ACG HW and QUIZ chapter 1

A company should report cash paid to its employees as wages on its statement of cash flows as

AN Operating activity

Which of the following is an asset? Retained earnings Dividends Accounts receivable Notes payable Revenue

Accounts receivable

At the end of the year, Stoneland Corporation has liabilities of $3,500 and equity of $2,000. How much are the company's assets at the end of the year?

Assets = Liabilities + Equity Assets = $3,500 + 2,000 = $5,500.

1. Which organizational forms are subject to double taxation? a. Sole proprietorships b. Partnerships c. Corporations d. All of these e. None of these

Corporations

Which of the following is considered to be an external user of accounting data for given company? Finance director of the company None of these President of the company Creditors Marketing vice president of the company

Creditors

A corporation began the year with total liabilities of $100,000 and stockholders' equity of $40,000. During the year the company reported the following: Net income, $110,000 Dividends, $5,000 Total liabilities at the end of the year were $240,000. How much were total assets at the end of the year?

First, determine the ending balance of stockholders' equity. Ending stockholders' equity = beginning stockholders' equity + net income - dividends. Ending stockholders' equity = $40,000 + 110,000 - 5,000 = $145,000. Second, determine total liabilities. Assets = Liabilities + Stockholders' equity Assets = $240,000 + 145,000 Assets = $385,000

the balance sheet

Reports on the assets, liabilities, and stockholders' equity of the business as of a specific date.

Retained earnings at the end of the period is equal to which of the following? Assets plus liabilities Retained earnings at the beginning of the period plus net income minus liabilities Retained earnings at the beginning of the period plus net income minus dividends Net income since the business began operating Assets minus liabilities

Retained earnings at the beginning of the period plus net income minus dividends

Liabilities

debts and obligations of a business

Which section of the annual report presents highlights of favorable or unfavorable trends and identifies significant events and uncertainties affecting a company's ability to pay near-term obligations, and a company's ability to fund operations and expansion?

management discussion and analysis

net loss

the amount by which expenses exceed revenues

Accounting

the process of identifying, measuring, and communicating the economic events of a business to interested users of the information

Which financial statement is divided into three sections including operating activities, investing activities, and financing activities?

the statement of cash flows

The cost of assets consumed or services used in the process of generating revenues is also known as an asset. an expense. a contra revenue. an equity. a liability.

an expense

Publicly traded U.S. companies must provide shareholders with an annual report. Which of the following is not part of the annual report provided to shareholders? Auditor's report Notes to the financial statements General ledger Management discussion and analysis Balance sheet

general ledger

Which of the following would appear on a balance sheet? Retained earnings Service revenue Dividends Salaries and wages expense Net cash flows from operating activities

retained earnings

Net income will result during a time period when

revenues exceed expenses.

Which of the following would appear on an income statement? Service revenue Cash Accounts payable Net cash flows from operations Retained earnings

service revenue

11. patents =

= asset = balance sheet

12. inventory =

= asset = balance sheet

8. equipment =

= asset = balance sheet

9. accumulated depreciation =

= asset = balance sheet

4. dividends =

= dividend =. statement of stockholders' equity

10. common stock =

= equity = balance sheet and statement of stockholders' equity

7. retained earnings =

= equity = balance sheet and statement of stockholders' equity

6. unearned revenue =

= liability = balance sheet

5. service revenue =

= revenue = income statement

4. Which of the following financial statements is dated as of a specific date? a. Balance sheet b. Income statement c. Retained earnings statement d. Statement of cash flow

Balance sheet balance sheet reports the assets, liabilities, and equities of a company for a particular date such as "as of the end of the current year"

2. Which of the following is a financing activity? a. Borrowing money from a bank b. Collecting cash from a customer c. Buying inventory d. Buying equipment

Borrowing money from a bank

Martha's Maid Service began the year with total assets of $125,000 and stockholders' equity of $40,000. During the year the company earned $90,000 in net income and paid $20,000 in dividends. Total assets at the end of the year were $215,000. How much are total liabilities at the end of the year?

First, determine the ending balance of stockholders' equity. Ending stockholders' equity = beginning stockholders' equity + net income - dividends. Ending stockholders' equity = $40,000 + 90,000 - 20,000 = $110,000. Second, determine total liabilities(i.e., Assets = Liabilities + Stockholders' equity) Liabilities = $215,000 - 110,000 = $105,000.

