Chapter 1 Accounting
Which financial statement is prepared first
income statement
Which of the following groups uses accounting information to determine whether the company's operating performance might result in a stock price increase?
investors in common stock
A business organized as a corporation
is owned by its stockholders
An advantage of the corporate form of business is that
its ownership is easily transferrable via the sale of shares of stock
Debts and obligations of a business are referred to as
liabilities
Net income for the period is determined by subtracting expenses and dividends from revenues
false
Owners of the business forms are the only people who need accounting information
false
The economic resources owned by a business are called stockholders' equity
false
Gilkey Corporation began the year with retained earnings of $310,000. During the year, the company issued $420,000 of common stock, recorded expenses of $1,200,000, and paid dividends of $80,000. If Gilkey's ending retained earnings was $330,000, what was the company's revenue for the year?
1,300,000;310,000+x-1,280,000=330,000
Finney Company began the year with retained earnings of $100,000. During 2022, the company issued $80,000 of common stock for cash. The company recorded revenues of $740,000, expenses of $640,000, and paid dividends of $40,000. What was Finney's net income for the year 2022?
100,000; 740,000-640,000
If total liabilities increased by $90,000 and stockholders' equity increased by $30,000 during a period of time, then total assets must change by what amount and direction during that same period?
120,000 increase
A company's total liabilities decreased by $105,000 and its stockholders' equity decreased by $35,000 during a period of time. By what amount and in what direction must the company's total assets have changed during that same period?
140,000 decrease
Lankston Company began the year by issuing $120,000 of common stock for cash. The company recorded revenues of $1,100,000, expenses of $960,000, and paid dividends of $60,000. What was Lankston's net income for the year?
140,000: 1,100,000-960,000
Jimmy's Repair Shop started the year with total assets of $300,000 and total liabilities of $240,000. During the year, the business recorded $630,000 in revenues, $330,000 in expenses, and dividends of $60,000. The net income reported by Jimmy's Repair Shop for the year was
195,000: 330,000-165,000-60,000=105,000; 210,000+105,000=315,000; 315,000-120,000=195,000
Jimmy's Repair Shop started the year with total assets of $300,000 and total liabilities of $240,000. During the year, the business recorded $630,000 in revenues, $330,000 in expenses, and dividends of $60,000. Stockholders' equity at the end of the year was
300,000; 630,000-330,000-60,000=240,000; 240,000+300,000=540,000; 540,000-240,000=300,000
Jimmy's Repair Shop started the year with total assets of $300,000 and total liabilities of $240,000. During the year, the business recorded $630,000 in revenues, $330,000 in expenses, and dividends of $60,000. The net income reported by Jimmy's Repair Shop for the year was
300,000; 630,000-330,000=300,000
Kilmer Corporation began 2022 with total stockholder's equity of $1,270,000, including retained earnings of $930,000. During the year, the company issued $1,260,000 of common stock, recorded expenses of $3,600,000, and paid dividends of $240,000. If Kilmer's ending retained earnings was $990,000, what was the company's revenue for 2022? $3,660,000
4,920,000: 930,000+x-1,260,000-3,600,000=990,000
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)
42,000 increase
Henderson Company began the year with retained earnings of 380,000. During the year, the company recorded revenues of 500,000, expenses of 380,000, and paid dividends of 40,000. What was Henson's retained earnings balance at the end of the year?
460,000; 380,000+120,000=40,000
During September 2022, Blowing Rock Diner's total liabilities decreased by $75,000 and its stockholders' equity increased by $15,000. The company's total assets must change by what amount and in what direction during that same period?
60,000 decrease
If total liabilities increased by $90,000 and stockholders' equity increased by $30,000 during a period of time, then total assets must change by what amount and direction during that same period?
60,000 decrease
Pinson Company began the year 2022 with retained earnings of $670,000. During the year, the company sold additional shares of stock for $1,000,000, recorded revenues of $600,000, expenses of $380,000, and paid dividends of $140,000. What was Pinson's retained earnings balance at the end of 2022?
750,000; 670,000+220,000-140,000
Which of the following is not a liability?
Accounts receivable
Which of the following statements is true?
Amounts paid out as dividends are not expenses
The proprietorship form of business organization
generally recieves favorable tax treatment relative to a corporation
Claims of creditors and owners on the assets of a business are called liabilities
False
The accounting equation can be expressed as Assets - Stockholders' Equity = Liabilities
False: Assets = Liabilities + Stockholders Equity
If the assets owned by a business total 100,000 and liabilities total 65,000, then stockholders equity totals 25,000
False: Stockholders' Equity = 35,000
Which of the following is not an advantage of the corporate form of business organization
Favorable tax treatment
Which of the following statements concerning users of accounting information is incorrect?
Regulatory authorities are considered internal users
The liability created by a business when it purchases coffee beans and coffee cups on credit from supplies is termed an
account payable
The right to receive money in the future is called an
account receivable
Liabilities
are debts and obligations
Common stock is reported on the
balance sheet
Which of the following financial statements is concerned with the company at a point in time?
balance sheet
Debt securities sold to investors that must be repaid at a certain date some years in the future are called
bonds payable
Stockholders' equity is comprised of
common stock and retained earnings
A business organized as a separate legal entity is a
corporation
Which of the following external groups uses accounting information to determine whether the company can pay its obligations
creditors
Payments to stockholders are called
dividends
Which of the following set of characteristics describes a corporation
easier to transfer ownership and raise funds, no personal liability
A business is organized as a separate legal entity owned by stockholders is a partnership
false
External users of accounting information are managers who plan, organize, and run a business
false
Management of a business enterprise is the major external user of accounting information
false
If the retained earnings account increases from the beginning of the year to the end of the year, then
net income is greater than dividends
If the retained earnings account decreases from the beginning of the year to the end of the year, then
net income is less than dividends
Stockholders' equity can be described as claims of
owners on total assets
Which of the following is an advantage of corporations relative to partnerships and sole propietorships
reduced legal liability for investors
The balance sheet
reports the assets, liabilities, and stockholder's equity at a specific date
Retained earnings at the end of the period is equal to
retained earnings at the beginning of the period plus net income minus dividends
Dividends are reported on the
retained earnings statement
The retained earnings statement would not show
revenues and expenses
The retained earnings sheet
summarizes the changes in retained earnings for a specific period of time
Retained earnings is
the amount of net income kept in the corporation for future use
All publicly traded U.S. companies must provide their stockholders with an annual report each year
true
An auditor is an accounting professional who conducts an independent examination of the accounting data presented by a company
true
Assets are resources owned by a business and provide future services or benefits to the business
true
Corporate stockholders have no personal liability for the debts of the corporation
true
Creditors' rights to assets supersede owners' rights to assets
true
The liability of corporate stockholders is limited to the amount of their investment
true
The management discussion and analysis (MD&A) section of an annual report covers various financial aspects of a company
true
Two primary external users of accounting information are investors and creditors
true