19,500 C. Increase by 61,500 D. Increase by 103,500 E. Increase by 407,000

D

(Ch.8) Reid Inc. is preparing to repay a loan it received from MT Bank. The loan had a principal value of $120,000 and accrued interest at a 5% rate. What is the entry Reid will record for repayment of the principal of the loan on May 31st, 2021? A. Note Payable_____$120,000 Cash____$120,000 B. Cash____$120,000 Note Payable____$120,000 C. Cash__________$120,000 Interest Expense___$2,500 Note Payable_____$120,000 Interest Payable_____$2,500 D. Note Payable___$120,000 Interest Expense___$2,500 Cash_____________122,500 E. Note Payable___$120,000 Interest Expense___$2,500 Cash_____________120,000 Interest Payable_____$2,500

D.

(Ch.7) ABC Company recently bought a new truck with the following specifications: Cost 80,000 Useful Life 8 years Residual Value $5,000 Expected Mileage 50,000 miles Considering the mileage schedule below, ABC Company wants to maximize its depreciation expense to have more cash on hand in each of the first three years. Determine which method ABC Company should use in each of those years. Year Usage Year 1 12,000 Year 2 15,000 Year 3 6,000 Year 4 5,000 Year 5 4,000 Year 6 3,000 Year 7 3,000 Year 8 3,000 Answers (method): Year 1 Year 2 Year 3

Depreciation per Unit = (Book Value - Salvage )/Units = (80,000-5,000)/50,000 = $1.50/unit Year 1: 1.50(12,000) = 18,000 Year 2: 1.50(15,000) = 22,500 Year 3: 1.50(6,000) = 9,000

(Ch.1) Which of the following Financial Statement "buckets" represent Claims to Resources? A. Assets B. Liabilities C. Equity D. Both A&C E. Both B&C

E

(Ch.3) ABC Company provides services to a local client on January 20th; however, the client was not liquid and needed to pay the balance on account. On January 26th, the client paid ABC Company. Which of the following statements related to this transaction is true?A. Using Accrual Accounting, ABC Company records revenue on January 20th B. Using Accrual Accounting, ABC Company records revenue on January 26th C. Using Cash Accounting, ABC Company records revenue on January 20th D. Using Cash Accounting, ABC Company records revenue on January 26th E. Both A & D are correct

E

(Ch.1) Which of the following numbers must be equal (i.e. the same amount)? A. Assets B. Liabilities & Equity C. End of Year Cash from the Statement of Cash Flows D. Cash on the Balance Sheet E. A = B and D = C

E-A= B & D=C (b/c A=L+E & YE Cash from SCF= Cash on BS)

(Ch.6) Which of the following is not considered an operating expense? A. Cost of Good Sold B. Income Tax Expense C. Salaries Expense D. Utilities Expense E. Both A&B are NOT operating expenses

E.

(Ch.7) Which of the following is a feature of MACRS depreciation? A. Congress approved MACRS and it is allowed by the IRS B. It results in high depreciation expense amounts in early years to lower income tax costs as it is a combination of double-declining and straight-line methods. C. It is acceptable for GAAP purposes and is commonly used in financial reporting D. All of the Above are features of MACRS E. Only A&B are features of MACRS

E.

(Ch.7) Which of the following is true related to fixed assets? A. The cost of fixed assets is allocated over time using depreciation, other than land B. Fixed assets are long-term assets on the balance sheet C. Fixed assets are valued using the historical cost concept, where the dollar value it tied to the amount paid for the asset D. Fixed assets can appreciate where the market value is greater than its value on the balance sheet value E. All of the Above are true related to fixed assets

E.

(Ch.8) Buckeye Company recently hired a law firm to litigate on its behalf which cost $8,000. Upon review, the law firm says that Buckeye Company has a reasonably possible chance of paying an estimated $35,000 to the plaintiff. Which of the following is the correct amount to record for the contingent liability? A. $8,000 B. $17,500 C. $35,000 D. $43,000 E. No entry is required

E.

(Ch.8) On January 1st, 2017, Zoey takes out a note payable of $60,000 with 4% interest. The note is due on December 31st, 2021. If it is currently April 30th, 2021 and Zoey accrues interest monthly and pays its interest annually, what is Zoey's amount of current liabilities related to the note? A. $800 B. $10,400 C. $12,800 D. $60,000 E. $60,800

E.

(Ch.8) Under which of the following circumstances is only a disclosure required for a contingent liability? A. A reasonably possible payment of $50,000 B. A probable payment of $15,000 C. A remote possibility of paying an inestimable amount D. A probable payment of an inestimable amount E. Both A & D are correct

E.

(Ch.8) XYZ Company has total employee salaries of $500,000 in 2020. What is the amount of FICA Tax Payable that XYZ Company will record? A. $7,250 B. $31,000 C. $38,250 D. $62,000 E. $76,500

E.

(Ch.6) 7D Incorporated uses a periodic inventory system where it updates its Cost of Goods Sold balance and Ending Inventory based on inventory movements quarterly. The following happened during the first quarter of 2021, its first year of operations: · 1/1 - Purchased 400 units of inventory for $40 per unit · 1/15 - Purchased 200 units of inventory for $35 per unit · 1/20 - Sold 150 units of inventory for $100 per unit · 1/28 - Purchased 200 units of inventory for $42 per unit · 2/10 - Sold 300 units of inventory for $100 per unit · 2/15 - Purchased 150 units of inventory for $45 per unit · 2/22 - Sold 100 units of inventory for $100 per unit · 3/1 - Purchased 400 units of inventory for $38 per unit · 3/12 - Sold 200 units for $100 per unit · 3/15 - Purchased 200 units of inventory for $32 per unit · 3/25 - Sold 200 units of inventory for $100 per unit Using the transaction information above, complete the below table assuming $30,000 of SG&A Expense and recommend which cost allocation method 7D Incorporated should use if it wants to MAXIMIZE Net Income/Gross Profit (i.e., minimize Cost of Goods Sold). FIFO LIFO Weighted Avg Sales Revenue Cost of Good Sold Gross Profit SG&A Expenses Net Income Ending Inventory

