ACCT 2100 Syllabus Spring 2020 Qu- Exam 1 Study Guide

Retained Earnings at the beginning and ending of the accounting period was $1,000 and $2,100, respectively. If revenues were $3,900 and dividends paid to stockholders were $900, expenses for the period must have been: $1,900. $3,000. $2,800. $1,100.

$1,900 Explanation: Beginning retained earnings + Revenues - Expenses - Dividends = Ending retained earnings math: $3,900- $900- $1100= $1,900

Required information The year-end financial statements of Grunewald Company contained the following elements and corresponding amounts. Assets = $21,650; Common Stock = $5,000; Revenue = $11,400; Dividends = $690; Beginning Retained Earnings = $3,960; Ending Retained Earnings = $6,460. rev: 03-04-2011 The amount of liabilities reported on the end-of-period balance sheet was rev: 03-04-2011 Multiple Choice $10,710. $8,960. $690. $10,190.

$10,190.

Assume the perpetual inventory method is used. 1) The company purchased $13,800 of merchandise on account under terms 2/10, n/30. 2) The company returned $3,300 of merchandise to the supplier before payment was made. 3) The liability was paid within the discount period. 4) All of the merchandise purchased was sold for $21,600 cash. The amount of gross margin from the four transactions is: $11,376. $7,800. $11,310. $7,644.

$11,310 Explanation: Cost of goods sold = ($13,800 - $3,300) × 0.98 = $10,290Sales revenue $21,600 - Cost of goods sold $10,290 = $11,310

The year-end financial statements of Calloway Company contained the following elements and corresponding amounts: Assets = $34,000; Liabilities = ?; Common Stock = $6,400; Revenue = $13,800; Dividends = $1,450; Beginning Retained Earnings = $4,450; Ending Retained Earnings = $8,400.The amount of liabilities reported on the end-of-period balance sheet was: a. $10,850. b. $12,850. c. $19,200. d. $23,150.

$19,200 Math: 34,000 - 6400 - 8400 (because end of year) = 19,200L = 19,200

Nelson Company experienced the following transactions during Year 1, its first year in operation. Issued $9,000 of common stock to stockholders. Provided $5,300 of services on account. Paid $2,350 cash for operating expenses. Collected $3,400 of cash from accounts receivable. Paid a $250 cash dividend to stockholders. The amount of net income recognized on Nelson Company's Year 1 income statement is: $2,950. $2,150. $1,900. $2,700.

$2,950 $5300-$2350=$2950 rev-exp=net income

Revenue on account amounted to $7,200. Cash collections of accounts receivable amounted to $4,700. Expenses for the period were $3,700. The company paid dividends of $1,250. Net income for the period was $1,000. $3,500. $2,250. $3,450.

$3,500 Explanation: net income= rev. - expense Math: $7,200 - $3,700 = $3,500

Sheldon Company began Year 1 with $2,100 in its supplies account. During the year, the company purchased $6,200 of supplies on account. The company paid $3,000 on accounts payable by year end. At the end of Year 1, Sheldon counted $3,700 of supplies on hand. Sheldon's financial statements for Year 1 would show: Multiple Choice $5,300 of supplies; $1,600 of supplies expense $3,700 of supplies; $2,500 of supplies expense $3,700 of supplies; $4,600 of supplies expense $5,300 of supplies; $6,200 of supplies expense

$3,700 of supplies; $4,600 of supplies expense Math 6200+2100-3700=4600

Packard Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.) 1) Acquired $1,200 cash from the issue of common stock. 2) Borrowed $670 from a bank. 3) Earned $850 of revenues cash. 4) Paid expenses of $300. 5) Paid a $100 dividend. During Year 2, Packard engaged in the following transactions. (Assume all transactions are cash transactions.) 1) Issued an additional $575 of common stock. 2) Repaid $395 of its debt to the bank. 3) Earned revenues of $1,000 cash. 4) Incurred expenses of $460. 5) Paid dividends of $150. Packard Company's net cash flow from financing activities for Year 2 is: $425 outflow. $545 inflow. $395 outflow. $30 inflow.

$30 inflow. Explanation: $575 inflow from stock - $395 outflow for loan repayment - $150 outflow for dividends = $30 inflow.

