Acc 3000 Exam 1. (new)

Which ONE of the following statements is FALSE with respect to the FASB? A. Lacks the legal power to enforce the accounting standards it sets B. Receives most of the money for its operating budget from fees charged to public companies C. Is composed of people from a variety of business-related backgrounds D. Is a subcommittee of the AICPA

D. Is a subcommittee of the AICPA

Which ONE of the following statements is TRUE? A. The IASB is an agency of the U.S. federal government. B. Accounting standards in the United States are set by the IRS. C. The balance sheet reports the excess of a company's revenues over its expenses. D. Not all CPAs work in CPA firms.

D. Not all CPAs work in CPA firms.

Which ONE of the following statements is TRUE? A. Managerial accounting information is provided to external users to aid in decision making. B. The balance sheet reports the excess of a company's revenues over its expenses. C. Accounting and bookkeeping are the same thing. D. The SEC is an agency of the U.S. federal government. E. Accounting standards in the United States are set by the IRS.

D. The SEC is an agency of the U.S. federal government.

Which ONE of the following statements is TRUE with respect to the SEC? A. Is a subcommittee of the AICPA B. Is an agency of the United States government C. Lacks the legal power to enforce the accounting standards it sets D.Works under the direction of the United Nations

B. Is an agency of the United States government

The New Company's assets equal $124,000, and its stockholders' equity totals $48,500. What is the amount of its liabilities? A. $144,000 B. $75,500 C. $212,500 D. $88,500

B. $75,500 Assets = Liabilities + Equity $124,000 = Liabilities + $48,500

Which ONE of the following is one of the categories in the statement of cash flows? A. Hedging B. Financing C. Holding D. Trading

B. Financing

On January 1, Company E has total assets of $300,000 and total liabilities of $200,000. On January 2, Company E entered into the following three transactions. a. Sold inventory costing $105,000 to customers for $150,000. The customers paid $100,000 in cash and the remaining $50,000 was put on the customers' accounts. b. Paid employee wages totaling $28,000. These wages had not been previously recorded. c. Borrowed $85,000 cash with a long-term bank loan. After these three transactions, compute Company E's TOTAL OWNERS' EQUITY. A. $117,000 B. $85,000 C. $67,000 D. $32,000 E. $72,000

A. $117,000 See Image

Using the data below, compute TOTAL CURRENT ASSETS. Cash 100 Wages Payable 160 Accounts Receivable 500 Accounts Payable 600 Land 800 Paid-in Capital 1,000 Retained Earnings 1,640 Inventory 1,800 Bank Loan Payable (due in 2 years) 2,200 Equipment 2,400 A. $2,400 B. $1,900 C. $4,040 D. $3,400 E. $2,240

A. $2,400 The most common current assets are cash, accounts receivable, and inventory. By definition, a current asset is an asset that is expected to be used or sold within one year. A current liability is a liability that is expected to be repaid within one year. Cash 100 Accounts Receivable 500 Inventory 1,800 Total Current Assets 2,400

On December 31, 20X1, Grantsville Company had the following account balances. Accounts receivable $15,000 Sales revenues 845,000 Retained earnings (beginning of year, January 1, 20X1) 120,000 Income taxes payable 25,000 Loan payable 30,000 Cost of goods sold 650,000 Cash 65,000 Inventory 20,000 Common stock 41,000 Operating expenses 196,000 Income tax expense 25,000 Unearned revenue 55,000 Property, plant, and equipment 150,000 Prepaid rent 35,000 Bonds payable 40,000 Given these data, what are Grantsville's TOTAL ASSETS as of December 31, 20X1? A. $285,000 B. $305,000 C. $235,000 D. $446,000 E. $255,000

A. $285,000 Assets Accounts receivable - 15,000 Cash - 65,000 Inventory - 20,000 Property, plant, and equipment - 150,000 Prepaid rent -35,000 TOTAL = 285,000 Revenue and expense items are shown in the INCOME STATEMENT. NOT in the balance sheet.

The New Company's assets equal $104,000, and its stockholders' equity totals $68,500. What is the amount of its liabilities? A. $35,500 B. $104,000 C. $172,500 D. $48,500

A. $35,500 Assets = Liabilities + Equity $104,000 = Liabilities + $68,500

Using the following information, compute CURRENT ASSETS. Cost of Goods Sold $ 9,000 Accounts Payable 1,100 Paid-in Capital 1,750 Cash 400 Sales 10,000 Accrued Wages Payable 250 Dividends 700 Retained Earnings (beginning) 1,000 Inventory 4,000 A. $4,400 B. $5,100 C. $7,150 D. $6,150 E. $5,400

A. $4,400 Current Assets: Cash $ 400 Inventory 4,000 Total $4,400

The New Company's assets equal $124,000, and its stockholders' equity totals $68,500. What is the amount of its liabilities? A. $55,500 B. $192,500 C. $68,500 D. $124,000

A. $55,500 Assets = Liabilities + Equity $124,000 = Liabilities + $68,500 Liabilities equal $55,500 or $124,000 - $68,500

