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Exam 1: An Introduction to Accounting

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Question 1

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Stosch Company's balance sheet reported assets of $40,000,liabilities of $15,000 and common stock of $12,000 as of December 31,Year 1.Retained earnings on the December 31,Year 2 balance sheet is $18,000 and Stosch paid a $14,000 dividend during Year 2.What is the amount of net income for Year 2?

A) $17,000
B) $19,000
C) $13,000
D) $21,000

E) None of the above
F) C) and D)

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Question 2

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During Year 2,Chico Company earned $1,950 of cash revenue,paid $1,600 of cash expenses,and paid a $150 cash dividend to its owners.Based on this information alone,which of the following statements is not true?

A) Net income amounted to $350.
B) Total assets increased by $200.
C) Cash inflow from operating activities was $350.
D) Cash inflow from operating activities was $200.

E) B) and C)
F) A) and C)

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Question 3

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Algonquin Company reported assets of $50,000,liabilities of $22,000 and common stock of $15,000.Based on this information only,what is the amount of the company's retained earnings?

[The following information applies to the questions displayed below.] Yowell Company began operations on January 1, Year 1. During Year 1, the company engaged in the following cash transactions: 1) issued stock for $40,000 2) borrowed $25,000 from its bank 3) provided consulting services for $39,000 4) paid back $15,000 of the bank loan 5) paid rent expense for $9,000 6) purchased equipment costing $12,000 7) paid $3,000 dividends to stockholders 8) paid employees' salaries for work completed during the year, $21,000 -What is Yowell's ending notes payable balance?

[The following information applies to the questions displayed below.] Yowell Company began operations on January 1, Year 1. During Year 1, the company engaged in the following cash transactions: 1) issued stock for $40,000 2) borrowed $25,000 from its bank 3) provided consulting services for $39,000 4) paid back $15,000 of the bank loan 5) paid rent expense for $9,000 6) purchased equipment costing $12,000 7) paid $3,000 dividends to stockholders 8) paid employees' salaries for work completed during the year, $21,000 -What is Yowell's net income?

In a market,creditors are resource providers.

Indicate whether each of the following statements about the types of transactions is true or false. ________ a)An asset source transaction increases total assets and increases claims to assets. ________ b)The issuance of stock to owners for cash would be an example of an asset exchange transaction. ________ c)Purchasing equipment for cash is an example of an asset use transaction. ________ d)Paying a dividend to stockholders is an example of an asset use transaction. ________ e)Making a payment on a bank loan is an example of an asset exchange transaction.

The historical cost concept requires that most assets be recorded at the amount paid for them,regardless of increases in market value.

[The following information applies to the questions displayed below.] Packard Company engaged in the following transactions during Year 1, its first year of operations: (Assume all transactions are cash transactions.) 1) Acquired $950 cash from the issue of common stock. 2) Borrowed $420 from a bank. 3) Earned $650 of revenues. 4) Paid expenses of $250. "5) Paid a $50 dividend. During Year 2, Packard engaged in the following transactions: (Assume all transactions are cash transactions.) " 1) Issued an additional $325 of common stock. 2) Repaid $220 of its debt to the bank. 3) Earned revenues of $750. 4) Incurred expenses of $360. 5) Paid dividends of $100. -What is the amount of total stockholders' equity that will be reported on Packard's balance sheet at the end of Year 1?

Delta Company experienced an accounting event that affected its financial statements as indicated below: $\begin{array} { | c | c | c | c | c | c | c | } \hline \text { Assets } & = & \text { Liabilities } & + & \begin{array} { c } \text { Common } \\\text { Stnck }\end{array} & + & \begin{array} { c } \text { Retained } \\\text { Earnings }\end{array} \\\hline - & = & \mathrm { NA } & + & \mathrm { NA } & + & - \\\hline\end{array}$ Which of the following accounting events could have caused these effects on Delta's statements?

