ACCT. 2301 HW 1
Investing activities involve collecting necessary funds from investors
: False. Investing activities includes buying and selling long-term assets (PPE and investments). Collecting money from investors will constitute financing activity. The most typical mistake some students make, please, do not be one of them.
What was Jackson's net cash provided by operating activities?
A. $125,000 Solution: Cash from operating activities includes revenue and expense related items: Cash collected from customers (revenue related)- cash paid for salary-cash paid for utility =$275,000 - $135,000 - $15,000 = $125,000
Cash $10,000 Inventory $31,000 Loan $26,000 Equipment $18,000 Revenue $103,000 Common Stock $143,000 Dividends $81,000 Expenses $46,000 Land $100,000 What are total assets?
A. $159,000 In this example, there are the following assets accounts- cash, inventory, equipment and Land. Thus, 10,000+31,000+18,000+100,000=159,000. Loan is a Liability account. Temporary accounts, such as Revenues, Expenses and Dividends will eventually be closed into Retained Earnings account (Equity account)
The balance sheet for Raymond Company shows total assets of $4,000, liabilities of $1,500, and retained earnings of $1,200. Based on this information, the amount of common stock must be:
A. 1,300 Assets=Liabilities+Equity, Equity section has two accounts Common Stock (CS) and Retained earnings (RE), thus accounting equation could be re-written as: Assets=Liability+ CS+RE $4,000=$1,500 + ($1,200 +RE ) $4,000 - $1,500 - $1,200 = $1,300=RE
calculate net income based on net income; Salary expense 21,200 Rent expense 5,400 Retained earnings 52,000 Cash 10,000 Advertisement expense 3,000 Service revenue 50,700
A. 21,100 Net Income=Total revenues-Total Expenses Total Revenue=50,700 Total Expenses= 21,200+5,400+ 3,000= 29,600 Net income= 50,700-29,600=21,100 Cash is an asset (appears on the Balance Sheet). Retained earnings is an Equity account (appears in Statement of Changes in Equity and Balance Sheet accounts)
Liabilities are:
A. Claims of creditors Liabilities are amounts owed to creditors in the form of debt and other obligations. The owner's interest or claims of investors (B and C are absolute synonymous) is represented by Equity.
Which account is associated with the ASSET financial statement element?
A. Land
Which of the following is the most appropriate and modern definition of accounting?
A. The information system that identifies, records, and communicates the economic events of an organization to interested users.
Which of the following financial statements will be the most useful in evaluating company profitability?
A. income statement
The company pays cash for a building. This is what type of cash flow activity?
A. investing Cash transactions dealing with long-term assets such as buildings, land, etc., are investing activities.
Accounts payable $62,000 Accounts receivable 100,000 Cash 30,000 Inventory 138,000 Land 160,000 Common Stock 200,000 Revenue 80,000 Dividends 56,000 Expenses 40,000 what is the amount of total assets?
B. $428,000 Assets accounts from the list: Cash, Accounts receivable, Inventory, Land 30,000 + 100,000 +138,000 + 160,000 = 428,000 Revenue is not an asset account
Based on this information, what is Dawson's Retained Earnings balance at the end of the year?
B. $480 End RE = Beg RE + Net Income - Dividends End RE =$425 + $130 - $75 = $480
What is the accounting equation?
B. Assets= Liabilities + Stockholders Equity
What is the most probable name of the statement below?
B. Balance sheet
Which financial statement element is the common stock account associated with?
B. Equity Common stock is an equity account. It represents the amount of ownership and/or claims the owners have to the business' assets.
A company has to provide ALL available accounting information in the summarized format to current or potential investors.
B. False
What is the amount of net income?
C. $40,000 Net Income = Total Revenues - Total Expenses= 80,000 - 40,000 = 40,000. Please, do not OVERTHINK this question.
What is Stockholders Equity? Assets=75,000 Liabilities=25,000
C. $50,000 Balance Sheet equation (Accounting equation) is Assets = Liabilities + Stockholders??? Equity Therefore, Stockholder???s Equity is Assets-Liabilities=75,000-25,000=50,000
Jack and Jill form a partnership. Jack runs the business in New York, while Jill vacations in Hawaii. During the time Jill is away from the business, Jack increases the debts of the business by $20,000. Which of the following statements is true regarding this debt?
