ACCT 101 Final
Benedict Company compiled the following financial information as of December 31, 2012: Revenues $280,000 Common stock 60,000 Equipment 80,000 Expenses 250,000 Cash 70,000 Dividends 20,000 Supplies 10,000 Accounts payable 40,000 Accounts receivable 30,000 Retained earnings, 1/1/12 150,000 Benedict's retained earnings on December 31, 2012 are:
$160,000
N3 Corporation has assets of $3.6 million, common stock of $936,000, and retained earnings of $571,000. What are the creditors' claims on their assets?
$2,093,000
If total liabilities increased by $42,000 during a period of time and stockholders' equity decreased by $18,000 during the same period, then the amount and direction (increase or decrease) of the period's change in total assets is a(n)
$24,000 increase.
Elston Company compiled the following partial financial information as of December 31, 2012: Revenues $420,000 Common stock 90,000 Equipment 120,000 Expenses 375,000 Cash 105,000 Dividends 30,000 Supplies 15,000 Accounts payable 60,000 Accounts receivable 45,000 Retained earnings, 1/1/12 225,000 Elston's retained earnings on December 31, 2012 are:
$240,000 RE= previous RE +net income(Revenues - Expenses) - dividends
If total liabilities increased by $45,000 and stockholders' equity increased by $15,000 during a period of time, then total assets must change by what amount and direction during that same period? $75,000 increase $60,000 increase $90,000 increase $60,000 decrease
$60,000 increase
Gilkey Corporation began the year with retained earnings of $155,000. During the year, the company issued $210,000 of common stock, recorded expenses of $600,000, and paid dividends of $40,000. If Gilkey's ending retained earnings was $165,000, what was the company's revenue for the year?
$650,000
Lankston Company began the year by issuing $60,000 of common stock for cash. The company recorded revenues of $550,000, expenses of $480,000, and paid dividends of $30,000. What was Lankston's net income for the year?
$70,000
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 $225,000 from customers. What was Jackson's net cash provided by operating activities?
$75,000
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Jamal Company began the year with $64,000 in its Common Stock account and a debit balance in Retained Earnings of $36,000. During the year, the company earned net income of $18,000 and declared and paid $6,000 of dividends. In addition, the company sold additional common stock amounting to $22,000. Based on this information, what should the transaction analysis show for the ending total of all stockholders' equity accounts?
62,000 $64k - 36k(dr) + 18k(cr) - 6k(dr) +22(cr)
Wilton Corporation had beginning retained earnings of $764,000 and ending retained earnings of $833,000. During the year they issued common stock totaling $47,000. What was their net income for the year?
69,000 end RE - beginning RE
Auditor's Report
An outside CPA determines fairness of presentation of financial situation to prevent fraud/bias checks GAAP conformance
The ending retained earnings balance appears on:
Both the retained earnings statement and the balance sheet.
Current Assets
Cash Short -term investments Accounts receivable Inventories Prepaid expenses(insurance and supplies)
CPA
Certified Public Accountant, only one who can perform audits. They give out "unqualified opinions" when GAAP standards are men, with out an expressed "unqualified opinion" proceed with caution
Which of the following groups uses accounting information to determine whether the company can pay its obligations? Investors in common stock Marketing managers Chief Financial Officer Creditors
Creditors
Free cash flow provides an indication of a company's ability to: A.generate cash to invest in new capital expenditures. B.generate net income. C.generate cash to pay dividends. D.both A and C.
D
Adjusting entries
Deferalls: prepaid expense & unearned revenue Accruals: accrued revenues/expenses
Cost principal
Dictates that companies record assets at their initial cost.
Which of the following would not appear on the income statement?
Dividends paid
Economic Entity Assumption
Every economic entity can be separately identified and accounted for
Cost of goods sold is classified as what type account?
Expense Expense
free cash flow
FCF = cash provided by operations - capital expenditures - cash dividends
Which of the following is not an external user of accounting data?