The Bloom Company issued stock for $51,500 cash on January 20, 2011. During 2011, the company recorded revenue on account of $18,300 and expenses for which cash was paid of $10,120. Bloom received $10,350 cash from accounts receivable. The company also purchased land for $6,075 cash. Based on this information, the amount of change in cash for 2011 was Multiple Choice $51,730 $45,655 $63,955 $55,775

$45,655

Sanchez Company engaged in the following transactions during Year 1: 1) Started the business by issuing $11,100 of common stock for cash. 2) The company paid cash to purchase $6,900 of inventory. 3) The company sold inventory that cost $4,300 for $8,400 cash. 4) Operating expenses incurred and paid during the year, $3,800. Sanchez Company engaged in the following transactions during Year 2: 1) The company paid cash to purchase $9,400 of inventory. 2) The company sold inventory that cost $8,500 for $15,000 cash. 3) Operating expenses incurred and paid during the year, $4,800. Note: Sanchez uses the perpetual inventory system. Sanchez's gross margin for the Year 2 is: $1,700. $5,600. $8,500. $6,500.

$6,500 Explanation: $15,000 Sales - $8,500 COGS = $6,500 Gross margin

Assume the perpetual inventory method is used. 1) Green Company purchased merchandise inventory that cost $16,200 under terms of 2/10, n/30 and FOB shipping point. 2) The company paid freight cost of $620 to have the merchandise delivered. 3) Payment was made to the supplier within 10 days. 4) All of the merchandise was sold to customers for $23,900 cash and delivered under terms FOB shipping point with freight cost amounting to $420. The gross margin from these transactions of Green Company is Multiple Choice $8,024. $6,984. $7,404. $7,604.

$7,404. 23900 sales -(16,200 x .98 + 620)cost of goods sold =7404 gross margin

Revenue on account amounted to $4,000. Cash collections of accounts receivable amounted to $3,700. Cash paid for expenses was $3,000. The amount of employee salaries accrued at the end of the year was $800. Cash flow from operating activities was $800. $700. $1,000. $4,400.

$700 $3700-$3000=700 Explanation: $3,700 collected from customers − $3,000 paid for expenses = $700. Revenue earned on account and accrued salaries are not cash flow activities.

Required information The year-end financial statements of Grunewald Company contained the following elements and corresponding amounts. Assets = $21,650; Common Stock = $5,000; Revenue = $11,400; Dividends = $690; Beginning Retained Earnings = $3,960; Ending Retained Earnings = $6,460. rev: 03-04-2011 Based on this information, the amount of expenses on Grunewald's income statement was rev: 03-04-2011 Multiple Choice $4,500. $8,210. $8,960. $5,000.

$8,210.

Ballard Company uses the perpetual inventory system. The company purchased $9,600 of merchandise from Andes Company under the terms 2/10, net/30. Ballard paid for the merchandise within 10 days and also paid $410 freight to obtain the goods under terms FOB shipping point. All of the merchandise purchased was sold for $18,200 cash. The amount of gross margin for this merchandise is: $8,600. $8,382. $9,600. $8,190.

$8,382. 9600x.98=9408+410=9818 18200-9818=8382

Assume the perpetual inventory method is used. 1) The company purchased $12,500 of merchandise on account under terms 3/10, n/30. 2) The company returned $2,000 of merchandise to the supplier before payment was made. 3) The liability was paid within the discount period. 4) All of the merchandise purchased was sold for $19,000 cash. The net cash flow from operating activities as a result of the four transactions is $8,875. $8,815. $6,500. $6,305.

$8,815. Explanation: Cash outflow for inventory purchase: ($12,500 - $2,000) × 0.97 = $10,185Cash inflow from inventory sale: $19,000Net cash flow = $19,000 - $10,185 = $8,815

Assume the perpetual inventory method is used. 1) The company purchased $12,600 of merchandise on account under terms 2/10, n/30. 2) The company returned $2,100 of merchandise to the supplier before payment was made. 3) The liability was paid within the discount period. 4) All of the merchandise purchased was sold for $19,200 cash. The amount of gross margin from the four transactions is: Multiple Choice $8,910. $6,468. $8,952. $6,600. Explanation Cost of goods sold = ($12,600 - $2,100) × 0.98 = $10,290Sales revenue $19,200 - Cost of goods sold $10,290 = $8,910

