14) Michael Company has just completed operations for the year ended December 31, 2018. This is the
second year of operations for the company. The following data have been assembled for the business.
Accounts Payable
$12,200
Office Expense
$6,500
Accounts Receivable
14,500
Rent Expense
9,600
Cash
8,200
Retained Earnings, Jan. 1, 2018
8,300
Common Stock
9,000
Salaries Expense
36,000
Dividends
13,500
Service Revenue
84,000
Equipment
15,000
Utilities Expense
6,200
Insurance Expense
4,000
Prepare the income statement. Use a proper heading.
15) By looking at a statement of retained earnings, the effect of dividends on the ending balance of
retained earnings can be determined.
16) The net income (or net loss) must be calculated after the statement of retained earnings is prepared.
17) Which of the following transactions will affect the balance of Retained Earnings?
A) issued common stock for cash
B) paid rent expense for the month
C) purchased land for cash
D) collection on account
18) In a statement of retained earnings, decreases in retained earnings result from ________.
A) issuance of stock
B) net losses
C) net income
D) revenues earned
19) The amount of net income is transferred from ________ to ________.
A) the income statement; the statement of retained earnings
B) the balance sheet; the statement of cash flows
C) the balance sheet; the income statement
D) the income statement; the statement of expenditures
20) Which of the following appears on both the income statement and statement of retained earnings?
A) Ending stockholders’ equity
B) Total revenues
C) Net income
D) Dividends
21) Which of the following financial statements shows the dividends distributed to stockholders?
A) Income statement
B) Statement of retained earnings
C) Budgeted balance sheet
D) Balance sheet
22) Merian Company has just completed operations for the year ended December 31, 2018. This is the
second year of operations for the company. The following data have been assembled for the business at
December 31, 2018.
Accounts Payable
$12,200
Office Expense
$6,500
Accounts Receivable
14,500
Rent Expense
9,600
Cash
8,200
Retained Earnings, Jan. 1, 2018
8,300
Common Stock
9,000
Salaries Expense
36,000
Dividends
13,500
Service Revenue
84,000
Equipment
15,000
Utilities Expense
6,200
Insurance Expense
4,000
Prepare the statement of retained earnings for the year. Use a proper heading.
23) The balance sheet of a business summarizes an entity‘s revenues and expenses.
24) The balance sheet reports on the assets, liabilities, and stockholders’ equity of the business as of a
specific date.
25) The heading of a balance sheet will show the date as a specific date, not a period of time.
26) The heading of a balance sheet will show the same information for the date line as the heading for a
statement of retained earnings.
27) The balance sheet is prepared after the statement of retained earnings.
28) Which of the following is included on the balance sheet?
A) Revenues
B) Expenses
C) Assets
D) Dividends
29) Which financial statement includes a specific date in its heading?
A) Statement of retained earnings
B) Statement of cash flows
C) Income statement
D) Balance sheet
30) Which of the following financial statements reports that total assets are equal to total liabilities plus
total stockholders’ equity?
A) Statement of retained earnings
B) Statement of cash flows
C) Income statement
D) Balance sheet
31) Which of the following appears on both the statement of retained earnings and the balance sheet?
A) Ending retained earnings
B) Total assets
C) Total revenues
D) Net income
32) Which of the following financial statements lists the entity’s assets, liabilities, and stockholders’ equity
as of a specific date?
A) Balance sheet
B) Statement of retained earnings
C) Income statement
D) Statement of cash flows
33) Following is an extract of account balances of Aztec Moving Services as of December 31, after the first
year of operation.
Accounts Receivable
$6,000
Accounts Payable
4,000
Salaries Expense
5,000
Repairs Expense
500
Truck
11,000
Equipment
11,000
Notes Payable
8,500
Cash
7,300
Supplies Expense
1,500
Service Revenue
29,000
Gasoline Expense
2,900
Salaries Payable
200
What is the amount of total assets at the end of the year?
A) $17,000
B) $35,300
C) $22,000
D) $29,300
34) The total assets and the total liabilities of Atlas Financial Services are shown below. The company
issued no common stock and paid no dividends during the year.
Total Assets
Total Liabilities
Beginning of year
$405,000
$295,000
End of year
455,000
305,000
What was the amount of net income for the year?
A) $50,000
B) $10,000
C) $40,000
D) $60,000
35) The balance of stockholders’ equity at the beginning of the year and the end of the year was $50,000
and $60,000, respectively. The company issued no common stock during the year. Dividends were
$24,000. What was the net income or loss for the year?
A) Net income of $84,000
B) Net loss of $84,000
C) Net loss of $34,000
D) Net income of $34,000
36) The net income of Thomas Corporation was $71,000 for this year. The beginning balance of
stockholders’ equity was $33,000 and the ending balance was $72,000. The company issued no common
stock during the year. What was the amount of dividends distributed during the year?
A) $72,000
B) $32,000
C) $143,000
D) $33,000
37) Following is a list of account balances of Nabers Delivery Services as of December 31, after the first
year of operations.
Accounts Receivable
$5,000
Accounts Payable
5,000
Salaries Expense
4,000
Repairs Expense
600
Truck
9,000
Equipment
10,000
Notes Payable
8,500
Cash
11,500
Supplies Expense
1,400
Service Revenue
31,000
Gasoline Expense
3,200
Salaries Payable
200
What is the amount of total liabilities at the end of the year?
A) $13,700
B) $22,900
C) $19,700
D) $13,500