Using the following information, compute total CURRENT ASSETS: Goodwill $ 9,000 Prepaid Expenses 1,100 Paid-in Capital 1,750 Cash 400 Property, Plant, and Equipment 10,000 Short-term Investment Securities 250 Accounts Receivable 700 Retained Earnings 1,000 Inventory 4,000 A. $6,450 B. $9,200 C. $5,350 D. $6,350 E. $7,450

A. $6,450 Current Assets: Cash $ 400 Short-term Investment Securities 250 Accounts Receivable 700 Inventory 4,000 Prepaid Expenses 1,100 Total Current Assets $6,450

Which ONE of the following items is NOT a type of stockholders' equity? A. Accrued issuances B. Retained earnings C. Paid-in capital D. Treasury stock E. Accumulated other comprehensive income

A. Accrued issuances

Which ONE of the following is TRUE with respect to International Financial Reporting Standards (IFRS)? A. Allowed by the SEC for use in the United States by non-U.S. companies. B. Adopted by the IRS as a substitute for U.S. GAAP. C. Developed by a joint committee of the AICPA and the European Union. D. Developed by a high commission of the United Nations.

A. Allowed by the SEC for use in the United States by non-U.S. companies.

"The accounting records of a small business must be kept separate from the personal finances of the owner." - Which ONE of the terms below matches the definition/description just given? A. Entity concept B. Stable monetary measure C. Going concern assumption D. Arm's-length E. Historical cost convention

A. Entity concept

Which ONE of the following is a correct description of the IASB? A. Is a private organization that establishes international accounting standards B. Has regulatory authority to establish both income tax and financial accounting standards for companies in Korea, Japan, China, Hong Kong, and Taiwan. C. Works under the direction of the United Nations D. Created by the IRS as a substitute for the FASB

A. Is a private organization that establishes international accounting standards

Which ONE of the following is included in a balance sheet? A. Liabilities B. Financing cash flows C. Net income D. Revenues

A. Liabilities

"Obligations to pay cash, transfer other assets, or provide services to someone else" - Which ONE of the terms below matches the definition/description just given? A. Liability B. Accumulated depreciation C. Loss D. Dividends E. Expense

A. Liability

Amount of assets created through doing business operations" - Which ONE of the terms below matches the definition/description just given? A. Revenues B. Expenses C. Owners' equity D. Accounts receivable E. Cash

A. Revenues

Which ONE of the following is NOT part of the definition of "accounting"? A. Structure B. Financial C. Decision-making to influence the future D. Useful

A. Structure

Which ONE of the following statements is TRUE? A. The SEC has specific legal authority to establish accounting standards in the United States. B. The AICPA inspects the audit practices of registered audit firms in the United States. C. The IASB has specific legal authority to establish accounting standards in the United States. D. The FASB inspects the audit practices of registered audit firms in the United States.

A. The SEC has specific legal authority to establish accounting standards in the United States.

Which ONE of the following describes managerial accounting reports and does NOT describe financial accounting reports. A. They are used primarily by internal users. B. They are based on the financial statements: balance sheet, income statement, and statement of cash flows. C. They represent general purpose information. D. They are based on generally accepted accounting principles.

A. They are used primarily by internal users.

During Year 1, Knight Company recorded the following information on its Income Statement. Sales revenue $500,000 Interest expense 10,000 Interest income 15,000 Gross Profit (or Gross Margin) 200,000 Selling and administrative expenses 75,000 Income tax expense 12,000 What is Knight Company's cost of goods sold for Year 1? A. $ 220,000 B. $ 300,000 C. $ 155,000 D. $ 188,000 E. $ 430,000

B. $ 300,000 By definition, gross profit is the amount of sales revenue left, after taking out the cost of goods sold, to cover other expenses. Therefore, Gross Profit = Sales Revenue - Cost of Goods Sold By using algebra, Cost of Goods Sold = Sales Revenue - Gross Profit In this problem, Cost of Goods Sold = $500,000 - $200,000 = $300,000 None of the other accounts were relevant in determining this answer.

During Year 1, Knight Company recorded the following information on its Income Statement. Sales revenue $500,000 Interest expense 10,000 Interest income 15,000 Gross Profit 200,000 Selling and administrative expenses 75,000 Income tax expense 12,000 What is Knight Company's cost of goods sold for Year 1? A. $ 188,000 B. $ 300,000 C. $ 155,000 D. $ 430,000 E. $ 220,000

B. $ 300,000 Cost of Goods Sold = Sales Revenue - Gross Profit In this problem, Cost of Goods Sold = $500,000 - $200,000 = $300,000 None of the other accounts are relevant in determining this answer.