FIFO LIFO Weighted Avg Sales Revenue Cost of Good Sold Gross Profit SG&A Expenses Net Income Ending Inventory

(Ch.1) Which activity on the Statement of Cash Flows measures the day-to-day, primary transactions made by a company? A. Operating Activities B. Financing Activities C. Income Activities D. Investing Activities E. Revenue Activities

A

(Ch.8) Charlie Bites takes out a loan of $240,000 with 10% interest on May 19th, 2021. If Charlie will begin paying interest on the loan starting in June, how much interest will he record for 2021? A. $14,000 B. $16,000 C. $12,000 D. $18,000 E. $10,000

A.

(Ch.3) Orca Company recently incurred 4 transactions on August 1st, 2021: 1) Pays Rent for the next 6 months at a cost of $18,000 2) Purchases liability insurance for one year worth $1,440 3) Pays a Dividend of $50,000 to shareholders 4) Takes out a loan of $320,000 with 8% interest Record all necessary entries adjusting entries (closing entry for the Dividends) for the above transactions at December 31st. Debit Account(s) Credit Account(s) Debit Amount(s) Credit Amount(s)

1) Initial Entry Prepaid Rent____ $18,000 (A ^) Cash_________ $18,000 (A Down) Next, determine what is happening at December 31st...we have USED 5 months of rent. Calculate the amount of prepaid rent FOR (count on your fingers) 5 months and then record the entry reducing the Prepaid Rent account. $18,000/6 = $3,000 Per Month $3,000 * 5 = $15,000 for the 5 months. Rent Expense____$15,000 (Exp ^) Prepaid Rent ____ $15,000 (A Down) 2) Initial Entry Prepaid Insurance____ $1,440 (A ^) Cash_________ $1,440 (A Down) Next, determine what is happening at December 31st...We have used 5 months of our insurance coverage. Calculate prepaid insurance FOR 5 months and record the entry reducing the Prepaid Insurance account $1,440/12 = $120 Per Month $120 * 5 = $600 for the 5 months. Insurance Expense____$600 (Exp ^) Prepaid Insurance ____ $600 (A Down) 3) Initial Entry Dividends____ $50,000 (Contra Equity ^, so Equity Down) Cash_________ $50,000 (A Down) Next, determine what is happening at December 31st...We need to close out Dividends Retained Earnings____$50,000 (Equity Down) Dividends________ $50,000 (Contra Equity Down, so Equity ^) 4) Initial Entry Cash____ $320,000 (A ^) Notes Payable_____ $320,000 (L ^) Next, determine what is happening at December 31st...We need to record interest Interest = Principal * Rate * Time Interest = 320,000 * 0.08 * 5/12 ß Note that this 5/12 is the number of months passed (count on your fingers)/12 Interest = 10,666.67 Interest Expense____$10,666.67 (Exp ^) Interest Payable_____ $10,666.67 (L ^)

(Ch.2) Orca Company recently incurred 5 transactions which they need you, their head of financial accounting, to record to the ledger. Please review the following transactions and record the appropriate entries: 1) Provides services to customers for $10,000; however, the customer will pay later (the services are on account) 2) Takes out a loan of $300,000 which they plan to use to expand business operations but have not started that expansion. 3) A customer paid Orca Company $17,500 in cash for a service which Orca Company will perform next week. 4) Orca Company recorded salaries for its employees of $375,000 which will be paid later. 5) Orca Company sold $250,000 of Common Stock to finance operations and paid out $10,000 of Dividends on those shares. Debit Account(s) Credit Account(s) Debit Amount(s) Credit Amount(s)

1)Accounts Receivable ____ $10,000 (A^)Service Revenue ______ $10,000 (R^) 2)Cash ____ $300,000 (A^)Note Payable ______ $300,000 (L^) 3)Cash ____ $17,500 (A^)Deferred Revenue ____ $17,500 (L^) 4)Salaries Expense ____ $375,000 (Exp^)Salaries Payable ______ $375,000 (L^) 5)Cash _______ $240,000 (A^)Dividends ___ $10,000 (C. Eq^)Common Stock ____ $250,000 (Eq^)

(Ch.6) ABC Company had the following related to its 2021 inventory: · Beginning Balance: $62,000 · Ending Balance: $71,000 · Cost of Goods Sold: $250,000 · Sales Revenue: $395,000 What is ABC Company's amount of inventory purchased during 2021? A. $259,000 B. $265,000 C. $275,000 D. $350,000 E. $388,000

Answer: A. $259,000

(Ch.6) Buckeye Company recently began operations. To ensure greater cash on hand, Buckeye wants to increase its cost of goods sold through selecting the appropriate cost allocation method for its inventory. Currently, there is a running period of deflation in Buckeye Company's inventory costs. Which cost method should Buckeye Company choose to increase Cost of Goods Sold; thereby decreasing the ending inventory. A. First-In, First-Out B. Last-In, First-Out C. Specific Identification D. Weighted Average

Answer: A. First-In, First-Out

(Ch.6) West Ham Corporation purchased goods from its supplier. The stated terms of delivery were FOB Shipping Point. Which party had ownership of the goods while in transit? A. West Ham Corporation B. The Inventory Supplier C. The Common Carrier D. The Government E. All of the Above