Finance directors
Elements of an Annual Report
Financial Statements: Balance Sheet, Income Statement, Retained Earnings Statement, Statement of Cash Flows Management Discussion and Analysis(MD&A) Notes to Financial Statement Auditor's report
The issuance of common stock is reported on the statement of cash flows as a(n): OFI activities
Financing activity.
The payment of dividends is an example of a(n): OFI activities
Financing activity.
GAAP IASB FASB IFRS
Generally Accepted Accounting Principals International Accounting Standards Board Financial Accounting Standard Board -for usGAAP International Finance Reporting Standard
Revenue Recognition Principal
Goes hand in hand with the periodicity assumption
The financial statements are usually prepared in which of the following sequences?
Income statement, retained earnings statement, balance sheet, and statement of cash flows
Fair Value Principal
Indicates that assets and liabilities should be reported at fair value
Long Term Investments
Investments in stock and bonds of other corporations long-term assets such as land or buildings that are not in use
External Users
Investors use accounting information to make decisions to buy, hold, or sell stock Creditors use accounting info to evaluate the risk of selling on credit or lending money Taxing authority, compliance w/tax laws Customers, product support labor unions, want to know whether owners can pay out more regulatory agencies, compliance
Which of the following would not be considered an external user of accounting data for the Julian Company? Internal Revenue Service Agent, Management Creditors Customers
Management
Which of the following is the best definition of an internal user of accounting information? Investors who use accounting information to decide whether to buy or sell stock. Creditors like banks that use accounting information to evaluate the risk of lending money. Labor unions who use accounting information to examine the ability of the company to pay increased wages and benefits. Managers who use accounting information to plan, organize, and run a business.
Managers who use accounting information to plan, organize, and run a business.
Liquidity Ratios
Measure short-term ability of company to pay it's maturing obligations and to meet unexpected needs for cash
Paying interest expense and receiving interest revenue are examples of: OFI activities
Operating activities.
Monetary Unit Assumption
Requires that only things that can be expressed in money are included in accounting records
Which of the following would not appear on the retained earnings statement?
Service revenue
In which forms of business organization are the owners personally liable for all the debts of the business?
Sole proprietorship and partnerships
Which of the following statements is not true regarding the Sarbanes-Oxley Act (SOX) of 2002? The Act calls for decreased independence of outside auditors reviewing corporate financial statements. The Act calls for increased oversight responsibilities for boards of directors. The Act has resulted in increased penalties for financial fraud by top management. The Act is meant to decrease the likelihood of unethical corporate behavior.
The Act calls for decreased independence of outside auditors reviewing corporate financial statements.
The management discussion and analysis (MD&A) section of the annual report covers all of the following aspects except: The certification criteria of the company's auditors. The ability of the company to pay near-term obligations. The results of the company operations. The company's ability to fund operations and expansion.
The certification criteria of the company's auditors.
Management Discussion and Analysis(MD&A)
ability to pay near-term obligations, ability to fund operations and expansion, and it's results of operation examines trends, identifies significant events and uncertainties involves a number of subjective estimates and opinions
Current Liabilities
accounts payable, wages payable, bank loans payable, interest payable, and taxes payable current maturities of long term obligations
Which type of corporate information is readily available to investors? financial comparison of operating alternatives financial comparison of operating alternatives forecasts of cash needs for the upcoming year amount of net income retained in the business
amount of net income retained in the business
materiality constraint
an item is material if it is likely to influence an investor or creditor, immaterial items needn't follow GAAP
Liabilities: possess service potential. are things of value owned by a business. are future economic benefits. are debts and obligations.
are debts and obligations.
Prepaid Expense adjustment
assets overstated, expenses understated dr. expence cr. assets
accrued revenue
assets understated revenues understated dr assets cr. revenues
A balance sheet shows
assets, liabilities, and stockholders' equity.
Customarily, a trial balance is prepared
at the end of an accounting period.
