ACG 2021 Chapter 1, Financial Accounting
Accounts Receivable
Asset
Accumulated Depreciation--Buildings
Asset
Accumulated Depreciation--Equipment
Asset
Allowance for Doubtful Accounts
Asset
Buildings
Asset
Cash
Asset
Copyrights
Asset
Equipment
Asset
Goodwill
Asset
Interest Receivable
Asset
Inventory
Asset
Land
Asset
Patents
Asset
Prepaid Insurance
Asset
Prepaid Rent
Asset
Supplies
Asset
In which of the following order are these financial statements usually prepared? A. All of these B. None of these C. The financial statements are independent and the order they are prepared is not important. D. The retained earnings statement is prepared before the balance sheet. E. The balance sheet is prepared before the income statement.
D. The retained earnings statement is prepared before the balance sheet. The financial statements are prepared in the following order: income statement, retained earnings statement, balance sheet. This is because the net income (from the income statement) is a required input for the retained earnings statement, ending retained earnings (from the retained earnings statement) is a required input for the balance sheet.
If Rock INC. has a current ratio of 1.8, and Pebble INC. has a current ratio of 1.6, compared to Rock INC, Pebble Inc. has: A. Lower profitability B. Lower solvency. C. Higher solvency. D. Higher liquidity E. Lower liquidity
E. Lower liquidity The current ratio is current assets divided by current liabilities and measures liquidity. Higher ratios indicate higher liquidity, and lower current ratios mean that the company is less liquid.
Faithful representation means that information accurately depicts what really happened. Characteristics associated with faithfully representative accounting information include being: A. Complete, neutral, and free from error. B. Relevant, verifiable, and predictable. C. Material and predictive D. Verifiable and neutral E. Confirmatory explanatory, and valuable
A. Complete, neutral, and free from error.
Which of these measures is an evaluation of a company's ability to pay current liabilities? A. Both the current ratio and working capital B. Both earning per share and current ratio C. Earnings per share D. Working capital E. Current ratio
A. Both the current ratio and the working capital The current ratio measures liquidity (assets/liability). Working capital measures liquidity (assets-liabilities). Since both measure liquidity, both measure a company's ability to pay liabilities.
Accounting Equation
Assets= Liabilities + Stockholder Equity
Which of the following is an indicator of profitability? A. All of these B. Earnings per share C. Current Ratio D. Debt to total assets ratio E. Working Capital
B. Earnings per share. The earnings per share ratio is a measure of profitability. The others are measures of solvency or liquidity.
The Retained Earnings Statement A. Summarizes the cash inflows and outflows for a period of time partitioned into operating, investing, and financing activities. B. Summarizes the changes in total equity for a specific period of time such as a year. C. Reports the assets, liabilities, and stockholder's equity at a specific date. D. Presents the revenues and expenses for a specific period of time.
B. Summarizes the changes in total equity for a specific period of time such as a year. The balance sheet reports the assets, liabilities, and stockholder's equity at a specific date. The income statement reports revenues minus expenses (i.e net income). The retained earnings statement summarizes the changes in retained earnings for a specific period of time.
Jeremiah Company recorded the following cash transactions for the year: Collected $460,000 from customers Collected $50,000 from lenders Paid $10,000 to purchase office equipment Paid $140,000 for salaries Paid $20,000 in dividends Paid $260,000 of goods and services What was the company's net cash provided by operating activities for the year? A. $50,000 B. $300,000 C. $60,000 D. $40,000
C. $60,000 A company's activities are divided into three categories: 1) operating activities, 2) investing activities, and 3) financing activities. Operating activities include selling goods or services, paying suppliers or buying inventory, employing workers, etc. Cash flows from operating activities are increased by collecting cash from operating activities. The company's net cash provided by operating activities includes cash collected from customers, salaries paid for salaries, and cash paid for goods and services. =$460000-$140000-$260000=$60000
How does a company compute its free cash flow? A. Net cash flow from all activities minus its expenditures on property, plant, and equipment, and its dividends paid. B. Net cash provided by its operating activities plus its expenditures on property, plant, and equipment, and its dividends paid. C. Net cash provided by its operating activities minus expenditures on property, plant, and equipment, and its dividends paid. D. Net cash flow from all activities plus its expenditures on property, plant, and equipment, and its dividends paid.