$8,910. Correct Explanation Cost of goods sold = ($12,600 - $2,100) × 0.98 = $10,290Sales revenue $19,200 - Cost of goods sold $10,290 = $8,910

On January 1, 2011, Baird Company had beginning balances as follows:Assets = $1,525Liabilities = $570Common Stock = $525 During 2011, Baird paid dividends to its stockholders of $500. Given that ending retained earnings was $750, what was Baird's net income for the 2011 accounting period? Multiple Choice $525 $820 $1,525 $930

$820

Jason Company paid $3,600 for one year's rent in advance beginning on October 1, Year 1. Jason's Year 1 income statement would report rent expense, and its statement of cash flows would report cash outflow for rent, respectively, of $3,600; $3,600 $900; $900 $900; $3,600 $600; $3,600

$900; $3,600 Math: $3,600 / 12 x 3 = 900 Explanation: he payed 900 out of the 3600 for year one

At the end of 2011, retained earnings for the Bisk Company was $2,550. Revenue earned by the company in 2011 was $2,600, expenses paid during the period were $1,135, and dividends paid during the period were $500. Based on this information alone, retained earnings at the beginning of 2011 was Multiple Choice $3,515. $1,085. $5,200. $1,585.

1,585

Stosch Company's balance sheet reported assets of $97,000, liabilities of $26,000 and common stock of $23,000 as of December 31, Year 1. If Retained Earnings on the balance sheet as of December 31, Year 2, amount to $62,000 and Stosch paid a $25,000 dividend during Year 2, then the amount of net income for Year 2 was which of the following? a. $39,000 b. $48,000 c. $14,000 d. $25,000

39,000 :Step 1: Find Beginning Balance by solving for R/E of Year 1: 97,000 - 26,000 - 23,000 = 48,000Step 2: Plug into Net Income EquationR/E: + 48,000N/I: +XDividends: - 25,000is equal to E/B = 62,000Step 3: Solve for X: 62,000 + 25,000 - 48,000 = $39,000X = 39,000

Llewelyn Company paid the amount due on a purchase of merchandise on account. Llewelyn uses the perpetual inventory system. Which of the following answers reflects the effect of the payment on the financial statements? Assets = Liab. + Equity Rev. − Exp. = Net Inc. Cash Flow A.−=−+NANA−NA=NA− OA B.−=−+NANA−+=−− OA C.+/−=NA+NANA−NA=NA− IA D.+/−=NA+NANA−NA=NA− OA Multiple Choice Option A Option B Option C Option D

A

The Wilson Company purchased $42,000 of merchandise from the Poole Wholesale Company. Wilson also paid $3,500 for freight costs to have the goods shipped to its location. Which of the following statements regarding the necessary entries for the transactions is true? Wilson uses the perpetual inventory system. A. Total increases to the inventory account would be $45,500. B. Total increases to the inventory account would be $42,000. C. Transportation-in would be decreased by $3,500. D. Total increases to the inventory account would be $3,500.

A. Total increases to the inventory account would be $45,500. Wilson company (as the buyer of the merchandise) pays the transportation costs. Transportation-in is reported as merchandise inventory.

Which of the following is considered a period cost? Transportation cost on goods received from suppliers. Advertising expense for the current month. Cost of merchandise purchased. None of these answer choices are considered a period cost.

Advertising expense for the current month. Explanation: Advertising expense is a selling and administrative expense, or period cost.

The recognition of an expense may be accompanied by which of the following? An increase in liabilities A decrease in liabilities A decrease in revenue An increase in assets

An increase in liabilities (because Liabilities are also Salaries Payable) Explanation: Recognizing an expense may be accompanied by an increase in liabilities (i.e. accounts payable, salaries payable) or a decrease in assets (i.e. cash, prepaid rent or insurance).

Master formulas

Asset = liabilities + (common stock + Retained earnings) net income = revenue - expense Net Income= (Change in retained earning) + Dividend

assume the perpetual inventory method is used. 1. 1) The company purchased $12,500 of merchandise on account under terms 2/10, n/30. 2. 2) The company returned $1,200 of merchandise to the supplier before payment was made. What effect will the return of merchandise to the supplier have on the accounting equation? A. Assets and equity are reduced by $1,176. B. Assets and liabilities are reduced by $1,176. C. Assets and liabilities are reduced by $1,200. D. None. It is an asset exchange transaction.

