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b. $60,000
c. $70,000
d. $10,000
82. For EFG Co., the transaction “purchase of store equipment with a note payable” would _____.
a. increase total assets
b. decrease total assets
c. have no effect on total assets
d. decrease total liabilities
83. If assets have a balance of $80,000 and stockholders’ equity has a balance of $60,000, then liabilities must have a
balance of _____.
a. $140,000
b. $60,000
c. $80,000
d. $20,000
84. Flow Inc. received cash from fees earned. How does this transaction affect the Statement of Cash Flows?
a. Increase cash from Operating Activities
b. Increase cash from Investing Activities
c. Increase cash from Financing Activities
d. No effect on the Statement of Cash Flows
85. A to Z Corporation purchased a building for $80,000 cash. On the Statement of Cash Flows, the transaction would be
classified as _____.
a. Cash Flows from Operating Activities
b. Cash Flows from Investing Activities
c. Cash Flows from Financing Activities
d. Noncash transaction
86. A _____ is an economic event that under generally accepted accounting principles affects an element of the financial
statements and must be recorded.
a. framework
b. control
c. set of rules
d. transaction
87. Which of the following transactions changes the mix of assets only?
a. Paid for supplies with cash
b. Borrowed money from Second National Bank
c. Received money for fees earned
d. Received a utility bill
88. Johnson, Inc., issued $15,000 in common stock in exchange for cash. What is the effect of this transaction?
a. Total assets remain unchanged.
b. Cash flow from Financing Activities will increase.
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c. Net Income will increase.
d. Total Retained Earnings will increase.
89. Which of the following transactions changes the mix of only liabilities?
a. Paying off accounts payables by increasing a short-term loan
b. Writing off accounts receivable as bad debt
c. Financing the purchase of land with a long-term loan
d. Paying accounts receivable with cash
90. For EFG Co., the transaction “payment of interest expense” would _____.
a. increase total assets
b. decrease total assets
c. have no effect on total assets
d. increase stockholders’ equity
91.
Year 2 Year 1
Sales $170,000 $130,000
Cost of sales 135,000 105,000
Gross profit $ 35,000 $ 25,000
Using the information in the table, calculate the percentage increase or decrease in cost of sales from Year 1 to Year 2.
a. Increase of 2.1%
b. Decrease of 1.4%
c. Increase of 1.4%
d. Decrease of 2.1%
92. The basic financial statements include the _____.
a. trial balance
b. bank reconciliation statement
c. balance sheet
d. ledger account
93. Calculate the following:
(a) Determine the cash receipts for May based on the following data:
Cash payments during May $42,500
Cash account balance, May 1 3,750
Cash account balance, May 31 6,000
(b) Determine the cash received from customers on account during May based on the following data:
Accounts receivable account balance, May 1 $11,500
Accounts receivable account balance, May 31 8,250
Fees billed to customers during May 28,000
94. Explain how the four financial statements are linked.
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95. On May 1, the cash account balance was $72,600. During May, cash receipts totaled $345,600 and the May 31
balance was $95,230. Determine the cash payments made during May.
96. The following are included in Ace Auto Parts, Inc.’s December 31, 20Y7 balance sheet:
Accounts Receivable $ 50,000
Building 100,000
Cash 60,000
Land 130,000
Accounts Payable 40,000
Notes Payable 70,000
Stockholders’ Equity ?
Below are the balances for December 31, 20Y8:
Accounts Receivable $ 90,000
Building 100,000
Cash 150,000
Land 130,000
Accounts Payable 60,000
Notes Payable 50,000
Stockholders’ Equity ?
Analyze the changes in these balances and determine net income for 20Y8, assuming that the only change to stockholders’
equity is from net income.
97. The accounting equation “Assets = Liabilities + Stockholders’ Equity” is affected by transactions. Is it possible to have
a transaction that only impacts one financial element of the equation? Can a transaction impact two elements of the
equation? Give examples.
98. Letty’s Laundry and Dry Cleaning incorporated and started business on January 1, 20X8.
1 Letty’s Laundry and Dry Cleaning began business by depositing $30,000 in a checking account in the name of Letty’s
Laundry and Dry Cleaning, Inc., for which common stock is issued.
2 Borrowed $6,000 from City Bank.
3 Purchased equipment on account from Washers Wholesale, $16,200.
4 Purchased supplies costing $3,000 from Suds ‘n Stuff for cash.
5 Paid one month’s rent for business space in Pine Plaza, $1,000.
6 Services provided to customers during January totaled $13,400. All services were paid for in cash.
7 Paid employees for January, $2,240.
8 Received and paid the utility bill, $500.
9 Received and paid the telephone bill, $250.
10 Paid dividends to the stockholders, $2,140.
Indicate the effect of each transaction on the accounting equation by listing the numbers identifying the transactions, (1)
through (10) in a vertical column, and inserting at the right of each number the appropriate letter from the following list:
a. Increase in an asset, decrease in another asset
b. Increase in an asset, increase in a liability
c. Increase in an asset, increase in stockholders’ equity
d. Decrease in an asset, decrease in a liability
e. Decrease in an asset, decrease in stockholders’ equity
99. What are the basic elements of a financial accounting system?
100. How can a company earn a large net income and have a small balance in retained earnings?
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101. Refer to Coke’s balance sheet and/or Statement of Shareowners’ Equity and answer the following questions:
(a) Did Coke issue any common stock in 2018? If so, how many shares of common stock (in millions) were issued?
(b) Did Coke purchase any common treasury stock in 2018? If so, what was the dollar amount (in millions)
repurchased?
(c) Did Coke issue any treasury stock in 2018? If so, for what purpose?
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Answer Key
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