C. Net cash provided by its operating activities minus expenditures on property, plant, and equipment, and its dividends paid. Free cash flow is computed by subtracting capital expenditures and cash dividends from its cash provided by operations.
How is stockholder's equity calculated?
Common Stock + Retained Earnings. Assets = Liabilities+Stockholder Equity
What is the formula for current ratio?
Current Ratio = Current Assets / Current Liabilities
The Income Statement A. Summarizes the changes in total equity for a specific period of time B. Reports the assets, liabilities, and stockholder's equity as a specific date C. Summarizes the cash inflows and outflows for a specific period of time partitioned into operating, investing, and financing activities D. Reports the changes in assets, liabilities, and stockholder's equity over a period of time E. Presents the revenues and expenses for a specific period of time.
E. Presents the revenues and expenses for a specific period of time. The balance sheet reports the assets, liabilities, and SE at a specific date. The income statement reports net income, and the retained earnings statement summarizes the changes in retained earnings for a specific period of time.
How is earnings per share calculated?
Earnings (net income) divided by the number of common shares outstanding. If there are preferred dividends, they are subtracted from the net income before dividing by common shares outstanding.
What is the formula for the ending balance?
Ending Balance = Beginning Cash - Cash Disbursements + Cash Receipts
Ending Balance of Stockholder's Equity
Ending SE= Beginning SE + Net Income - Dividends
How is ending retained earnings calculated?
Ending retained earnings equals beginning retained earnings plus net income minus dividends. ERE = BRE + NI -DIV
Administration Expenses
Expenses
Amortization Expenses
Expenses
Bad Debt Expense
Expenses
Cost of Goods Sold
Expenses
Depreciation Expense
Expenses
Freight-Out
Expenses
Income Tax Expense
Expenses
Insurance Expense
Expenses
Interest Expense
Expenses
Loss on Disposal of Plant Assets
Expenses
Maintenance and Repairs Expense
Expenses
Rent Expense
Expenses
Salaries and Wages Expense
Expenses
Selling Expenses
Expenses
Supplies Expense
Expenses
Utilities Expense
Expenses
Accounts Payable
Liability
Bonds Payable
Liability
Discount on Bonds Payable
Liability
Dividends Payable
Liability
Income Taxes Payable
Liability
Interest Payable
Liability
Mortgage Payable
Liability
Notes Payable
Liability
Premium on Bonds Payable
Liability
Salaries and Wages Payable
Liability
Unearned Service Revenue
Liability
Gain on Disposal of Plant Assets
Revenue
Interest Revenue
Revenue
Sales Discounts
Revenue
Sales Returns and Allowance
Revenue
Sales Revenue
Revenue
Service Revenue
Revenue
Common Stock
Stockholder's Equity
Dividends
Stockholder's Equity
Income Summary
Stockholder's Equity
Paid-in Capital in Excess of Par Value-- Common Stock
Stockholder's Equity
Paid-in Capital in Excess of Par Value--Preferred Stock
Stockholder's Equity
Preferred Stock
Stockholder's Equity
Retained Earnings
Stockholder's Equity
Treasury Stock
Stockholder's Equity
What is the primary criterion by which accounting information can be judged? A. Comparability B. Usefulness for decision making C. Consistency D. Predictive Value
Usefulness for decision making
What are the three fundamental qualities of useful accounting information?
Verifiability, Relevance, Faithful Representation
What is the formula for working capital?
Working Capital = Assets - Current Liabilities
The economic entity assumption states that economic events
of each entity can be separately identified and accounted for