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Exam 1: An Introduction to Accounting

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Question 71

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The total equity of Timberlake Company at the beginning of 2013 amounted to $5,500. During 2013 the company reported net income of $1,800 and paid a $500 dividend. If retained earnings at the end of 2013 is $2,200, what was beginning common stock?

A) $3,300
B) $2,800
C) $1,300
D) $4,600

E) B) and D)
F) A) and B)

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Question 72

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The following events are for Leisure Travel Services for the year 2013, the first year of operations. Assume that all transactions involve the receipt or payment of cash. 1) The business acquired $40,000 from stock issued to owners. 2) Creditors loaned the company $17,500. 3) The company provided services to its customers and received $55,400. 4) The company paid expenses amounting to $43,250. 5) The company purchased land for $29,000. 6) The company paid a dividend of $5,000 to its owners. Required: a) Show the effects of the above transactions on the accounting equation (use appropriate element and account headings). For those events that affect retained earnings, indicate in a separate column the appropriate temporary account. Accounting Equation: Event No. 1) 2) 3) 4) 5) 6) Tiotals b) Prepare an income statement and balance sheet for the year 2013.

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a) b) Leisure Travel Services
Income S...

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Question 73

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Equity represents the future obligations of a business entity.

Freed Company paid $500 cash for salary expenses. Which of the following choices accurately reflects how this event affects the company's financial statements? $\begin{array}{|l|l|l|l|l|l|l|l|l|l|l|}\hline\text { Assets }&=& \text { Liab. }&+&\text { Equity } &\text { Rev. }&-& \text { Exp. }&=& \text { Net Inc. } &\text { Cash Flow }\\\hline\end{array}$

Use the following information to prepare an income statement for Grandin Company for the period ending December 31, 2012. All transactions were for cash. A) Received revenue from services provided to customers, $28,500. B) Paid $19,000 cash for land. C) Paid operating expenses, $19,400. D) Paid dividends to stockholders, $3,200. E) Issued $16,000 of common stock.

Grayson Corporation reports the following cash transactions for the year ending December 31, 2012, its first year of operation: 1) issued common stock for $36,000 2) borrowed $20,000 from a local bank 3) purchased land for $24,000 4) provided services to clients for $28,000 5) paid operating expenses of $21,500 6) paid $2,500 cash dividends to stockholders Required: a) What are the total assets for Grayson Corporation at December 31, 2012? b) Prepare an income statement for 2012.

Briefly distinguish between financial accounting and managerial accounting.

Petras Company engaged in the following transactions during 2012, its first year in 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 $600 of revenues. 4) Paid expenses of $250. 5) Paid a $50 dividend. During 2013, Petras 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. The amount of assets on Petras's 2013 balance sheet is

The accounting term "reliability" refers to information that is consistent from one accounting period to the next.

Which of the following items appears in the investing activities section of the statement of cash flows?

Indicate whether each of the following statements about accounting information is true or false. _______ a) Financial accounting is primarily intended to satisfy the information needs of external resource providers. _______ b) Financial accounting information is useful only to banks and stockholders. _______ c) The accounting information intended to satisfy the needs of a company's employees is managerial accounting information. _______ d) GAAP requires that companies adhere to managerial accounting standards. _______ e) Managerial accounting information is usually more detailed than financial accounting information.

Petras Company engaged in the following transactions during 2012, its first year in 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 $600 of revenues. 4) Paid expenses of $250. 5) Paid a $50 dividend. During 2013, Petras 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. The net cash inflow from financing activities on Petras's 2013 statement of cash flows is

Rosemont Company began operations on January 1, 2013, and on that date issued stock for $60,000 cash. In addition, Rosemont borrowed $50,000 cash from the local bank. The company provided services to its customers during 2013 and received $35,000. It purchased land for $70,000. During the year, it paid $10,000 cash for salaries and $9,000 cash for supplies that were used up in its operations. Stockholders were paid cash dividends of $8,000 during the year. Required: a) List the transactions from the information above (for example, issued common stock for $60,000) and indicate in which section of the statement of cash flows each transaction would be reported. b) What would the amount be for net cash flows from operating activities? c) What would be the amount of the total assets for the Rosemont Company at the end of 2013? d) What would the end-of-year balance be for the retained earnings account? e) What would the end-of-year balance be for the cash account?

Which of the following could represent the effects of an asset source transaction on a company's financial statements? $\begin{array} { | l | l | l | l | l | l | l | l | l | l | l |} \hline \text { Assets } & = & \text { Liab. } & + & \text { Equity } & \text { Rev. } & - & \text { Exp. } & = & \text { Net Inc. } & \text { Cash Flow } \\\hline\end{array}$

La Paz Company engaged in the following transactions during 2012, its first year in operation: (Assume all transactions are cash transactions) 1) Acquired $3,000 cash from issuing common stock. 2) Borrowed $2,200 from a bank. 3) Earned $3,100 of revenues. 4) Incurred $2,400 in expenses. 5) Paid dividends of $400. La Paz Company engaged in the following transactions during 2013: 1) Acquired an additional $500 cash from the issue of common stock. 2) Repaid $1,300 of its debt to the bank. 3) Earned revenues, $4,500. 4) Incurred expenses of $2,750. 5) Paid dividends of $640. The amount of liabilities on La Paz's 2013 balance sheet was

Which financial statement matches asset increases from operating a business with asset decreases from operating the business?

Liabilities are shown on the

Retained earnings reduces a company's commitment to use its assets for the benefit of its stockholders.

Accounts are subclassifications of the various elements of the financial statements.

George Company was started on January 1, 2013, when it acquired $8,000 cash by issuing common stock. During 2013, the company earned cash revenues of $3,500, paid cash expenses of $2,750, and paid a cash dividend of $300. Based on this information,