Assets and liabilities are reduced by $1,200

Assume the perpetual inventory method is used. 1) The company purchased $12,500 of merchandise on account under terms 2/10, n/30. 2) The company returned $1,200 of merchandise to the supplier before payment was made. 3) The liability was paid within the discount period. 4) All of the merchandise purchased was sold for $18,800 cash. The amount of gross margin from the four transactions is: A. $5,100. B. $7,726. C. $6,550. D. $11,074.

B. $7,726. Cost of goods sold = ($12,500 - $1,200) × 0.98 = $11,074 Sales revenue $18,800 - Cost of goods sold $11,074 = $7,726

Which of the following is considered a period cost? A. None of these answer choices are considered a period cost. B. Advertising expense for the current month. C. Cost of merchandise purchased. D. Transportation cost on goods received from suppliers.

B. Advertising expense for the current month. advertising expense is a selling and administrative expense, or period cost.

Ballard Company uses the perpetual inventory system. The company purchased $9,200 of merchandise from Andes Company under the terms 3/10, net/30. Ballard paid for the merchandise within 10 days and also paid $370 freight to obtain the goods under terms FOB shipping point. All of the merchandise purchased was sold for $17,400 cash. The amount of gross margin for this merchandise is: A. $7,830. B. $8,106. C. $9,200. D. $8,200.

B. $8,106. sales $17,400 - Cost of goods sold ($9,200 × 0.97 + $370) = $8,106 Gross margin

SX Company sold merchandise on account for$19,000. The merchandise had cost the company$7,800. What is the effect of the sale on the income statement? A.Revenue increases by $11,200 B.Expenses increase by $7,800 C.Net Income increases by $19,000 D.All of the above

B.Expenses increase by $7,800

Abbott Company purchased $7,600 of merchandise inventory on account. Advent uses the perpetual inventory method. How does this transaction affect the financial statements? A.Decrease accounts payable and decrease purchases. B.Increase inventory and increase accounts payable. C.Increase cost of goods sold and increase accounts payable. D.Decrease accounts payable and decrease inventory.

B.Increase inventory and increase accounts payable.

Assume the perpetual inventory method is used. 1) Green Company purchased merchandise inventory that cost $17,300 under terms of 2/10, n/30 and FOB shipping point. 2) The company paid freight cost of $730 to have the merchandise delivered. 3) Payment was made to the supplier within 10 days. 4) All of the merchandise was sold to customers for $26,100 cash and delivered under terms FOB shipping point with freight cost amounting to $530. The gross margin from these transactions of Green Company is A. $9,146. B. $7,886. C. $8,416. D. $8,616.

C. $8,416. Gross margin=$26,100 Sales - [($17,300 × 0.98) + $730] Cost of goods sold = $8,416

Which of the following items is not a product cost? A. Transportation cost on merchandise purchased from suppliers. B. Cost of merchandise purchased for resale. C. Transportation cost on goods delivered to customers. D. All of these answer choices are product costs.

C.Transportation cost on goods delivered to customers. Explanation. transportation cost on goods delivered to customers is a period cost (expense) called transportation-out.

Which of the following items is an example of revenue? Cash received from a bank loan Cash received from investors from the sale of common stock Cash received from customers at the time services were provided Cash received from the sale of land for its original selling price

Cash received from customers at the time services were provided Explanation: someone payed the company for a service or product

Addison Company experienced an accounting event that affected its financial statements as indicated below: Assets = Liab. + Equity Rev.− Exp. = Net Inc. Cash Flow + NA ++ NA +NA Which of the following accounting events could have caused these effects on Addison's statements? Issued common stock. Earned revenue on account. Correct Earned cash revenue. Collected cash from accounts receivable.

Earned revenue on account.