Answer: A. West Ham Corporation

(Ch.6) Pullman Professionals had the following inventory data relevant to fiscal year 2021: · Beginning Inventory = $40,000 · Ending Inventory = $32,000 · Cost of Goods Sold = $657,000 What is Pullman Professionals Days in Inventory for 2021? A. 20.53125 B. 20.00000 C. 18.25000 D. 16.42500 E. 15.25000

Answer: B. 20.00000

(Ch.6) Cougar Corporation had the following inventory movements during May 2021, its first year of operations: · 5/2 - Purchases 100 units @ $25 per unit · 5/10 - Purchases 150 units @ $22 per unit · 5/15 - Purchases 100 units @ $28 per unit · 5/19 - Sells 200 units for $60 per unit · 5/22 - Purchases 150 units @ $20 per unit · 5/30 - Sells 250 units for $60 per unit Which of the following is the correct amounts of Cost of Goods Sold and Ending Inventory for May 2021 using the Weighted Average Method? A. Cost of Goods Sold = $10,600 Ending Inventory = $1,160 B. Cost of Goods Sold = $10,600 Ending Inventory = $1,000 C. Cost of Goods Sold = $10,350 Ending Inventory = $1,250 D. Cost of Goods Sold = $10,440 Ending Inventory = $1,160 E. Cost of Goods Sold = $10,350 Ending Inventory = $1,160

Answer: B. COGS = 10,440; Ending Inventory = 1,160

(Ch.6) Cougar Corporation had the following inventory movements during May 2021, its first year of operations: · 5/2 - Purchases 100 units @ $25 per unit · 5/10 - Purchases 150 units @ $22 per unit · 5/15 - Purchases 100 units @ $28 per unit · 5/19 - Sells 200 units for $60 per unit · 5/22 - Purchases 150 units @ $20 per unit · 5/30 - Sells 250 units for $60 per unit Which of the following is the correct amounts of Cost of Goods Sold and Ending Inventory for May 2021 using the FIFO Method? A. Cost of Goods Sold = $30,000 Ending Inventory = $1,000 B. Cost of Goods Sold = $10,600 Ending Inventory = $1,000 C. Cost of Goods Sold = $10,350 Ending Inventory = $1,250 D. Cost of Goods Sold = $8,600 Ending Inventory = $1,000 E. Cost of Goods Sold = $12,600 Ending Inventory = $1,250

Answer: B. COGS = 10,600, Ending Inventory = $1,000

(Ch.6) That Company purchased 500 units of inventory for $50 per unit. That Company utilizes very conservative accounting methods and recently learned the inventory was currently on the market for $42 per unit. What entry should That Company record related to writing its inventory down to market value (i.e. using the lower of cost or market)? A. Inventory_____$4,000 Cost of Goods Sold____$4,000 B. Cost of Goods Sold____$4,000 Inventory____$4,000 C. Cost of Goods Sold____$21,000 Inventory____$21,000 D. Inventory____$21,000 Cost of Goods Sold____$21,000 E. Cash____$8,000 Cost of Goods Sold____$8,000

Answer: B. Cost of Goods Sold_________$4,000 Inventory______$4,000

(Ch.6) Cougar Corporation had the following inventory movements during May 2021, its first year of operations: · 5/2 - Purchases 100 units @ $25 per unit · 5/10 - Purchases 150 units @ $22 per unit · 5/15 - Purchases 100 units @ $28 per unit · 5/19 - Sells 200 units for $60 per unit · 5/22 - Purchases 150 units @ $20 per unit · 5/30 - Sells 250 units for $60 per unit Which of the following is the correct amounts of Cost of Goods Sold and Ending Inventory for May 2021 using the LIFO Method? A. Cost of Goods Sold = $30,000 Ending Inventory = $1,000 B. Cost of Goods Sold = $10,600 Ending Inventory = $1,000 C. Cost of Goods Sold = $10,350 Ending Inventory = $1,250 D. Cost of Goods Sold = $8,600 Ending Inventory = $1,000 E. Cost of Goods Sold = $12,600 Ending Inventory = $1,250

Answer: C. COGS = 10,350, Ending Inventory = $1,250

(Ch.6) Betty DeRose Motor Warehouse sells luxury vehicles. Commonly, Betty sells less than a dozen cars each week with each vehicle selling for over $70,000 and costing Betty around $40,000 on average to add to its inventory. Which accounting method would be recommend for Betty due to its high accuracy and Betty's low volume? A. First-In, First-Out B. Last-In, First-Out C. Specific Identification D. Exact Item E. Weighted Average

Answer: C. Specific Identification

(Ch.6) Which of the following is NOT a manufacturing costs used to calculate the cost of goods manufactured? A. Common Costs B. Direct Materials C. Direct Labor D. Selling & Administrative E. All of the Above are manufacturing costs

Answer: D. Selling & Administrative

(Ch.4) Which of the following is/(are) attributes of the Statement of Cash Flow ("SCF")? A. SCF eliminates accruals used in creating the Income Statement and Balance Sheet. B. SCF allows investors to have greater insight into the potential future revenues and expenses a firm may have because items which would not yet be recorded in revenue are present in SCF. C. SCF gives insight into a firm's solvency and liquidity by demonstrating how much of a firms operations involve cash transactions and how much cash is being collected by the firm. D. Provides good comparability between firms as the use of Cash Accounting normalizes accounting procedures where accrual accounting involves management estimates and different management choices (such as different inventory methods) E. All of the above are attributes of the SCF

Answer: E - All of the Above > Review SCF Lecture material

(Ch.6) Which of the following is not considered (i.e., added or subtracted) in the cost of inventory and, later, used for calculating the cost of goods sold? A. Freight-In B. Inventory Purchases C. Purchase Returns & Allowances D. Beginning Inventory E. Freight-Out