Long term liabilities
bonds payable, mortgages payable, long term notes payable, lease liabilities, pension liabilities
Notes to the Financial Statements
clarify the financial statements and provide additional detail
Stock holder's equity
common stock: investments of assets by stockholders retained earnings: income retained for use in business
Easy transfer of ownership is a characteristic of which form of business organization?
corporation
perpetual inventory system
determines cost of goods sold each time a sale occurs
working capital
difference between the amounts of current assets and current liabilities
cost constraint
does it cost more to report than the actual items worth
Limitations of a trial balance
does not prove that all transactions have been recorded or that the ledger is correct
EPS
earnings available to common stock holders(or net income)/average number of outstanding common shares
accrues expenses
expenses understated liabilities understated dr. expenses cr, liabilities
Sole proprietorships and partnerships are taxable entities. T/F
false
The Statement of Cash Flows reports only cash flows from operations. T/F
false
The notes to the financial statements are not required. T/F
false
Intangible Assets
goodwill, patent, trademark, tradenames. ex:film library, customer list, franchise
Classified Balance Sheet
groups together similar assets and similar liabilities
Notes to the financial statements: are optional. need not be read in detail if an unqualified opinion accompanies the financial statements. help clarify information presented in the financial statements. are generally brief and few in number.
help clarify information presented in the financial statements.
Expense recognition principal
indicated that expenses will be matched with their revenues. Matching principal.
The partnership form of business organization enjoys an unlimited life. is a common form of organization for service-type businesses. is a separate legal entity. has limited liability.
is a common form of organization for service-type businesses.
A business organized as a corporation: is not a separate legal entity in most states. requires that stockholders be personally liable for the debts of the business. is owned by its stockholders. has tax advantages over a proprietorship or partnership.
is owned by its stockholders.
Trial Balance
is the listing of all the account balances as of a particular date
property, plant, and equipment
land&land improvement buildings machinery and equipment delivery vehicles furniture less -accumulated depreciation
unearned revenue adjustment
liabilities overstated revenues understated dr. liabilities cr. revenues
current ratio
liquidity ratio current assets/current liabilities
Management's views on the company's short-term debt paying ability, expansion financing, and results of operations are found in the president's state of the company report. auditor's report. management discussion and analysis section. notes to the financial statements.
management discussion and analysis section.
Profitability Ratios
measures income or operating success of a company for a given period of time, EPS
Solvency Ratios
measures the ability of a company to survive over a long period of time
earnings available to common stock holders
net income- preferred stock dividends
post-closing trial balance
only permanent accounts balance
Internal Users:
plan, organize and run a business. includes marketing managers, production supervisors, finance directors, and company officers.
Accrual basis accounting
record in time period in which they occur, periodicity
cash basis accounting
record only when cash is recieved/paid. this is prohibited under GAAP
Monetary Unit Assumption
requires that only things that can be expressed in money be included in accounting recordf
The best definition of assets is the: Owners' investment in the business. resources belonging to a company have future benefit to the company. cash owned by the company. collections of resources belonging to the company and the claims on these resources.
resources belonging to a company have future benefit to the company.
debt to total assets ratio
solvency ratio total liabilities/total assets
Claims of owners are called
stockholders' equity
Going Concern assumption
the business with remain in operation for the foreseeable future
Periodicity Assumption
the life of a business can be divided into artificial time periods, and useful reports covering those periods can be prepared for the business
Accrual Basis
transactions that change a company's financial statements are recorded in the periods in which the events occur
closing entries
transfer net income & dividends to retained earnings produces a zero balance in temporary accounts(rev/expense/div)
Interest expense would be classified under operating activities T/F
true
Internal users of accounting information include a company's investors (or stockholders). T/F
true
Only Certified Public Accountants may perform audits. T/F
true
The balance sheet reports assets and claims to those assets at a specific point in time. T/F
true
When the auditor is satisfied that the financial statements are presented in accordance with generally accepted accounting principles, a(n):
unqualified opinion is expressed.
General Ledger
where all the accounts and their transactions are maintained with their balances in the five different types of accounts : Assets, Liabilities, Owner's Equity, Revenue, and Expenses