Use the following information to compute NET INCOME. The income tax rate is 40%. Cost of Goods Sold $ 4,000 Interest Expense 1,100 Selling and Administrative Expense 1,750 Sales 10,000 Dividends 700 A. $980 B. $1,890 C. $1,260 D. $1,470 E. $1,190

B. $1,890 Sales $10,000 Cost of Goods Sold 4,000 Gross Profit $ 6,000 Less: Selling and Administrative Expense 1,750 Operating Income $ 4,250 Interest Expense 1,100 Income Before Income Taxes $3,150 Income Tax Expense (40%) 1,260 Net Income $1,890

The liabilities of the Old Company are $46,200, and its owners' equity is $55,800. What is the amount of its assets? A. $55,800 B. $102,000 C. $66,200 D. $30,400

B. $102,000 Assets = Liabilities + Equity Assets = $46,200 + $55,800

The Barney Corporation started July with assets of $150,000 and liabilities of $90,000. During the month of July, stockholders' equity increased by $24,000 and liabilities increased by $10,000. What is the amount of total assets at the end of July? A. $136,000 B. $184,000 C. $164,000 D. $116,000 E. $140,000

B. $184,000 Stockholders' equity at the beginning of July ($150,000 - $90,000) $60,000 Increase in stockholders' equity 24,000 Stockholders' equity at the end of July $84,000 Liabilities at the end of July ($90,000 + $10,000) 100,000 Assets at the end of July $184,000

On December 31, 20X1, Grantsville Company had the following account balances. Accounts receivable......................................................................... $15,000 Sales revenues.............................................................................................. 845,000 Retained earnings (beginning of year, January 1, 20X1).......................... 120,000 Income taxes payable...................................................................................... 25,000 Loan payable................................................................................................... 45,000 Cost of goods sold.......................................................................................... 650,000 Cash............................................................................................................... 65,000 Inventory.......................................................................................................... 20,000 Common stock................................................................................................. 41,000 Operating expenses......................................................................................... 196,000 Income tax expense.................................................................................. ........ 25,000 Unearned revenue.............................................................................................. 55,000 Property, plant, and equipment.............................................................. .......... 145,000 Prepaid rent....................................................................................................... 50,000 Bonds payable................................................................................................... 35,000 Given these data, what are Grantsville's TOTAL ASSETS as of December 31, 20X1? A. $245,000 B. $295,000 C. $456,000 D. $265,000 E. $315,000

B. $295,000 Assets Accounts receivable 15,000 Cash 65,000 Inventory 20,000 Property, plant, and equipment 145,000 Prepaid rent 50,000 TOTAL 295,000 Revenue and expense items are shown in the INCOME STATEMENT, NOT in the balance sheet.

Using the data below, compute NET INCOME. Wages Expense 200 Cash 220 Income Tax Expense 240 Prepaid Insurance Expense 120 Interest Expense 300 Interest Revenue 500 Unearned Rent Revenue 150 Accounts Payable 600 Inventory 800 Cost of Goods Sold 2,100 Sales Revenue 3,000 A. $690 B. $660 C. $2,290 D. $2,260 E. $540 F. $810

B. $660 Sales Revenue 3,000 Interest Revenue 500 Cost of Goods Sold (2,100) Wages Expense (200) Interest Expense (300) Income Tax Expense (240) Net Income 660

Using the following information, compute cash flow from financing activities. Cash balance, beginning $1,500 Cash paid to purchase inventory 7,800 Cash received from sale of a building 5,600 Cash paid for interest 450 Cash paid to repay a loan 1,000 Cash collected from customers 10,000 Cash received from issuance of new shares of common stock 1,200 Cash paid for dividends 780 Cash paid for income taxes 1,320 Cash paid to purchase machinery 1,950 A. Negative $1,780 B. Negative $580 C. Negative $30 D. Positive $420 E. Negative $1,030

B. Negative $580 Financing activities: e. Cash paid to repay a loan (1,000) h. Cash received from issuance of new shares of common stock 1,200 i. Cash paid for dividends (780) Net cash flow from financing activities (580)

Use the following account balance information to compute TOTAL STOCKHOLDERS' EQUITY as of the END of the year. Salary Expense $18,000 Unearned Service Revenue 4,700 Paid-in Capital 2,000 Cash 800 Service Revenue 20,000 Rent Expense 6,400 Retained Earnings (beginning) 1,500 Prepaid Rent Expense 3,000 A. Negative $2,900 B. Negative $900 C. Positive $3,500 D. Negative $4,400 E. Negative $2,400

B. Negative $900 Net income (or loss) Service revenue 20,000 Salary expense (18,000) Rent expense (6,400) Net LOSS (4,400) Equity Paid-in capital 2,000 + Retained earnings 1,500 - 4,400 (2,900) TOTAL (900)

Which ONE of the following statements is TRUE? A. The PCAOB has specific legal authority to establish accounting standards in the United States. B. The AICPA is responsible for preparing and grading the CPA exam. C. The PCAOB has specific legal authority to regulate stock exchanges in the United States. D. The AICPA has specific legal authority to establish accounting standards in the United States. E. The IRS inspects the audit practices of registered audit firms in the United States.