Answer: E. Freight-Out

(Ch.1) Which of the following are the two primary, external shareholders which provide capital for businesses? A. Customers, Regulators B. Creditors, Investors C. Managers, Employees D. Creditors, Regulators E. Customers, Investors

B

(Ch.2) ABC Company purchase a new equipment which costs $50,000 by putting $5,000 down and taking out a note payable for the remaining $45,000. What is the net effect to assets? A. Increase by $50,000 B. Increase by $45,000 C. No Net Change D. Decrease by $45,000 E. Decrease by $50,000 Equipment ___ $50,000 Cash ___________________$5,000 Note Payable ____________$45,000

B

(Ch.1) ABC Company reported a Net Income of $50,000 in 2021. In addition, ABC Company reported it paid dividends of $8,000 in 2021. If ABC Company began 2021 with $120,000 of Retained Earnings, what amount of Retained Earnings would ABC report at the end of 2021? A. $ 178,000 B. $ 170,000 C. $ 162,000 D. $ 128,000 E. $ 120,000

C

(Ch.2) ABC Company sells Common Stock for $20,000 to help finance its goals. What is the entry ABC Company must record in its journal entry? A. Debit - Cash for $20,000; Credit - Investment for $20,000 B. Debit - Investment for $20,000 Credit - Cash for $20,000 C. Debit - Cash for $20,000 Credit - Common Stock for $20,000 D. Debit - Investment for $20,000 Credit - Common Stock for $20,000

C

(Ch.2) Which of the following is the correct interpretation of a contra-asset account based on our class definition? A. An account which fits into the asset bucket, but has a debit normal balance B. An account which is NOT an asset because it has a credit normal balance C. An account which fits into the asset bucket, but has a credit normal balance D. An account which is NOT an asset because it has a debit normal balance E. An account which is NOT an asset because it does not fit the asset bucket

C

(Ch.3) On January 31st, XYZ Company recorded a need to pay $425,000 for salaries for its employees related to the work performed during January. A week later, on February 7th, XYZ Company pays the salaries. What is the Debit for the journal entry XYZ Company would make on February 7th. A. Cash _____________ $425,000 B. Salaries Expense ____$425,000 C. Salaries Payable_____$425,000 D. Salaries Notes_______$425,000 E. Service Revenue_____$425,000

C

(Ch.4) The Sarbanes-Oxley Act of 2002 includes which of the following provisions? A. It is unlawful for auditors of public companies to provide certain non-audit services to their public company audit clients B. Audit Partner Rotation must occur every 5 years C. Auditors are hired by Company Management and must be independent of management D. All of the above E. Only A & B are provisions of SOX.

Explanation: Per Lecture, we had 8 new provisions of SOX. How many of these are among those 8 provisions?... Let's review the provisions and the key points of each: Oversight Board: Established the PCAOB which establishes standards for public accounting Corporate Executive Accountability: Management must certify the appropriateness of financial statements & disclosures Non-Audit Services: It is unlawful for auditors to perform certain non-audit services for clients Retention of Workpapers: Auditors must retain workpapers for 7 years Auditor Rotation: LEAD AUDIT PARTNERS must rotate off clients every 5 years Conflicts of Interest: Cannot audit a firm whose chief executives were on audit team the year before. Hiring Auditors: PERFORMED BY THE AUDIT COMMITTEE not management Internal Controls: Section 404: -Management must asses the effectiveness of I.C.'s affecting financial reporting -External auditors express an opinion on this assessment being fairly stated Answer: Answer: E - Only A & B are provisions (not C because the AUDIT COMMITTEE hires auditors, not management)

(Ch.4) The Sarbanes-Oxley ("SOX") Act of 2002 includes which of the following provisions? A. The PCAOB which establishes standards for auditing and other financial statement activities. B. The audit retention rule that auditors must retain workpapers for 5 years. C. Section 404 on Internal Controls stating companies must assess internal controls and external auditors must express opinions on management's assessment. D. All of the above E. Only A & C are provisions of SOX

Explanation: Per Lecture, we had 8 new provisions of SOX. How many of these are among those 8 provisions?... Let's review the provisions and the key points of each: Oversight Board: Established the PCAOB which establishes standards for public accounting Corporate Executive Accountability: Management must certify the appropriateness of financial statements & disclosures Non-Audit Services: It is unlawful for auditors to perform certain non-audit services for clients Retention of Workpapers: Auditors must retain workpapers for 7 years Auditor Rotation: LEAD AUDIT PARTNERS must rotate off clients every 5 years Conflicts of Interest: Cannot audit a firm whose chief executives were on audit team the year before. Hiring Auditors: PERFORMED BY THE AUDIT COMMITTEE not management Internal Controls: Section 404: -Management must asses the effectiveness of I.C.'s affecting financial reporting -External auditors express an opinion on this assessment being fairly stated Answer: E - Only A & C are provisions (not B because retention is for 7 years not 5)

(Ch.4) Which of the following is the correct interpretation of the control of Separation of Duties? A. Accounting records must be accessible only to authorized personnel. B. Activities requiring authorization should be separated among employees C. Verifying of assets periodically to see if they match accounting records. D. Actual performance must be measured against expected performance E. Employees must be appropriately trained for the job they perform

Explanation: Per Lecture: Activities such as authorizing transactions, recording transactions, and maintaining control of the related assets should be separated among employees Answer: B. Activities requiring authorization should be separated among employees

(Ch.4) Which of the following is NOT included in the fraud triangle? A. Motivation - feeling a need to commit fraud such as financial distress B. Opportunity - a situation arises which allows for fraud to occur C. Collusion - committing fraud requires the assistance of a second party D. Rationalization - perceived justification for the fraudulent act. E. All of the Above are included in the fraud triangle.