Publicly traded U.S. companies must provide shareholders with an annual report. Which of the following is NOT part of the annual report provided to shareholders? Income tax return Notes to the financial statements Income statement Auditor's report Management discussion and analysis

INCOME TAX RETURN

Which of the following is not one of the three primary business activities listed on the statement of cash flows? Investing activities Merchandising activities All of these are activities listed on the statement of cash flows Financing activities Operating activities

Merchandising activities

Marvin Services Corporation had the following accounts and balances: Accounts payable$ 6,000 Accounts receivable 8,000 Cash 7,000 Common stock 15,000 Equipment 44,000 Notes payable 8,000 Prepaid insurance 4,000 Retained earnings Not given Supplies 2,000 Unearned service revenue 3,000 What is the balance of the company's retained earnings account?

Solution: Assets = Accounts receivable + cash + equipment + prepaid insurance + supplies = 8,000 + 7,000 + 44,000 + 4,000 + 2,000 = 65,000 Liabilities = accounts payable + notes payable + unearned revenue = 6,000 + 8,000 + 3,000 = 17,000 Assets = liabilities + stockholders' equity Stockholders' equity = assets - liabilities = 65,000 - 17,000 = 48,000 Stockholder's equity = common stock + retained earnings Retained earnings = stockholders' equity - common stock = 48,000 - 15,000 = 33,000

8. Indicate whether each statement if true or false. I. GAAP is a set of rules and practices established by accounting standard‐setting bodies to serve as a general guide for financial reporting purposes. II. Substantial authoritative support for GAAP usually comes from two standards‐ setting bodies: the FASB and the IRS.

1 True 2 False

A corporation began the year with retained earnings of $620,000. During the year, the company did the following: Issued common stock, $840,000 Declared and paid dividends, $160,000 Incurred expenses, $2,400,000. The company's ending retained earnings is $660,000. What was the company's revenue for the year?

Beginning retained earnings + Net income - Dividends = Ending retained earnings Replace net income with revenue - expenses Beginning retained earnings + Revenue - Expenses - Dividends = Ending retained earnings Re-arranging this equation to solve for revenues: Revenue = Ending retained earnings - Beginning retained earnings + Expenses + Dividends Revenue = 660,000 - 620,000 + 2,400,000 + 160,000Revenue = 2,600,000

Which of the following is not one of the forms of business organization? These are all forms of business organization Partnership Creditorship Corporation Sole proprietorship

Creditorship

Which of the following is true with regards to dividends? -Dividends are listed on the balance sheet as a deduction from retained earnings. None of these. -Dividends represent a portion of corporate profits that are paid to the shareholders. -Dividends should be shown on the balance sheet as assets. -Dividends are a cost of generating revenues and that makes them an expense.

Dividends represent a portion of corporate profits that are paid to the shareholders.

6. Which financial statement is generally prepared first? a. Balance sheet b. Income statement c. Retained earnings statement d. Statement of cash flow

Income statement income statement is prepared before preparing the statements of the stockholders' equity because net income must be reported on the statement of a stockholders equity. Prepare the balance sheet after preparing the statement of stockholders' equity because ending equity must be reported on the balance sheet. prepare the cash flow statements last; it reports beginning cash, ending cash, and changes in cash.

The financial records for Harold Corporation included the following information: Accounts receivable, $60,000 Accounts payable, $25,000 Cash, $15,000 Common stock, $5,000 Dividends, $10,000 Insurance expense, $10,000 Sales revenue, $90,000 Salaries and wages expense, $25,000 Based on this information, how much was its net income?

Net income = Revenue - expenses Net income = $90,000 - 25,000 - 10,000 = $55,000

The financial records for Harold Corporation included the following information: Accounts receivable, $60,000 Accounts payable, $25,000 Cash, $15,000 Common stock, $5,000 Dividends, $10,000 Insurance expense, $10,000 Sales revenue, $90,000 Salaries and wages expense, $25,000 Based on this information, how much was its net income?

Net income = Revenue - expenses Net income = $90,000 - 25,000 - 10,000 = $55,000

7. The financial statements of Seminole Corporation shows that at the beginning of the year, its total assets was $200,000, total liabilities was $70,000, retained earnings was $40,000, and common stock was $90,000. During the year, the company paid dividends of $15,000, earned revenues of $175,000 and incurred expenses of $110,000. What is the company's retained earnings at the end of the year? a. $15,000 b. $200,000 c. $90,000 d. $105,000 e. None of these

Net income= Revenue-expenses Ending retained earnings= beginning retained earnings+net income-dividends Net income= 175,000-110,000 =$65,000 Ending retained earnings= 40,000+ 65,000 -15,000= $90,000

5. Which financial statements report dividends paid to the company's stockholders? a. Balance sheet b. Income statement c. Retained earnings statement (i.e., Statement of Stockholders' Equity) d. Statement of cash flow

Retained earnings statements and statements of cash flow DIVIDENDS ARE NOT A REVENUE OR EXPENSE. DIVIDENDS CHANGES RETAINED EARNINGS. DIVIDENDS ARE NOT ASSETS, LIABILITY, OR EQUITY. DIVIDENDS PAID IS A CASH FLOW

3. Net income will result during a period when a company's a. assets exceed its liabilities. b. assets exceed its revenues. c. expenses exceed its revenues. d. revenues exceed its expenses.