B. The AICPA is responsible for preparing and grading the CPA exam.

Chen Corporation had the following cash flows during the year. Cash receipt from the issuance of stock $30,000 Cash received from customers 15,000 Interest received on long-term investments 7,500 Cash paid for wages 9,000 Cash paid for insurance 750 Cash paid for dividends 4,500 Cash paid to purchase building 45,000 Cash paid to purchase land 15,000 Given this information, net cash inflow or outflow from financing activities is: A. outflow of $4,500 B. inflow of $25,500 C. inflow of $30,000 D. outflow of $19,500

B. inflow of $25,500 The following constitute financing activities for Chen Corporation: Cash receipt from issuance of stock $30,000 Cash paid for dividends ($4,500) Total Cash from Financing Activities $25,500

The following data relate to Company A. Retained earnings 500 Paid-in capital 200 Long-term liabilities 1,050 Current assets 400 Current liabilities 600 Given these data, compute Company A's TOTAL LONG-TERM ASSETS. A. $1,650 B. $1,050 C. $1,950 D. $300 E. $1,250

C. $1,950 According to the accounting equation, Assets = Liabilities + Owners' Equity Current liabilities 600 Long-term liabilities 1,050 Paid-in capital 200 Retained earnings 500 Total liabilities and owners' equity 2,350 Also, we know that Total Assets = Current Assets + Long-Term Assets 2,350 = 400 + Long-Term Assets

The following items were taken from the records of Anasonic Corporation for the month of October. Sales revenue $620,000 Salaries expense 80,000 Capital stock issued 140,000 Cost of goods sold 335,000 Service revenues 55,000 Rental expense 45,000 Repairs and maintenance expense 54,000 Retained earnings, October 1 230,000 Accounts payable 40,000 Taxes expense 30,000 Dividends declared and paid 13,000 Compute NET INCOME for October. A. $218,000 B. $258,000 C. $131,000 D. $118,000

C. $131,000 Revenues Sales $ 620,000 Service revenues 55,000 Total revenues $ 675,000 Expenses Cost of goods sold $ 335,000 Salaries expense 80,000 Rental expense 45,000 Repairs and maintenance expense 54,000 Total expenses 514,000 Income before taxes $ 161,000 Taxes 30,000 Net income $ 131,000

The Barney Corporation started July with assets of $150,000 and liabilities of $90,000. During the month of July, stockholders' equity increased by $24,000 and liabilities decreased by $10,000. What is the amount of total assets at the end of July? A. $116,000 B. $104,000 C. $164,000 D. $140,000 E. $136,000

C. $164,000 Total assets at the end of July equal $164,000, computed as follows. Stockholders' equity at the beginning of July ($150,000 - $90,000) $60,000 Increase in stockholders' equity 24,000 Stockholders' equity at the end of July $84,000 Liabilities at the end of July ($90,000 - $10,000) 80,000 Assets at the end of July $164,000

The Barney Corporation started July with assets of $170,000 and liabilities of $90,000. During the month of July, stockholders' equity increased by $24,000 and liabilities decreased by $10,000. What is the amount of total assets at the end of July? A. $160,000 B. $136,000 C. $184,000 D. $156,000 E. $124,000

C. $184,000 Total assets at the end of July equal $184,000, computed as follows. Stockholders' equity at the beginning of July ($170,000 - $90,000) $80,000 Increase in stockholders' equity 24,000 Stockholders' equity at the end of July $104,000 Liabilities at the end of July ($90,000 - $10,000) 80,000 Assets at the end of July $184,000

Thomson Company started business on January 1 of Year 1. On December 31 of Year 1, Thomson had the following account balances: Accounts receivable: $145,000 Sales revenues: $991,000 Income taxes payable: $29,000 Loan payable: $60,000 Cost of goods sold: $627,000 Cash: $80,000 Inventory: $33,000 Operating expenses: $235,000 Income tax expense: $30,000 Accounts payable: $60,000 Property, Plant, and Equipment: $166,000 Prepaid Rent: $60,000 Bonds Payable: $150,000 Capital Stock: $86,000 Given these data, what is the total amount of Thomson's Stockholders' Equity as of December 31 of Year 1? A. $484,000 B. $86,000 C. $185,000 D. $99,000 E. $299,000

C. $185,000 Assets Cash $80,000 Accounts receivable $145,000 Inventory $33,000 Prepaid Rent $60,000 Property, Plant, and Equipment $166,000 $484,000 Liabilities Accounts payable $60,000 Income taxes payable $29,000 Loan payable $60,000 Bonds payable $150,000 $299,000 Stockholders' Equity Capital Stock $86,000 Sales revenues $991,000 Cost of goods sold $(627,000) Operating expenses $(235,000) Income tax expense $(30,000) $185,000 Revenue, expense, and dividend accounts are subcategories of retained earnings. These accounts are included in the computation of retained earnings at the end of the year. In this example, because this is the company's first year of business, the beginning balance in retained earnings is zero. Assets - Liabilities = Stockholders' Equity $484,000 - $299,000 = $185,000