Explanation: Per lecture, the fraud triangle is: Opportunity Motivation Rationalization Answer: C. Collusion - committing fraud requires assistance of a second party

(Ch.5) Which of the following is NOT a reason a company would choose to sell on credit? A. Selling on credit is a more customer-friendly or buyer-friendly approach B. Customers always pay back 100% of what is owed C. Offering sales on credit can attract more customers D. The net gain of more sales outweighs the potential loss on uncollected receivables E. All of the above are reasons a company would choose to sell on credit

Explanation: Per lecture, we know the following about why companies sell on credit: 1)It is customer-friendly 2)This customer-friendly approach is expected to drive-up sales 3)The increased sales should benefit the company by outweighing any potential write-offs of receivables Answer: B. Customers always pay back 100% of what is owed

(Ch.4) If each is a cash transaction, which of the below is/are Financing Cash Outflow(s)? A. Payment of interest on a loan B. Lending money via a note to another company C. Repayment of a note payable D. Taking out a note payable from the bank E. Both C & D are financing cash outflows

Explanation: Recall that Financing Cash Flows affect the long-term liabilities and equity sections of the balance sheet; however, •payment and collection of interest is NOT financing (operating) •RECEIVING dividends is NOT financing (operating) •lending notes is NOT financing (it is investing) Answer: C. - Repayment of a note payable (Not D as that is a cash INFLOW)

(Ch.4) ABC Company records the following transactions during 2021: · $200,000 of revenue, half is on account and half cash payments · Pays $15,000 for utilities in cash · Pays employees $50,000 in cash · Buys a new machine worth $20,000 in cash · Pays a Dividend of $2,000 in cash to shareholders · Pays Interest on a loan of $5,000 in cash Which of the following is correct for ABC Company's 2021 Operating cash flow? A. $8,000 Inflow B. $28,000 Inflow C. $30,000 Inflow D. $90,000 Inflow E. $132,000 Inflow

Explanation: Recall that operating activities refer to cash transactions which impact the current assets/liabilities on the financial statements. Cash from revenue = operating $100,000 inflow Cash for utilities = operating $15,000 outflow Cash to employees = operating $50,000 outflow Cash for machine = investing $20,000 outflow Cash PAID for dividend = financing $2,000 outflow Cash for interest paid = operating $5,000 outflow • $200,000 of revenue, half is on account and half cash payments • Pays $15,000 for utilities in cash • Pays employees $50,000 in cash • Buys a new machine worth $20,000 in cash • Pays a Dividend of $2,000 in cash to shareholders • Pays Interest on a loan of $5,000 in cash So: +100,000 - 15,000 - 50,000 - 5,000 = 30,000 INFLOW Answer: C - $30,000 INFLOW

(Ch.5) Buckeye Company recorded a write-off for a customer which went insolvent. The total value of the customer's account was $10,000. Recently, the customer's attorney contacted Buckeye Company to inform them the customer had recoup enough to pay 25% of its balance. What is the net change to Buckeye Company's assets from this 25% recovery of cash? A. Assets increase by $2,500 B. Assets decrease by $2,500 C. No Net Change to Assets D. Assets increase by $7,500 E. Assets decrease by $7,500

Explanation: Recall the recoveries ultimately have the following entry: Cash_____X Allowance for Uncollectible Accounts____X That is an increase to an asset, but an equal increase to a contra-asset: Answer: C. No Net Change

(Ch.5) ABC Company sells inventory to a customer with the following transactions relevant to the sale: · ABC Company purchased the 200 units of inventory for $10,000 · The selling price of the inventory was $90 for 200 units · The sale was made on account with terms 5/7, n/20. Assuming the customer paid 10 days after the sale, what is the correct entry for the payment? A. Cash ____________________________$17,100 Sales Discount____________________________$900 Accounts Receivable________$18,000 A. Cash___________________________________________$17,640 Sales Discount______________________________$360 Accounts Receivable______________$18,000 C. Cash______________________________$17,100 Accounts Receivable_______________$17,100 D. Cash______________________________$18,000 Accounts Receivable_______________$18,000

Explanation: Since we see the terms 5/7, n/20, we know that this question is a sales discount question. What we need to attend to is if the customer paid within the discount period. ... In this case, the discount is for 5% if paid within 7 days. The customer here paid in 10 days, so NO! The customer would be paying the net amount and we would record: Cash_____$18,000 Accounts Receivable______$18,000 Answer: D.

(Ch.5) Washington Enterprises recorded the following on its 2021 comparative financial statements: 12/31/2021 12/31/2020 Sales Revenue 620,000 Sales Discount 22,000 Sales Allowance 7,000 Allowance for Uncollectible Accounts 387,500 400,500 Which of the following is Washington Enterprises' 2021 Average Collection Period, rounded to 2 decimal places if necessary? A. 1.5 times B. 1.57 times C. 1.60 times D. 243.33 days E. 228.13 days

Explanation: Step 1 (always) = what are we solving for?...THE AVERAGE COLLECTION PERIOD ... Average Collection Period = 365 / A/R Turnover Ratio ß would be really easy to solve for this and stop. Solve first for A/R Turnover = Net Sales / Average A/R ... 620,000 - 22,000 - 7,000 / ((387,500 + 400,500) / 2) ... = 1.5 <- Again, do not stop here, we are not done ... Average Collection Period = 365 / 1.5 ... Average Collection Period = 243.33 Days Answer: D - 243.33 Days