Revenues exceed its expenses Net income= revenues-expenses

Which of the following is required as a result of the Sarbanes-Oxley Act (SOX) passed into law in 2002? None of these Companies that go bankrupt must repay shareholders for lost investments. Corporate income tax rates increased. All shareholders now have an oversight role of the company's financial activities. SOX increased independent auditors' independence.

SOX increased independent auditors' independence.

In which forms of business organization are the owners personally liable for the debts of the business? Only sole proprietorships Sole proprietorships and partnerships Sole proprietorships and corporations Only corporations Partnerships and corporations

Sole proprietorships and partnerships

balance sheet

a financial statement that reports the assets, liabilities, and stockholders' equity at a specific date

which of the following is an asset? Notes payable Cash Retained earnings Common stock Accounts payable

cash

publicly traded U.S. companies must provide shareholders with an annual report. Which of the following is not part of the annual report provided to shareholders? Auditor's report Notes to the financial statements Statement of cash flows Chart of accounts Management discussion and analysis

chart of accounts The annual report includes the financial statements and certain other items, including a management discussion and analysis, notes to the financial statements, and an independent auditor's report.

Stockholders' equity is comprised of two components, including

common stock and retained earnings.

Double taxation

corporations must pay income taxes and their shareholders must pay income taxes on dividends received from their corporations.

Which of the following is least likely to be considered a user of a business accounting information, but rather plays a role in the independent verification of the accuracy of a business's accounting information? Managers Finance directors Independent auditors Investors Creditors

independent auditors

The partnership form of business organization

is tax advantaged in comparison to a corporation.

Which of the following questions tends to be important to external users of a company's accounting information? What selling price for our product will maximize the company's net income? None of these Which product line is most profitable? All of these Is the company profitable?

is the company profitable?

1. Depreciation expense = expense = income statement 2. cash= asset = balance sheet and statement of cash flows 3. accounts payable =

liability= balance sheet

explanations of uncertainties and contingencies of a business, including various statistics and details too voluminous to be included in the financial statements, would be found in the company's

notes to the financial statement

Collecting cash from customers is an example of a cash flow from

operating activities.

Gilkey Corporation began the year with retained earnings of $465,000. During the year, the company issued $630,000 of common stock, recorded expenses of $1,800,000, and paid dividends of $120,000. If Gilkey's ending retained earnings was $495,000, what was the company's revenue for the year?

Beginning retained earnings + Net income - Dividends = Ending retained earningsReplace net income with revenue - expensesBeginning retained earnings + Revenue - Expenses - Dividends = Ending retained earnings Re-arranging this equation to solve for revenues:Revenue = Ending retained earnings - Beginning retained earnings + Expenses + Dividends Revenue = 495,000 - 465,000 + 1,800,000 + 120,000 Revenue = 1,950,000

A company recorded the following cash transactions for the year: Paid $150,000 for salaries. Paid $45,000 to purchase office equipment. Paid $10,000 in dividends .Collected $275,000 from customers. What is the company's net cash from operating activities for the year? $80,000 $125,000 $275,000 $115,000 $70,000

Business activities include financing activities, investing activities, and operating activities. After a company obtains financing from owners and creditors and after the company has invested in property, plant, and equipment, the company is ready for day-to-day operating activities. Examples of operating activities include buying and selling inventory, paying employees' wages, and other activities (e.g., paying for marketing). This company's net cash from its operating activities equals cash collected from customers minus payments for employee salaries (i.e., 275,000 - 150,000 = 125,000). Buying equipment is an investment activity. Paying a dividend is a financing activity.

Which of the following statements is true regarding the Sarbanes-Oxley Act (SOX)? SOX required increased independence of the certified public accountants hired to audit a company's financial statements. SOX decreased penalties for financial fraud by management. Penalties no longer include the possibility of imprisonment. SOX eliminated the requirement that company management certify the accuracy of the company's financial statements. None of these All of these

SOX required increased independence of the certified public accountants hired to audit a company's financial statements.

During the year, Finney Company recorded revenues of $370,000, recorded expenses of $320,000, issued an additional $10,000 of common stock, and paid dividends of $40,000. Its ending retained earnings is 400,000. What was the company beginning retained earnings?

