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