1. XYZ Company adopted the Direct Write-Off Method for its bad debt expense. Which of the following is the correct entry made for XYZ Company when write-offs a customer's account of $3,600 on December 31st? A. Bad Debt Expense_____3,600 Allowance for Uncollectible Accounts_____3,600 B. Bad Debt Expense_____3,600 Accounts Receivables_______ 3,600 C. Allowance for Uncollectible Accounts_____3,600 Accounts Receivable_____3,600 D. Allowance for Uncollectible Accounts_____3,600 Bad Debt Expense_____3,600 E. No Entry Required using the Direct Write-Off Method

Explanation: The direct write-off method (NOT GAAP) is unique as it does not estimate bad debt, instead it just writes off the accounts as they are determined uncollectible (i.e. when they would be written off). It uses an entry of: Bad Debt Expense _____ X Accounts Receivable ____ X Answer: B. Bad Debt Expense _____ 3,600 Accounts Receivable ____ 3,600

(Ch.4) Which of the following is the correct entry for establishing the petty cash fund of $500? A. Petty Cash_______$500 Petty Cash Revenue_______$500 B. Petty Cash_______$500 Cash_______$500 C. Cash_______$500 Petty Cash_______$500 D. Cash_______$500 Petty Cash Revenue_______$500 E. Petty Cash_______$500 Retained Earnings_______$500

Explanation: The petty cash fund is established by setting aside a small amount of cash which can be used by employees to make minor purchases more quickly using vouchers. Answer: B. Petty Cash _____ $500 Cash ________$500

(Ch.5) Which of the following refers to the contra-revenue account for when a customer receives incorrect inventory, but keeps it for a discounted price? A. Cost of Goods Sold B. Sales Allowance C. Sales Returns D. Sales Discount E. Trade Discount

Explanation: We need to be aware of the definitions of each of the relevant contra-revenues: -Sales Allowance: receives an incorrect or damaged product, but keeps it for a reduced price -Sales Return: receives an incorrect and damaged product and returns it for a refund -Sales Discount: a customer purchases on account and pays within given terms for a reduced price Answer: B. Sales Allowance

(Ch.5) Which of the following is true about Allowance Method of calculating Bad Debt, but is NOT true of the Net Credit Sales Method? A. The Allowance Method uses a permanent account to estimate bad debt, which is a temporary account B. The Allowance Method uses a temporary account to estimate the allowance for uncollectible accounts, which is a permanent account. C. The Allowance Method utilizes the Net Realizable Value for estimating bad debt D. The Allowance Method calculates the ending balance of the allowance for uncollectible accounts E. Both A&D are true statements for the Allowance Method, but not the Net Credit Sales Method

Explanation: We need to recall the differences between the Allowance Method and the Net Credit Sales Method: Allowance Method: -Utilizes A/R to estimate bad debt -A/R is a permanent, Balance Sheet account -When making the estimate, we calculate the ENDING BALANCE of the allowance for uncollectible accounts. - -We need to use the beginning balance of AUA to solve for the adjustment needed Net Credit Sales Method: -Utilizes net credit sales to estimate bad debt -Sales Revenue and the contra-revenue accounts which we use to solve for Net Sales are temporary, income statement accounts -When making the estimate, we calculate the ANNUAL CHANGE for the allowance for uncollectible accounts, so we do not need to solve for it; instead, we add it to the beginning amount to get the ending balance. Answer: E. Both A&D are true statements for the Allowance Method, but not the Net Credit Sales Method Note: B & C are NOT true of the Allowance Method

(Ch.5) Betty DeRose Inc. wants to record its bad debt expense for the end of Fiscal Year 2021. Betty DeRose had a rough 2020, so it wants to MAXIMIZE its net income for 2021 (so limit the amount of bad debt). Consider the following financial data: 12/31/2021 Sales Revenue 90,000 Sales Discount 10,000 Accounts Receivable 28,000 Allowance for Uncollectible Accounts 600 If Betty historically records 2% of its Net Sales to be uncollectible and 8% of its accounts receivables to be uncollectible, which method should Betty DeRose choose for 2021? A. Net Credit Sales Method B. Allowance Method C. Both have the same amount of bad debt

Explanation: We need to use the differences between the Allowance Method and the Net Credit Sales Method to calculate the estimate for Bad Debt for each: Allowance Method: Ending Balance = % Estimated * A/R Balance Ending Balance = 0.08 * 28,000 Ending Balance = 2,240 ... But we are worried about JUST 2021's Bad Debt, so we need to find the adjustment ... Allowance for UA | 600 | 1,640 | ________________________ | 2,240 Net Credit Sales Method 2021 Bad Debt = % Estimated * Net Credit Sales ... 2021 Bad Debt = 0.02 * (90,0000 - 10,000) ... 2021 Bad Debt = 1,600 Answer: A.Net Credit Sales Method Note: we wanted to have MORE income, so less bad debt.

(Ch.5) On May 1st, 2021, Wicked Works contracted with a customer to alter a $24,000 outstanding account receivable into a note receivable. The terms of the note were one-year at 5% interest. What is the amount of interest Wicked Works would accrue in 2021 on the note? A. $1,200 B. $800 C. $700 D. $400 E. $100

Explanation: When accruing interest, we need to utilize the formula: Principal * Rate * Time (PRT) ... 24,000 * 0.05 * (8/12) <- Note this 8/12 comes from 8 months occurring between 5/1 and 12/31. ... = 800 Answer: B - $800

(Ch.4) Which of the following represent adjustments made to the bank during a bank reconciliation? A. Deposits Outstanding B. Interest Earned C. Non-Sufficient Funds Checks D. Cash Collections E. Checks Cashed

Explanation: You must memorize the formulas for the bank reconciliation as presented in class: Cash balance per Books (cash account) Cash Balance per Bank (+) Interest earned (+) Cash collections ^ (-) NSF ("bad") checks ^ (-) Service charge ^ ^ (+) Deposits outstanding (-) Checks outstanding Adjusted Balance <-----> Adjusted Balance Answer: A - Deposits Outstanding