Use the following information to compute NET INCOME. The income tax rate on all items is 40%. Cost of Goods Sold $ 11,000 Interest Expense 2,100 Loss from sale of land 2,000 Cash 900 Selling and Administrative Expense 1,750 Accounts payable 400 Sales 20,000 Gain from sale of equipment 1,250 Dividends 700 A. $2,220 B. $3,180 C. $2,640 D. $2,760 E. $1,940

C. $2,640 Sales $20,000 Cost of Goods Sold (11,000) Gross Profit $ 9,000 Operating Expenses and Gains/Losses: Selling and Administrative Expense (1,750) Loss from sale of land (2,000) Gain from sale of equipment 1,250 Operating Income $6,500 Interest Expense (2,100) Income before Income Taxes $4,400 Income Tax Expense (40%) (1,760) Net Income $2,640

How does reliable financial disclosure benefit a company that is seeking to borrow money from a bank? [Choose only ONE.] A. By increasing synergy B. By guaranteeing compliance with SEC regulations C. By transferring operating control D. By reducing uncertainty

D. By reducing uncertainty

On December 31, 20X1, Grantsville Company had the following account balances. Accounts receivable........................................................................... $15,000 Sales revenues...................................................................................................... 845,000 Retained earnings (beginning of year, January 1, 20X1).......................... 120,000 Income taxes payable.......................................................................................... 25,000 Loan payable......................................................................................................... 65,000 Cost of goods sold............................................................................................... 650,000 Cash......................................................................................................................... 65,000 Inventory........................................................................................................... 20,000 Common stock...................................................................................................... 41,000 Operating expenses............................................................................................. 196,000 Income tax expense.............................................................................................. 25,000 Unearned revenue................................................................................................. 55,000 Property, plant, and equipment........................................................................ 145,000 Prepaid rent............................................................................................................. 70,000 Bonds payable....................................................................................................... 35,000 Given these data, what are Grantsville's TOTAL ASSETS as of December 31, 20X1? A. $265,000 B. $335,000 C. $315,000 D. $285,000 E. $476,000

C. $315,000 Assets Accounts receivable............................................................. 15,000 Cash......................................................................................... 65,000 Inventory................................................................................ 20,000 Property, plant, and equipment...................................... 145,000 Prepaid rent........................................................................... 70,000 TOTAL................................................................................. 315,000 Revenue and expense items are shown in the INCOME STATEMENT, NOT in the balance sheet.

Thomson Company started business on January 1 of Year 1. On December 31 of Year 1, Thomson had the following account balances: Accounts receivable: $145,000 Sales revenues: $991,000 Income taxes payable: $ 29,000 Loan payable: $ 60,000 Cost of goods sold: $627,000 Cash: $ 80,000 Inventory: $ 33,000 Operating expenses: $235,000 Income tax expense: $ 30,000 Accounts payable: $ 60,000 Property, Plant, and Equipment: $166,000 Prepaid Rent: $ 60,000 Bonds Payable: $150,000 Capital Stock: $ 86,000 Given these data, what is the total amount of Thomson's TOTAL ASSETS as of December 31 of Year 1? A. $86,000 B. $299,000 C. $484,000 D. $185,000 E. $99,000

C. $484,000 Assets Cash $80,000 Accounts receivable $145,000 Inventory $33,000 Prepaid Rent $60,000 Property, Plant, and Equipment $166,000 $484,000 Revenue and expense items are shown in the INCOME STATEMENT, NOT in the balance sheet.

The Rose Corporation has total assets of $94,000 and total liabilities of $37,500. What is the amount of its owners' equity? A. $94,000 B. $37,500 C. $56,500 D. $131,500

C. $56,500

The Rose Corporation has total assets of $109,000 and total liabilities of $37,500. What is the amount of its owners' equity? A. $37,500 B. $146,500 C. $71,500 D. $109,000

C. $71,500 Assets = Liabilities + Equity $109,000 = $37,500 + Equity

"Economic resources that are owned or controlled by a company" - Which ONE of the terms below matches the definition/description just given? A. Equity B. Revenue C. Asset D. Net income E. Gain

C. Asset

"When in doubt, recognize all losses but don't recognize any gains." - Which ONE of the terms below matches the definition/description just given? A. Articulation B. Reliability C. Conservatism D. Materiality E. Consistency

C. Conservatism

Which ONE of the following statements is FALSE with respect to the SEC? A. Has specific legal authority to establish accounting standards in the United States B. Is an agency of the United States government C. Is charged with protecting U.S. investors from losing money D. Has specific legal authority to regulate stock exchanges in the United States

C. Is charged with protecting U.S. investors from losing money

Which ONE of the following is one of the economic incentives an external auditor has to do a good job? A. Comparability B. Materiality C. Lawsuits D. Articulation

C. Lawsuits

Which ONE of the following statements is TRUE with respect to the FASB? A. Works under the direction of the United Nations B. Is an agency of the United States government C. Receives most of the money for its operating budget from fees charged to public companies D. Created by the IRS as a substitute for the IASB

C. Receives most of the money for its operating budget from fees charged to public companies

"Amount of assets created through doing business operations" - Which ONE of the terms below matches the definition/description just given? A. Accounts receivable B. Owners' equity C. Revenues D. Expenses E. Cash

C. Revenues

Which ONE of the following describes managerial accounting reports and does NOT describe financial accounting reports. A. They are based on the financial statements: balance sheet, income statement, and statement of cash flows. B. They are standardized across companies. C. They are used primarily by internal users. D. They are based on generally accepted accounting principles.