Retained earnings at the beginning and ending of the accounting period were $300 and $800,respectively.Revenues of $1,100 and dividends paid to stockholders of $200 were reported during the period.What was the amount of expenses reported for the period?

[The following information applies to the questions displayed below.] Lexington Company engaged in the following transactions during Year 1, its first year in operation: (Assume all transactions are cash transactions.) 1) Acquired $6,000 cash from issuing common stock. 2) Borrowed $4,400 from a bank. 3) Earned $6,200 of revenues. 4) Incurred $4,800 in expenses. "5) Paid dividends of $800. Lexington Company engaged in the following transactions during Year 2: (Assume all transactions are cash transactions.) " 1) Acquired an additional $1,000 cash from the issue of common stock. 2) Repaid $2,600 of its debt to the bank. 3) Earned revenues, $9,000. 4) Incurred expenses of $5,500. 5) Paid dividends of $1,280. -What was the amount of liabilities on Lexington's balance sheet at the end of Year 2?

Indicate whether each of the following statements about markets is true or false. ________ a)Financial resources can be provided to a business by conversion agents. ________ b)Resource owners are the businesses that transform resources into products that satisfy consumer desires. ________ c)Labor resources include both the physical and intellectual labor of a business's employees. ________ d)Conversion agents purchase their resources from resource owners. ________ e)Consumers are the main providers of resources in any market.

Which of the following could represent the effects of an asset source transaction on the accounting equation? $\begin{array} { | c | c | c | c | c | c | } \hline & \text { Assets } & = & \text { Linbilities } & + & \begin{array} { c } \text { Stackholders' } \\\text { Equity }\end{array} \\\hline \text { A } & + & = & + & + & \text { NA } \\\hline \text { B. } & - & = & \text { NA } & + & - \\\hline \text { C. } & + - & = & \text { NA } & + & \text { NA } \\\hline \text { D. } & \text { NA } & = & + & + & - \\\hline\end{array}$

Indicate whether each of the following statements about liabilities is true or false. ________ a)Expenses are reported on the balance sheet. ________ b)The acquisition of a bank loan increases both assets and liabilities. ________ c)The accounting equation requires that liabilities be equal to equity. ________ d)The amount of a company's liabilities is equal to the difference between its assets and its equity. ________ e)Liabilities are reported on the statement of cash flows of a business.

The four financial statements prepared by a business bear no relationship to each other.

[The following information applies to the questions displayed below.] Lexington Company engaged in the following transactions during Year 1, its first year in operation: (Assume all transactions are cash transactions.) 1) Acquired $6,000 cash from issuing common stock. 2) Borrowed $4,400 from a bank. 3) Earned $6,200 of revenues. 4) Incurred $4,800 in expenses. "5) Paid dividends of $800. Lexington Company engaged in the following transactions during Year 2: (Assume all transactions are cash transactions.) " 1) Acquired an additional $1,000 cash from the issue of common stock. 2) Repaid $2,600 of its debt to the bank. 3) Earned revenues, $9,000. 4) Incurred expenses of $5,500. 5) Paid dividends of $1,280. -What is the amount of total assets that will be reported on Lexington's balance sheet at the end of Year 1?

[The following information applies to the questions displayed below.] Packard Company engaged in the following transactions during Year 1, its first year of operations: (Assume all transactions are cash transactions.) 1) Acquired $950 cash from the issue of common stock. 2) Borrowed $420 from a bank. 3) Earned $650 of revenues. 4) Paid expenses of $250. "5) Paid a $50 dividend. During Year 2, Packard engaged in the following transactions: (Assume all transactions are cash transactions.) " 1) Issued an additional $325 of common stock. 2) Repaid $220 of its debt to the bank. 3) Earned revenues of $750. 4) Incurred expenses of $360. 5) Paid dividends of $100. -What is Packard Company's net cash flow from financing activities for Year 2?

Which of the following financial statements provides information about a company as of a specific point in time?

Which of the following would be reported in the cash flow from financing activities section of a statement of cash flows?