(Ch.7) Cougar Services has an old excavator which it is looking to dispose. The excavator had the following specifications at purchase and was depreciated using the straight-line method: - Cost: $90,000 - Useful Life: $7 years - Residual Value: $6,000 At the end of year 6, Cougar has three options: sell it, retire it, or exchange it. The different factors of the disposal methods can be found below: · Sale: a second party has offered to by the excavator for $16,000. Cougar could also sell scraped parts for an additional $3,000 This is Cougar's only interested buyer · Retirement: Cougar could retire the excavator. Retirement would allow Cougar to sell parts and scrap for $19,000 · Exchange: A local building company would exchange cougar's excavator for a newer one. The new excavator has a value of $100,000, but the builder is willing to offer Cougar $15,000 of trade-in. Record the entry Cougar would make for each disposal and select the one which carries the best outcome for Cougar related to maximizing Net Income on the Income Statement

How much accumulated depreciation do we have at the end of Year 6? Straight-Line: (90,000 - 6,000)/7 = 12,000 per year * 6 = 72,000 Next, we need to record each entry: Sale: Cash ________ $19,000 Accum Dep___ $72,000 Excavator ____ 90,000 Gain on Sale __ 1,000 Retirement: Cash ________ $19,000 Accum Dep___ $72,000 Excavator _________ 90,000 Gain on Retirement __ 1,000 Exchange: New Exce____ 100,000 Accum Dep___ 72,000 Loss on Exc___ 3,000 Excavator _________ 90,000 Cash______________85,000

(Ch.2) ABC Company reported the following related to fiscal year 2021 BEFORE the transactions in the previous question. ($) at End of 2021 Total Assets $ 750,000 Total Liabilities $ 315,000 Revenues $ 175,000 Expenses $ 100,000 Using the transactions in question Please write record the amounts for Assets, Liabilities, Equity, and Net Income for Orca Company following the transactions in question 6. Assets = Liabilities = Equity = Net Income =

NOTE: Transaction numbers from Problem 6 are in parenthesis ($) at End of 2021 Total Assets = 750,000 + 10,000 (1) + 300,000 (2) + 17,500 (3) + 240,000 (5) [ANSWER $ 1,317,500] Total Liabilities = 315,000 + 300,000 (2) + 17,500 (3) + 375,000 (4) [ANSWER $ 1,007,500] Net Income/(Loss) = (Rev - Exp) = 75,000 + 10,000 (1) - 375,000 (4) [ANSWER $ (290,000)] Equity = (CS + RE) = 435,000 + 250,000 (5) + 10,000 (1) - 375,000 (4) - 10,000 (5) [ANSWER $ 310,000] Equity = (CS + RE) = 435,000 + 250,000 (5) + 10,000 (1) - 375,000 (4) - 10,000 (5) [ANSWER $ 310,000]

(Ch.7) Harbinger Inc. had the following financial data in 2021 Value Sales Revenue $3,015,000 Sales Allowance $135,000 Cost of Goods Sold $1,250,000 Assets at 1/1/2021 $1,850,000 Assets at 12/31/2021 $1,750,000 Operating Expenses $830,000 Income Tax Expense $80,000 Determine Harbinger's Profit Margin Ratio, Asset Turnover Ratio, and Return on Assets. Answers: Profit Margin Asset Turnover Return on Assets

Profit Margin = Net Income/Net Sales = 720,000/2,880.000 = 0.25 ... Asset Turnover = Net Sales / (Average Total Assets) = 2,880,000/1,800,000 - 1.6 ... Return on Assets = Asset Turnover x Profit margin = 0.25 * 1.6 = 0.40 Or ROA = Net Income / Average Total Assets = 720,000/1,800,000 = 0.40

(Ch.4) ABC Company provided the following Financial Statement information related to the 2021 and 2020 fiscal year: 12/31/2021 12/31/2020 Cash 50,000 58,000 Accounts Receivable 25,000 22,000 Supplies 10,000 14,000 Inventory 16,000 9,000 Account Payable 19,000 24,000 Salaries Payable 35,000 27,000 Deferred Revenue 12,000 8,000 Depreciation Expense 7,000 Gain on Sale of Bulldoze 2,000 Net Income 16,000 Additionally, ABC Company had $35,000 OUTFLOW of cash related to its Investing Activities. What is the cash movement related to ABC Company's Financing Activities?

Remember our Step 1 à Identify FOR WHAT we are solving. In this case, we want to know the cash movement related to Financing Activities. -Financing activities are 1 of 3 different activities that give us the total change in cash. -So, we need to start with the following idea: Operating Cash Inflow/(Outflow) +Investing Cash Inflow/(Outflow) +Financing Cash Inflow/(Outflow) Net Change in Cash (+/-) Do we know our net change in Cash?... ... ...YES! - it is given as (8,000) or an $8,000 OUTFLOW -cash went from 58,000 in 2020 to 50,000 in 2021 Operating Cash Inflow/(Outflow) +Investing Cash Inflow/(Outflow) +Financing Cash Inflow/(Outflow) 8,000 OUTFLOW (or -$8,000) Do we know either of our other activities (investing/operating)?... ...YES! - Our investing cash flows are given as a $35,000 outflow Operating Cash Inflow/(Outflow) +35,000 OUTFLOW (or -$35,000) +Financing Cash Inflow/(Outflow) 8,000 OUTFLOW (or -$8,000) Operating Cash Inflow/(Outflow) +35,000 OUTFLOW (or -$35,000) +Financing Cash Inflow/(Outflow) 8,000 OUTFLOW (or -$8,000) We are not given our operating activities outright; however, we are given the information we need to perform the INDIRECT METHOD of creating our statement of cash flows. Recall our rules for the indirect method (this is in order of performance): 1)Start with Net Income 2)Add any non-cash Expenses (Losses or Depreciation Expense) 3)Subtract any non-cash Revenues (Gains) 4)Add the changes for Current Assets that are decreases 5)Subtract the changes for Current Assets that are increases 6)Add the changes for Current Liabilities that are increases 7)Subtract the changes for Current Liabilities that are decreases Net Income 16,000 Depreciation Expense 7,000 (Gain on Sale of Bulldozer) (2,000) (Accounts Receivable) (3,000) Supplies 4,000 (Inventory) (7,000) (Account Payable) (5,000) Salaries Payable 8,000 Deferred Revenue 4,000 Change in Operating Activities 22,000 Or 22,000 INFLOW 22,000 INFLOW (or $22,000) + 35,000 OUTFLOW (or -$35,000) + Financing Cash Inflow/(Outflow) 8,000 OUTFLOW (or -$8,000) So we can setup an equation: 22,000 - 35,000 + X = -8,000 .... Do some algebra: X = 5,000 Note that this is a positive 5,000 so we would HAVE to report a 5,000 INFLOW to get the answer correct.

