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Exam 1: An Introduction to Accounting

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Question 21

True/False

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The information reported in financial statements is organized into ten categories known as accounts.

A) True
B) False

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Question 22

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The Heritage Company is a manufacturer of office furniture.Which term best describes Heritage's role in society?

A) Conversion agent
B) Regulatory agency
C) Consumer
D) Resource owner

E) All of the above
F) C) and D)

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Question 23

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[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 cash flow from operating activities?

An asset use transaction does not affect the total amount of claims to a company's assets.

A company's total assets increased during the period while its liabilities and common stock were unchanged.No dividends were declared or paid during the period.Which of the following would explain this situation?

The dividends a business pays to its owners appear on the income statement.

[The following information applies to the questions displayed below.] The financial statements of Calloway Company prepared at the end of the current year contained the following elements and corresponding amounts: Assets = $50,000; Liabilities = ?; Common Stock = $15,000; Revenue = $22,000; Dividends = $1,500; Beginning Retained Earnings = $3,500; Ending Retained Earnings = $7,500. -What was the amount of total liabilities reported on the balance sheet as of the end of the current year?

On January 1,Year 2,Chavez Company had beginning balances as follows: total assets of $12,500,total liabilities of $4,500,and common stock of $3,000.During Year 2,Chavez paid dividends to its stockholders of $2,000.Given that retained earnings amounted to $6,000 at the end of Year 2,what was Chavez's net income for Year 2?

When a business provides services for cash,which elements of the accounting equation are affected?

During Year 2,Millstone Company provided $6,500 of services for cash,paid cash dividends of $1,000 to owners,and paid $4,000 cash for expenses.Liabilities were unchanged.Which of the following statements accurately describes the effect of these events on the elements of the company's financial statements?

In which section of a statement of cash flows would the payment of cash dividends be reported?

Borrowing cash from the bank is an example of which type of transaction?

At the time of liquidation,Fairchild Company reported assets of $200,000,liabilities of $120,000,common stock of $70,000 and retained earnings of $10,000.What is the maximum amount of Fairchild's assets that the shareholders are entitled to receive?

Santa Fe Company was started on January 1,Year 1,when it acquired $9,000 cash by issuing common stock.During Year 1,the company earned cash revenues of $4,500,paid cash expenses of $3,750,and paid a cash dividend of $250.Which of the following is true based on this information?

At the end of Year 2,retained earnings for the Baker Company was $3,500.Revenue earned by the company in Year 2 was $1,500,expenses paid during the period were $800,and dividends paid during the period were $500.Based on this information alone,what was the amount of retained earnings at the beginning of Year 2?

Borrowing money from the bank is an example of an asset source transaction.

Jackson Company had a net increase in cash from operating activities of $10,000 and a net decrease in cash from financing activities of $2,000.If the beginning and ending cash balances for the company were $4,000 and $11,000,what was the net cash change from investing activities?

Hazeltine Company issued common stock for $200,000 cash.What happened as a result of this event?

Frank Company earned $15,000 of cash revenue.Which of the following accurately reflects how this event affects the company's accounting equation? $\begin{array}{|c|c|c|c|c|c|c|c|} \hline& \text { Assets } & = & \text { Liabilities } & + & \begin{array}{c}\text { Common } \\\text { Stock }\end{array} & + & \begin{array}{c}\text { Retained } \\\text { Earnings }\end{array} \\\hline \text { A } & 15,000 & = & \text { NA } & + & 15,000 & + & \text { NA } \\\hline \text { B. } & 15,000 & = & \text { NA } & + & 7,500 & + & 7,500 \\\hline \text { C. } & 15,000 & = & \text { NA } & + & \text { NA } & + & 15,000 \\\hline \text { D. } & 15,000 & = & 15,000 & + & \text { NA } & + & \text { NA } \\\hline\end{array}$

As of December 31,Year 2,Bristol Company had $100,000 of assets,$40,000 of liabilities and $25,000 of retained earnings.What percentage of Bristol's assets were obtained through investors?