C. They are used primarily by internal users.

The following data relate to Company A. Retained earnings 500 Paid-in capital 200 Long-term liabilities 1,050 Current assets 400 Current liabilities 600 Given these data, compute Company A's TOTAL LONG-TERM ASSETS. A. $300 B. $1,250 C. $1,650 D. $1,950 E. $1,050

D. $1,950 According to the accounting equation, Assets = Liabilities + Owners' Equity Current liabilities 600 Long-term liabilities 1,050 Paid-in capital 200 Retained earnings 500 Total liabilities and owners' equity 2,350 Also, we know that Total Assets = Current Assets + Long-Term Assets 2,350 = 400 + Long-Term Assets Total Long-Term Assets = 1,950

The liabilities of the Old Company are $76,200, and its owners' equity is $35,800. What is the amount of its assets? A. $65,800 B. $76,200 C. $40,400 D. $112,000

D. $112,000 Answer: $112,000 Assets = Liabilities + Equity Assets = $76,200 + $35,800

The following list of items is for Company N. Cash 5,600 Inventory 14,000 Unearned Revenue 2,400 Paid-in Capital 4,000 Retained Earnings (ending) 13,200 Compute TOTAL STOCKHOLDERS' EQUITY. A. $29,600 B. $42,800 C. $19,600 D. $17,200 E. $23,600

D. $17,200 TOTAL STOCKHOLDERS' EQUITY: 4,000 + 13,200 = 17,200

Using the following information, compute total CURRENT LIABILITIES: Accrued Income Taxes Payable $9,000 Notes Payable (due in 14 months) 1,100 Paid-in Capital 1,750 Treasury Stock 400 Current Portion of Long-Term Debt 10,000 Unearned Revenue 250 Accounts Payable 700 Retained Earnings 1,000 Additional Paid-in Capital 4,000 A. $10,700 B. $20,350 C. $21,700 D. $19,950 E. $19,700

D. $19,950 Accounts Payable $ 700 Unearned Revenue 250 Accrued Income Taxes Payable 9,000 Current Portion of Long-Term Debt 10,000 Total Current Liabilities $19,950

Using the data below, compute TOTAL CURRENT LIABILITIES. Cash 100 Wages Payable 160 Accounts Receivable 500 Accounts Payable 600 Land 800 Paid-in Capital 1,000 Retained Earnings 1,640 Inventory 1,800 Bank Loan Payable (due in 9 months) 2,200 Equipment 2,400 A. $2,200 B. $2,400 C. $760 D. $2,960 E. $4,600

D. $2,960 A current liability is a liability that is expected to be repaid within one year. Wages Payable 160 Accounts Payable 600 Bank Loan Payable (due in 9 months) 2,200 Total Current Liabilities 2,960

Thomson Company started business on January 1 of Year 1. On December 31 of Year 1, Thomson had the following account balances: Accounts receivable: $145,000 Sales revenues: $991,000 Income taxes payable: $29,000 Loan payable: $60,000 Cost of goods sold: $627,000 Cash: $80,000 Inventory: $33,000 Operating expenses: $235,000 Income tax expense: $30,000 Accounts payable: $60,000 Property, Plant, and Equipment: $166,000 Prepaid Rent: $60,000 Bonds Payable: $150,000 Capital Stock: $86,000 Given these data, what is the total amount of Thomson's TOTAL LIABILITIES as of December 31 of Year 1? A. $99,000 B. $86,000 C. $484,000 D. $299,000 E. $185,000

D. $299,000 Liabilities Accounts payable $60,000 Income taxes payable $29,000 Loan payable $60,000 Bonds payable $150,000 $299,000 Revenue and expense items are shown in the INCOME STATEMENT, NOT in the balance sheet.

Hannah Company had the following account totals as of December 31, 20X2. Cost of goods sold $150,000 Accounts receivable 100,000 Rent revenue 10,000 Accounts payable 25,000 Sales 200,000 Inventory 50,000 Bank Loan Payable* 20,000 Cash 18,000 Retained earnings (beginning of year, January 1, 20X2) 80,000 Prepaid insurance (6-month insurance policy) 15,000 Paid-in capital 38,000 Equipment 45,000 Unearned rent revenue (9-month contract) 5,000 *Of the $20,000 bank loan payable, $15,000 will be repaid in 20X3. What are Hannah Company's TOTAL CURRENT LIABILITIES? A. $75,000 B. $60,000 C. $40,000 D. $45,000 E. $50,000