(Ch.3) ABC Company reported the Income Statement Accounts following related to fiscal year 2021: 12/31/2021 Service Revenues $ 499,000 Rent Revenue $ 65,000 Salaries Expense $ 260,000 Supplies Expense $ 27,500 Miscellaneous Expense $ 53,000 Advertising Expense $ 107,000 Interest Expense $ 39,500 In addition, ABC Company had the following related to its balance sheet: 12/31/2021 Total Assets $ 645,000 Total Liabilities $ 373,000 Dividends $45,000 ABC Company had Beginning Retained Earnings of $55,000 Record the necessary closing entries and calculate the balance of Ending Retained Earnings and Ending Common Stock. Debit Account(s) Credit Account(s) Debit Amount(s) Credit Amount(s)

Revenue Closing Entry: Service Revenue____499,000 Rent Revenue_______65,000 Retained Earning ____564,000 Expense Closing Entry: Retained Earnings_____487,000 Salaries Expense_______260,000 Supplies Expense_______27,500 Miscellaneous Expense_______53,000 Advertising Expense_______107,000 Interest Expense_______39,500 Dividend Closing Entry: Retained Earnings_____45,000 Dividends____45,000 Calculate the balance of Ending Retained Earnings and Ending Common Stock. Ending Retained Earnings = Beginning Retained Earnings + Revenues - Expenses - Dividends Ending Retained Earnings = 55,000 + 564,000 - 487,000 - 45,000 Ending Retained Earnings = 87,000 Remember: Equity = Common Stock + Retained Earnings ß But we are not given Equity Assets = Liabilities + Equity 645,000 = 373,000 + Equity Equity = 272,000 Equity = Common Stock + Retained Earnings 272,000 = Common Stock + 87,000 Common Stock = 185,000

(Ch.1) ABC Company reported the following related to fiscal year 2021($) at End of 2021 ($) End of 2020 Total Assets $181,000 $164,000 Total Liabilities --- $77,000 Net Income $25,000 $17,000 Common Stock $35,000 $35,000 Retained Earnings --- ---Dividends Paid $7,000 $10,000 Calculate the Total Liabilities for 2021

Start: Solving for? - Total Liabilities for 2021Equation: Assets = Liabilities + Equity We do NOT know Equity or Liabilities, so we need another equation....Equity = Common Stock + Ending Retained Earnings....Ending Retained Earnings = BRE + NI - Dividends..... 2020 Equity = Common Stock + Beginning RE (note: BRE for 2021) .......2020 Assets = 2020 Liabilities + 2020.... 2020 Assets = 2020 Liabilities + 2020 Equity164,000 = 77,000 + 2020 Equity so 2020 Equity = 87,000...2020 Equity = 2020 Common Stock + Beginning Retained Earnings (Ending for 2020, but beginning for 2021)87,000 = 35,000 + BRE -> so Beginning Retained Earnings = 52,000... Equity = Common Stock + Ending Retained EarningsEquity = 35,000 + 70,000 -> Equity = 105,000...Assets = Liabilities + Equity181,000 = Liabilities + 105,000 (ANS: Liabilities = 76,000)

(Ch.4) Washington Enterprises records the following cash transactions during 2021: · Collects $120,000 of receivables · Buys a new building for $250,000 · Takes out a loan from MT Bank for $500,000 · Purchases inventory worth $15,000 · Sells an old bulldozer for $65,000 · Purchases an equity stake in Pullman Products worth $50,000 Which is correct for Washington Enterprise's 2021 Investing cash flow? A. $235,000 Outflow B. $265,000 Inflow C. $115,000 Outflow D. $385,000 Inflow E. $185,000 Outflow

Which is correct for Washington Enterprise's 2021 Investing cash flow? Explanation: Recall that investing activities are cash movement related to long-term assets on the balance sheet. ·Collects $120,000 of receivables > Collect receivables = operating $120,000 inflow ·Buys a new building for $250,000 >Buying building = INVESTING $250,000 outflow ·Takes out a loan from MT Bank for $500,000 >Obtaining a loan = financing $500,000 outflow ·Purchases inventory worth $15,000 >Buying inventory = operating $15,000 outflow ·Sells an old bulldozer for $65,000 >Selling bulldozer = INVESTING $65,000 inflow ·Purchases an equity stake in Pullman Products worth $50,000 >Buying investment = INVESTING $50,000 outflow So: -250,000 + 65,000 - 50,000 = 235,000 OUTFLOW Answer: A - $235,000 OUTFLOW