Required information Cole Company began operations on January 1, 2011. During 2011, the company engaged in the following cash transactions: 1) issued stock for $30,0002) borrowed $34,000 from its bank3) sold merchandise for $29,0004) paid back $11,100 of the bank loan5) paid rent expense for $3,6506) purchased equipment costing $6,6507) paid $3,000 dividends to stockholders8) paid employees' salaries, $12,100 rev: 03-04-2011 What is Cole's net cash flow from operating activities? rev: 03-04-2011 Multiple Choice Inflow of $13,250 Inflow of $19,350 Inflow of $66,800 Inflow of $11,100

Inflow of $13,250

Yowell Company began operations on January 1, Year 1. During Year 1, the company engaged in the following cash transactions: 1) issued stock for $62,000 2) borrowed $36,000 from its bank 3) provided consulting services for $60,000 cash 4) paid back $26,000 of the bank loan 5) paid rent expense for $14,500 6) purchased equipment for $23,000 cash 7) paid $4,100 dividends to stockholders 8) paid employees' salaries of $32,000 What is Yowell's net cash flow from operating activities? Multiple Choice Inflow of $49,500 Inflow of $13,500 Inflow of $28,000 Inflow of $9,400

Inflow of $13,500 Explanation $60,000 inflow from consulting services - $14,500 outflow for rent expense - $32,000 outflow for salaries expense = $13,500 inflow

Santa Fe Company was started on January 1, Year 1, when it acquired $8,700 cash by issuing common stock. During Year 1, the company earned cash revenues of $4,550, paid cash expenses of $3,100, and paid a cash dividend of $650. Based on this information, Multiple choice The balance sheet at December 31, Year 1 would show total equity of $13,250. The Year 1 statement of cash flows would show a net cash flow from financing activities of $8,700. The Year 1 income statement would show net income of $800. The Year 1 statement of cash flows would show net cash inflow from financing activities of $8,050.

The Year 1 statement of cash flows would show net cash inflow from financing activities of $8,050. Explanation: $8,700 cash inflow from issuing stock - $650 cash outflow for dividends = $8,050 net cash inflow from financing activities

Middleton Company uses the perpetual inventory method. The company purchased an item of inventory for $155 and sold the item to a customer for $280. What effect will the sale have on the company's inventory account? The account will decrease by $280. The account will decrease by $155. The account will decrease by $125. No effect.

The account will decrease by $155. Explanation: The sale will cause the inventory account to decrease by $155, the cost of the item sold.

Galaxy Company sold merchandise costing $2,200 for $3,400 cash. The merchandise was later returned by the customer for a refund. If the perpetual inventory method is used, what effect will the sales return have on the accounting equation? Total assets and total equity decrease by $1,200. Total assets and total equity decrease by $3,400. Total assets decrease by $3,400 and total equity is decreased by $2,200. Total assets and total equity increase by $1,200.

Total assets and total equity decrease by $1,200. Explanation: The sales return will increase assets (inventory) and decrease cost of goods sold, which will increase equity, by $2,200 each. It will also decrease assets (cash) and decrease sales revenue, which will decrease equity, by $3,400 each. The net effect is a decrease in total assets and total equity of $1,200.

The Wilson Company purchased $35,000 of merchandise from the Poole Wholesale Company. Wilson also paid $2,800 for freight costs to have the goods shipped to its location. Which of the following statements regarding the necessary entries for the transactions is true? Wilson uses the perpetual inventory system. Total increases to the inventory account would be $37,800. Total increases to the inventory account would be $35,000. Transportation-in would be increased by $2,800. Total increases to the inventory account would be $2,800.

Total increases to the inventory account would be $37,800. 35000+2800=37800

Which of the following items is not a product cost? Transportation cost on goods delivered to customers. Cost of merchandise purchased for resale. Transportation cost on merchandise purchased from suppliers. All of these answer choices are product costs.

Transportation cost on goods delivered to customers. Explanation: Transportation cost on goods delivered to customers is a period cost (expense) called transportation-out.

Which of the following is considered a product cost? Utility expense for the current month. Salaries paid to employees of a retailer. Transportation cost on goods received from suppliers. Transportation cost on goods shipped to customers.

Transportation cost on goods received from suppliers. Explanation: Transportation cost on purchased goods is a product cost that increases the merchandise inventory account, and is reported as a component of cost of goods sold on the income statement.

The cost of goods sold account is classified as: a liability. an asset. a contra asset. an expense.

an expense. Explanation: Cost of goods sold is the expense recognized when merchandise is sold.