Solution: Ending retained earnings = Beginning retained earnings + Net income - Dividends Replace net income with revenue - expenses Ending retained earnings = Beginning retained earnings + Revenue - Expenses - Dividends Re-arranging to solve for beginning retained earnings: Beginning retained earnings = Ending retained earnings - Revenue + Expenses + Dividends Beginning retained earnings = 400,000 - 370,000 + 320,000 + 40,000 Beginning retained earnings = 390,000

Which of the following is comprised of two parts: (1) common stock and (2) retained earnings? Assets Stockholders' equity Lliabilities Revenues Expenses

Stockholders' equity

Which of the following best describes stockholders' equity?

Stockholders' equity are the claims of owners.

Which of the following best describes stockholders' equity? Stockholders' equity are the claims of creditors. Stockholders' equity are the economic resources of the firm. Stockholders' equity is the difference between revenues and expenses. Stockholders' equity are the claims of owners. Stockholders' equity is the cash collected from owners.

Stockholders' equity are the claims of owners.

The statement of stockholders' equity

Summarizes the changes in the balance in each stockholders' equity account over a period of time

If total liabilities decreased by $15,000 and total stockholders' equity increased by $5,000 during a period of time, then total assets must have changed by what amount and direction during that same period?

The accounting equation: Assets = Liabilities + Stockholders' Equity If liabilities decreased by $15,000 and stockholders' equity increased by $5,000 then the right side of the accounting equation decreased by $10,000. Therefore, assets must have decreased by $10,000 to keep the accounting equation in balance [i.e., ($15,000) + $5,000 = ($10,000)].

Which of the following best defines accounting? The management of large amounts of money, especially by governments or large companies. The organization and coordination of the activities of a business in order to achieve defined objectives. The processing system and regulatory rules for determining the fair market value of a business organization. The action or business of promoting and selling products or services, including market research and advertising. The information system that identifies, measures, and communicates economic information to permit informed judgements and decisions by the users of the information.

The information system that identifies, measures, and communicates economic information to permit informed judgements and decisions by the users of the information.

Jackson Company recorded the following cash transactions for the year: Paid $150,000 for salaries. Paid $45,000 to purchase inventory. Paid $10,000 in dividends. Collected $275,000 from customers. What is the company's net cash from operating activities for the year?

This company's net cash from its operating activities equals cash collected from customers minus payments for employee salaries (i.e., 275,000 - 150,000 - 45,000 = 80,000). Paying a dividend is a financing activity.

Which of the following is required as a result of the Sarbanes-Oxley Act (SOX) passed into law in 2002? All shareholders now have an oversight role of the company's financial activities. Top management must certify the financial statements for their company. Companies that go bankrupt must repay shareholders for lost investments. None of these Public companies must prepare audited financial statements.

Top management must certify the financial statements for their company.

corporation

a business organized as a separate legal entity having ownership divided into transferable shares of stock

A company should report an issuance of common stock on its statement of cash flows as

a financing activity.

The right to receive money in the future is called a(n) account receivable. liability. unearned revenue. revenue. account payable.

accounts receivable

Which of the following is an asset? Notes payable Revenue Retained earnings Accounts receivable Dividends

accounts receivable

The annual report provided to shareholders includes an auditor's report. The auditor's report includes an opinion about the fairness of the financial statements. The party expressing that opinion is

an independent auditor who is a Certified Public Accountant.

Paying cash to buy stocks or bonds of another company is an example of

an investing activity

proprietorship

an unincorporated business owned by a single individual

When the auditor is satisfied that the financial statements provide a fair representation of the company's financial position and results of operation in accordance with generally accepted accounting principles, the auditor will express

an unqualified opinion.

Resources owned by a business are referred to as

assets

Resources owned by a business are referred to as Stockholders' equity revenues. expenses. liabilities. assets.

assets

Which financial statement reports assets, liabilities, and stockholders' equity as of a given date? Balance sheet. Income statement. Statement of cash flows. All of these Statement of stockholders' equity

balance sheet

Which of the following would appear on an income statement accounts payable Interest expense Cash Net cash flows from operating activities Unearned revenues

interest expense

The statement of cash flows reports all of the following EXCEPT net cash provided from adjusting activities. net cash provided from investing activities. net cash provided from financing activities. the amount of cash at the end of the period. net cash provided from operating activities.

net cash provided from adjusting activities

Retained earnings

the amount of net income kept in the corporation for future use, not distributed to stockholders as dividends.

expenses

the cost of assets consumed or services used in the process of ongoing operations to generate resources

Equity

the owners' claim on a business entity's assets