D. $45,000 Cost of goods sold $150,000 expense Accounts receivable 100,000 CURRENT ASSET Rent revenue 10,000 revenue Accounts payable 25,000 current liability Sales 200,000 revenue Inventory 50,000 CURRENT ASSET Bank Loan Payable* 20,000 part LT part current Cash 18,000 CURRENT ASSET Retained earnings (beginning of year, January 1, 20X2) 80,000 equity Prepaid insurance (6-month insurance policy) 15,000 CURRENT ASSET Paid-in capital 38,000 equity Equipment 45,000 long-term asset Unearned rent revenue (9-month contract) 5,000 current liability *Of the $20,000 bank loan payable, $15,000 will be repaid in 20X3. CURRENT LIABILITIES = $25,000 + $15,000 + $5,000 = $45,000 Revenue and expense items are shown in the INCOME STATEMENT. NOT in the balance shee

The Rose Corporation has total assets of $109,000 and total liabilities of $52,500. What is the amount of its owners' equity? A. $109,000 B. $131,500 C. $52,500 D. $56,500

D. $56,500 Assets = Liabilities + Equity $109,000 = $52,500 + Equity

The liabilities of the Old Company are $46,200, and its owners' equity is $35,800. What is the amount of its assets? A. $10,400 B. $35,800 C. $46,200 D. $82,000

D. $82,000

Using the following information, compute NET INCOME. Cost of Goods Sold $ 6,000 Interest Expense 1,100 Selling and Administrative Expense 750 Cash 400 Sales 10,000 Wages Payable 250 Dividends 700 Retained Earnings (beginning) 1,000 Income Tax Expense 1,200 A. $1,350 B. $700 C. $1,950 D. $950 E. $1,700

D. $950 Sales $10,000 Less Expenses: Cost of Goods Sold 6,000 Selling and Administrative Expense 750 Interest Expense 1,100 Income Before Income Taxes $ 2,150 Income Tax Expense 1,200 Net Income $ 950

Use the following information to compute the CURRENT RATIO (current assets / current liabilities). Accounts Payable $ 1,100 Paid-in Capital 1,750 Cash 400 Sales 10,000 Accrued Wages Payable 250 Inventory 4,000 A. 3.00 B. 4.63 C. 1.74 D. 3.26 E. 1.65 F. 4.00

D. 3.26 Current Ratio = Current Assets / Current Liabilities = $4,400 / $1,350 = 3.26 Current Assets: Cash + Inventory Current Liabilities Accounts Payable + Accrued Wages Payable Revenue and expense items are shown in the INCOME STATEMENT. NOT in the balance sheet.

"Probable future economic benefits obtained or controlled by a company" - Which ONE of the terms below matches the definition/description just given? A. Revenue B. Net income C. Equity D. Asset E. Gain

D. Asset

Which ONE of the following is a criterion used in determining when to recognize revenue? A. Before recognizing revenue, cost of goods sold must be closed to the retained earnings account. B. Before recognizing revenue, both operating and investing activities must be completed, or be close to completion. C. Before recognizing revenue, all dividends must have been collected in cash. D. Before recognizing revenue, cash must have been collected, or, alternatively, collection must be reasonably assured.

D. Before recognizing revenue, cash must have been collected, or, alternatively, collection must be reasonably assured.

Using the following information, compute CURRENT LIABILITIES. Cost of Goods Sold 9,000 Accounts Payable. 1,100 Paid-in Capital 1,750 Cash 400 Sales 10,000 Accrued Wages Payable 250 Dividends 700 Retained Earnings (beginning) 1,000 Inventory 4,000 Hint: An item that appears in the income statement does NOT also appear in the balance sheet. A. $2,050 B. $3,100 C. $4,100 D. $950 E. $1,350

E. $1,350 Current Liabilities: Accounts Payable $1,100 Accrued Wages Payable 250 Total $1,350

On December 31, 20X1, Ryan Company had the following account balances. Accounts receivable $15,000 Sales revenues 845,000 Gain on sale of equipment 14,000 Retained earnings (beginning of year, January 1, 20X1) 20,000 Accounts payable 25,000 Loan payable 45,000 Cost of goods sold 650,000 Cash 6,000 Inventory 11,000 Common stock 41,000 Operating expenses 210,000 Dividends 34,000 Unearned revenue 5,000 Property, plant, and equipment 45,000 Prepaid rent 50,000 Bonds payable 26,000 Given these data, what are Ryan's TOTAL LIABILITIES as of December 31, 20X1? A. $96,000 B. $135,000 C. $151,000 D. $142,000 E. $101,000

E. $101,000 Liabilities: Accounts Payable Loan Payable Unearned Revenue Bonds Payable Revenue and expense items are shown in the INCOME STATEMENT. NOT in the balance sheet.