C. Both Jack and Jill are personally liable for the business debt.
Which account is associated with the ASSET financial statement element?
C. Cash
In a study session, a classmate makes this statement "Dividends are listed as expenses on the income statement." What is your best response to this statement?
C. Dividends represent a portion of corporate profits that are paid to the shareholders. They belong on the retained earnings statement.
A corporation has which of the following set of characteristics?
C. Easier to transfer ownership and raise funds, no personal liability
The company issues stock. This is what type of cash flow activity?
C. Financing Cash transactions with owners are financing activities. The cash is used to finance the operations of the business.
The company pays cash for insurance. This is what type of cash flow activity?
C. Operating Cash transactions dealing with routine, day-to-day activities are operating activities
Which ACCOUNT is associated with the EQUITY financial statement element?
C. Retained Earnings
The motivation for an investor to provide resources to a business is:
C. To gain on share appreciation and/or potentially receive a portion of the Income of the company in the future
The company paid $1 mln cash for a building. As a result of transaction:
C. Total assets remained unchanged Company paid $1mln cash, so one type of asset (Cash) decreased. At the same time, the company received another type of asset -a building +1mln. So, -1mln +1mln=0, so there were no change in total asset amount.
If total liabilities increased by $69,000 during a period of time and stockholders' equity decreased by $27,000 during the same period, then the amount and direction (increase or decrease) of the period's change in total assets is a(n)
D. $42,000 increase. Solution: Assets=Liabilities+ Equity $69,000 - $27,000 = $42,000 increase
At the beginning of the year BobCat Inc. assets were $650,000, liabilities were $110,000, and common stock was $90,000. Net income for the year was 280,000. Dividends of $220,000 were paid during the year. What is the ending balance for retained earnings in 2012?
D. $510,000 End RE = Beg. RE + Net Income - Dividends RE ending-? Are all of the components provided? No, RE beginning is not directly stated in the problems. So, we need to find RE beg. first from the accounting equation. Beg. Assets .=beg. Liabilities +beg. CS.+beg.RE Beg. RE: $650,000 = $110,000 + ($90,000+RE beg) so Beg RE = $450,000 End RE = Beg. RE + Net Income - Dividends =450,000 + $280,000 - $220,000 = $510,000
A company's retained earnings at the beginning and ending of the accounting period were $100,000 and $120,000, respectively. Common stock at the end of the year was $90,000. If the company had dividends of $3,000 and revenues of $280,000, the amount of expenses must have been?
D. 257,000 R/E end =R/E beg+Revenue-Expenses-Dividends R/E end =Retained Earnings at the end of the period R/E beg =Retained Earnings at the begining of the period So, by plugging the numbers we have: 120,000=100,000+280,000-Expenses-3,000 Expenses=100,000+280,000-3,000-120,000=257,000 While Common Stock stands for the amount invested by owners, the Retained earnings represent earned capital for investors. Naturally, earned capital increases when the company is profitable (net income is positive, which in turns means that revenues are bigger than expenses). Also, each time the company shares the profits with owners in form of Dividends, there is less earned capital left within the company, thus Retained earnings go down. In sum, at this point, we cover only three types accounts that may effect Retained Earnings: revenues (make Retained Earnings go up), expenses (make Retained Earnings go down) and dividends (make Retained Earnings go down).
What is Assets? Liabilities=20,000 Common Stock=15,000 Retained Earnings=23,500
D. 58,500 Balance Sheet equation (Accounting equation) is Assets = Liabilities + Stockholders??? Equity Further, Stockholder???s Equity has two components- Common Stock and Retained Earnings, thus Assets=Liabilities+Common Stock and Retained Earnings=20,000+15,000+23,500=58,500
A document that is evidence of ownership in a business (i.e. a claim to a business' assets) is called
D. Common stock
Which of the following is an asset?
D. accounts receivable
An income statement
D. presents the revenues and expenses for a specific period of time. The income statement reports a company's revenues and expenses and resulting net income or loss for a period of time. The changes in retained earnings for a specific period of time is summarized in the Statement of Retained earnings. Balance Sheet reports the assets, liabilities, and stockholders' equity at a specific date. Please, know the structure (components) of each of four financial statements
Pick FALSE statement
E. Dividends paid will decrease revenue accounts
A business is usually involved in two types of activity—financing and investing.
False. Business is usually involved in three types of activity: financing, investing and operating
