acct 201 chapter one

Which of the following statements is true?

An independent auditor's report must be included in the annual report.

If total liabilities decreased by $75,000 and stockholders' equity increased by $20,000 during a period of time, then total assets must change by what amount and direction during that same period?

$55,000 decrease ($75,000) + $20,000 = ($55,000).

Taylor Company compiled the following financial information as of December 31, 2022. Service revenue: $625,000 Common stock: $150,000 Equipment: $100,000 Operating expenses: $400,000 Cash: $100,000 Dividends: $30,000 Supplies: $25,000 Accounts payable: $75,000 Accounts receivable: $95,000 Retained earnings, 1/1/22: $375,000 Taylor's retained earnings on December 31, 2022, is which of the following?

$570,000 $375,000 + ($625,000-$400,000) - $30,000 = $570,000. Retained earnings, 1/1/22 + (Service revenue-Operating expenses) - Dividends = retained earnings on December 31, 2022

Which of the following statements are true? Select all that apply.

- An independent auditor's report must be included in the annual report. - The management discussion and analysis section must highlight favorable or unfavorable trends that will affect its ability to pay short-term obligations or fund expansion. - Publicly traded U.S. companies must provide an annual report to their shareholders each year.

A company purchases new manufacturing equipment using a loan from the bank. They plan to re-pay the loan over the next 10 years. The loan is an example of

a liability.

If total liabilities increased by $90,000 and stockholders' equity increased by $35,000 during a period of time, then total assets must change by what amount and direction during that same period?

$125,000 increase

Moran Steel started the year with total assets of $210,000 and total liabilities of $95,000. During the year, the business recorded $200,000 in revenues, $110,000 in expenses, and dividends of $45,000. Stockholders' equity at the end of the year was

$160,000 ($210,000 - $95,000) + ($200,000 - $110,000) - $45,000 = $160,000 (total assets - total liabilities) + (revenues - expenses) - dividends = stockholders' equity

Simon Properties began the year with retained earnings of $420,000. During the year, the company issued $400,000 of common stock, recorded expenses of $2,200,000, and paid dividends of $100,000. If Simon's ending retained earnings was $520,000, what was the company's revenue for the year?

$2,400,000 $520,000 + $100,000 + $2,200,000 - $420,000 = $2,400,000 ending retained earnings + dividends + expenses - beginning retained earnings = revenue

Which of the following are common ways that managers use balance sheets? Select all that apply.

- to determine whether the cash balance is sufficient for future needs - to analyze the balance of accounts receivable on the last day of the accounting period - to analyze the relationship between debt and common stock financing

What is the purpose of the notes to the financial statement? Select all that apply.

- to explain contingencies and uncertainties - to clarify the financial statements

A company has a net income of $2,750,000 million for 2022. They have decided to pay $750,000 as dividends. What is the major difference between dividends and retained earnings?

Dividends are paid to stockholders whereas retained earnings are reinvested in the company.

Financial statements can be prepared in any order. It does not matter which one is prepared first.

False

Financial statement users are interested in the statement of cash flows for which of the following reasons?

It provides information about a company's sources and uses of cash

To determine the retained earnings at the end of the period, the company starts with the beginning retained earnings and

adds net income and deducts dividends.

Amounts received from issuing stock ____ _______ revenues.

are not

A company has assets of $46,000 and stockholders' equity of $5,000. According to the basic accounting equation, its total liabilities are

$41,000

Carlson Company compiled the following financial information as of December 31, 2022: Service revenue: $800,000 Common stock: $650,000 Equipment: $150,000 Operating expenses: $575,000 Cash: $190,000 Dividends: $40,000 Supplies: $35,000 Accounts payable: $95,000 Accounts receivable: $70,000 Retained earnings, 1/1/22: $275,000 Carlson's assets on December 31, 2022, are

$445,000 $150,000 + $190,000 + $35,000 +$70,000 = $445,000 equipment + cash + supplies + accounts receivable = assets

Which of the following questions can be answered by the statement of cash flows? Select all that apply.

- How was the cash used during the period? - Where did the cash come from during the period?

Which of the following statements are true? Select all that apply.

- The balance sheet enables creditors to determine the likelihood that they will be repaid. - The balance sheet presents the company's financial position as of a specific date. - The balance sheet reports the assets, liabilities, and stockholders' equity at a specific date.

Describe the four financial statements and how they are prepared

An income statement presents the revenues and expenses of a company for a specific period of time. A retained earnings statement summarizes the changes in retained earnings that have occurred for a specific period of time. A balance sheet reports the assets, liabilities, and stockholders' equity of a business at a specific date. A statement of cash flows summarizes information concerning the cash inflows (receipts) and outflows (payments) for a specific period of time. Assets are resources owned by a business. Liabilities are the debts and obligations of the business. Liabilities represent claims of creditors on the assets of the business. Stockholders' equity represents the claims of owners on the assets of the business. Stockholders' equity is subdivided into two parts: common stock and retained earnings. The basic accounting equation is Assets = Liabilities + Stockholders' Equity. Within the annual report, the management discussion and analysis provides management's interpretation of the company's results and financial position as well as a discussion of plans for the future. Notes to the financial statements provide additional explanation or detail to make the financial statements more informative. The auditor's report expresses an opinion as to whether the financial statements present fairly the company's results of operations and financial position.

Which of the following represents an alternative expression of the basic accounting equation?

Assets - Liabilities = Stockholders' Equity

Which of the following is true?

Net income from the income statement flows into the retained earnings statement. The ending retained earnings balance then flows into the balance sheet.

The basic accounting equation states that

assets must equal liabilities plus stockholders' equity.

A company buys a cement mixer with cash. This purchase should affect the

balance sheet because the cement mixer is an asset

Custom Cabinets buys a $40,000 truck on credit. Which financial statement will this transaction affect?

balance sheet only

The auditor's report in an annual report must be prepared by a(n)

certified public accountant outside the company.

Which items are reported in stockholder' equity on the balance sheet? Select all that apply.

common stock and retained earnings

Which of the following are reported in the stockholders' equity section of the balance sheet?

common stock and retained earnings

The income statement will show a net loss when

expenses exceed revenues

A brick company calculated its stockholders' equity for the fiscal year 2022. Its overall revenues were $3.8 million, expenses were $2.4 million, and dividends paid were $500,000. The company experienced a net _________ of

income; $1.4 million.

During fiscal year 2022, the CEO noticed that the company's #1 selling product had decreased sales due to the release of a competitor's similar product. However, they also released a new product that showed good sales and a trend for performing even better than their previous #1 product. In which part of the annual report should this information be disclosed?

management discussion and analysis

A company prepares a statement of cash flows primarily to

provide information about cash receipts and cash payments.

On which financial statement are dividends reported?

retained earnings statement

Which financial statement would show a company's policy toward dividends and growth?

retained earnings statement

The time period covered by the retained earnings statement is

the same period as the income statement

What is the primary purpose of the statement of cash flows?

to provide information about cash receipts and cash payments for a specific period of time