Using the data below, compute EARNINGS PER SHARE. Wages Expense 200 Cash 220 Income Tax Expense 240 Prepaid Insurance Expense 120 Interest Expense 300 Interest Revenue 500 Unearned Rent Revenue 150 Accounts Payable 600 Inventory 800 Cost of Goods Sold 1,600 Sales Revenue 3,000 Number of shares outstanding = 500 Note: "Unearned revenue" is an obligation to deliver a service that has not yet been delivered but for which the customer has already paid. "Prepaid Insurance Expense" is the amount of insurance for which cash payment has already been made but which has not yet been used. A. $2.62 B. $2.38 C. $5.52 D. $5.58 E. $2.32 F. $2.08

E. $2.32 Remember that assets and liabilities are reported in the balance sheet, not in the computation of net income in the income statement. The income statement includes revenues (the sources of assets generated through business operations) and expenses (the uses of assets in business operations). Prepaid expenses are not expenses at all but are assets. Unearned revenues are not revenues at all but are liabilities. Sales Revenue 3,000 Interest Revenue 500 Cost of Goods Sold (1,600) Wages Expense (200) Interest Expense (300) Income Tax Expense (240) Net Income 1,160 $1,160 ÷ 500 shares = $2.32 per share

Use the following account balance information to compute TOTAL ASSETS as of the END of the year. Cost of Goods Sold 9,000 Accounts Payable 1,100 Paid-in Capital 2,000 Cash 400 Sales 10,000 Dividends 700 Retained Earnings (beginning) 1,000 Inventory 4,000 Hint: An item that appears in the income statement does NOT also appear in the balance sheet. A. $4,100 B. $5,100 C. $5,400 D.$3,000 E. $4,400

E. $4,400 Assets Cash $ 400 Inventory 4,000 Total Assets $4,400

On January 1, Company D has total assets of $700,000. On January 2, Company D entered into the following two transactions. a. Purchased goods for resale. Total cost of this inventory was $130,000; Company D paid $90,000 cash and the remainder was put on the company's credit accounts with its suppliers. b. Sold land for cash. The original cost of the land was $45,000. The land was sold for $62,000. After these two transactions, compute Company D's TOTAL ASSETS. A. $797,000 B. $837,000 C. $712,000 D. $695,000 E. $757,000

E. $757,000 Initial total assets $700,000 a. Addition to inventory 130,000 a. Subtraction from cash (90,000) b. Addition to cash 62,000 b. Subtraction from land (45,000) Final total assets $757,000

On October 1, 20x4, an appliance company sold a flat-screen TV for $8,000 along with a $960 service contract for any parts and labor on repairs not covered under the manufacturer's warranty for two years from the date of sale. Cash amounting to $8,960 was received at the time of sale. The customer took delivery of the TV on the date of the sale. Assume that historical experience has shown that service contract repairs occur evenly throughout the two-year life of the service contract. How much revenue, in total, should be recognized from this transaction during the year 20x4? A. $1,120 B. $8,960 C. $8,000 D. $0 E. $8,120

E. $8,120 On October 1, the $960 cash received for the service contract represents a future obligation to the customer; therefore, it is properly recorded as an unearned revenue liability. The $8,000 received from the TV can properly be recorded as revenue at this time because this is a separately-saleable product. Historical experience has shown that repairs occur evenly throughout the two-year life of the service contract. Thus, revenue for the service contract can be recognized evenly over the 24 month (2 years) with each month generating $40 ($960/24 months) of revenue. Because the service contract was sold on October 1, 3 months or $120 ($40*3) of revenue should be recognized during 20x4. The total revenue recognized during 20x4 equals the revenue recognized from the TV plus the revenue recognized from the service contract. $8,000 + $120 = $8,120

On September 1 of Year 1, Company A signed a contract to do a large consulting job beginning on Septermber 1 of Year 1 and extending for 20 months. The total amount of the consulting contract is $120,000. The consulting services are to be performed evenly during the 20-month period. Company A received $5,000 in cash at the beginning of this contract on September 1. On December 31 of Year 1, Company A received an additional $10,000 as partial payment for this contract; the remainder will be received at the end of the contract. What amount will be reported in Company A's balance sheet on December 31 of Year 1 for Accounts Receivable with respect to this consulting contract? A. $39,000 B. $15,000 C. $24,000 D. $105,000 E. $9,000

E. $9,000 Earned from September 1 through December 31 ($120,000 ÷ 20 months) × 4 months $24,000 Received on June 1 (5,000) Received on December 31 (10,000) Accounts Receivable, December 31 $9,000

"Amount of assets consumed through doing business operations" - Which ONE of the terms below matches the definition/description just given? A. Accounts payable B. Total liabilities C. Retained earnings D. Dividends E. Expenses

E. Expenses

Which ONE of the following is included in an income statement? A. Cash B. Operating cash flows C. Liabilities D. Owners' equity E. Revenues

E. Revenues

Which ONE of the following is included in an income statement? Expenses Owners' equity Operating cash flows Liabilities

Expenses

Which ONE of the following is NOT part of the definition of "accounting"? Financial Quantitative Decision-making to influence the future Minimum

Minimum

Which ONE of the following is included in a balance sheet? Financing cash flows Owners' equity Revenues Expenses

Owners' equity

Which ONE of the following is NOT one of the categories in the statement of cash flows? Financing Operating Trading Investing

Trading