The year-end financial statements of Calloway Company contained the following elements and corresponding amounts: Assets = $33,000; Liabilities = ?; Common Stock = $6,300; Revenue = $13,600; Dividends = $1,400; Beginning Retained Earnings = $4,400; Ending Retained Earnings = $8,300.Based on this information, the amount of expenses on Calloway's income statement was a. $16,600 b. $9,700 c. $8,300 d. $3,900

c. $8,300. Explanation: Beginning retained earnings + Revenue - Expenses - Dividends = Ending retained earnings$4,400 + $13,600 - Expenses - $1,400 = $8,300 Expenses = $8,300 4400+13600-1400= 16600 - 8300=8300

Stahl Company paid $7,800 on May 1, 2008 for insurance coverage for a one year period beginning that date. The adjusting entry required to recognize insurance expense on December 31, 2008 would have what effect on the financial statements? Multiple Choice Choice A Choice B Choice C Choice D

choice d Explanation: Since Stahl paid $7800 for one year of insurance the amount of insurnce the company will "use" each month is $650. ($7800/12 months.) The insurance was purchased on May 1. By December 31st Stahl will have used the pre-paid insurance for May, June, July, Aug, Sep, Oct, Nov, and Dec. - which is 8 months. Multiply the monthly amount of $650 times the 8 months to determine that $5200 of insurance has been used. Therefore, Stahl will record $5200 of insurance expense and reduce the prepaid insurance asset by the same amount. There is NEVER cash flow in an adjusting entry.

receive cash discount of $200 from suppliers decrease inventory decrease expense increase inventory increase expense

decrease inventory

cost of goods sold is an asset expense liability contra asset

expense

Jack's Snow Removal Company received a cash advance of $9,600 on December 1, Year 1 to provide services during the months of December, January, and February. The year-end adjustment on December 31, Year 1, to recognize the partial expiration of the contract will Multiple Choice increase assets by $3,200 increase equity by $3,200 increase liabilities by $3,200 increase assets by $3,200 and increase equity by $3,200

increase equity by $3,200 Explanation: 1/3 of the months is in year one. 9,600/3= 3200

Offer a cash discount $200 to customers decrease inventory decrease expense increase inventory increase expense

increase expense

sell inventory under FOB destination, Shipping costs decrease inventory decrease expense increase inventory increase expense

increase expense

buy inventory under FOB shipping, shipping costs decrease inventory decrease expense increase inventory increase expense

increase inventory

Faust Company uses the perpetual inventory method. Faust sold goods that cost $5,100 for $8,200. If the sale was made on account, the net effect of the sale will: increase total assets by $3,100. increase total equity by $8,200. increase total assets by $8,200. increase total assets by $5,100.

increase total assets by $3,100. Explanation: The sale will increase assets (accounts receivable) and equity (sales revenue) by $8,200 and it will decrease assets (inventory) and equity (increase cost of goods sold) by $5,100. The net effect is an increase to total assets and total equity of $3,100.

The claims of a business's creditors are called Multiple Choice assets. liabilities. equity. revenue.

liabilities

Jackson Company had a net increase in cash from operating activities of $8,600 and a net decrease in cash from financing activities of $1,900. If the beginning and ending cash balances for the company were $3,600 and $12,200, then net cash change from investing activities was: a. An outflow or decrease of $1,900 b. An inflow or increase of $1,700 c. An inflow or increase of $1,900 d. Zero

math: BB : 3,600 OA: +8,600 FA: - 1,900 IA: XEquals = (EB): 12,200Solve for X: 12,200+1,900-8600-3600 = 1900 Inflow/Increase of 1,900

Which of the following choices accurately reflects how the recording of accrued salary expense affects the financial statements of a business? Assets=Liab.+EquityRev.-Exp.=Net Inc.Cash Flow A.NA=++---+=NANA B.NA=NA++/-NA-NA=NANA C.NA=++-NA-+=-NA D.+=++NANA-+=--OA Option A Option B Option C Option D

option c

gross margin

sales revenue - cost of goods sold = gross margin

Li Company paid cash to purchase land. As a result of this accounting event: total assets decreased. total assets were unaffected. total equity decreased. both assets and total equity decreased.

total assets were unaffected. Explanation: you took money out and put an equivalent value of land back in.

which appears in income statement? cost of goods sold, transportation? cost of goods sold transportation-out loss on sales of land dividend

transportation-out, cost of goods sold, and loss on sales of land.