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principles.
Topic: Conceptual Framework
Essay Questions
177.
For each transaction, indicate whether a company would classify the related account as an
asset, liability, stockholders’ equity, dividend, revenue, or expense.
Transactions
Related Accounts
1.
Receive cash from investors.
Common Stock
2.
Pay rent for the current period.
Rent Expense
3.
Purchase office equipment.
Supplies
4.
Pay cash to stockholders.
Dividends
5.
Provide services to customers.
Service Revenue
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178.
Account classifications include assets, liabilities, stockholders’ equity, dividends,
revenues, and expenses. Indicate the account classification for each account name.
Accounts
Related Transactions
1.
Common Stock
Sell common stock to investors.
2.
Cash
Receive cash from customers.
3.
Salaries Payable
Incur amounts owed to employees.
4.
Service Revenue
Sell services to customers.
5.
Utilities Expense
Incur cost of utilities.
6.
Supplies
Purchase of office supplies.
7.
Advertising Expense
Pay for cost of advertising.
8.
Buildings
Purchase factory for operations.
9.
Accounts Payable
Purchase supplies on credit.
10.
Dividends
Distribute cash to stockholders.
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179.
Indicate whether a company would classify the transaction as financing, investing, or
operating.
Transactions
1.
Receive cash from investors.
2.
Pay rent for the current period.
3.
Purchase office equipment.
4.
Pay cash to stockholders.
5.
Provide services to customers.
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180.
Below are typical transactions for a company. Indicate whether each transaction is
classified as a financing, investing, or operating activity.
Type of
Business
Activity
Transactions
1.
__________
Purchase office building
2.
__________
Pay building maintenance fees
3.
__________
Pay sales taxes to the local government
4.
__________
Provide services to customers
5.
__________
Borrow from the bank
6.
__________
Pay workers’ salaries
7.
__________
Sell equipment used in operations
8.
__________
Sell common stock to investors
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181.
Below are typical transactions for a company. Indicate whether each transaction is
classified as a financing, investing, or operating activity.
Type of
Business
Activity
Related
Transactions
1.
__________
Sell common stock to investors.
2.
__________
Receive cash from customers.
3.
__________
Incur amounts owed to employees.
4.
__________
Sell services to customers.
5.
__________
Incur cost of utilities.
6.
__________
Purchase rent one year in advance.
7.
__________
Pay for cost of advertising.
8.
__________
Purchase factory for operations.
9.
__________
Purchase supplies on credit.
10.
__________
Distribute cash to stockholders.
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182.
At the end of the current period, Maltese, Inc. reports the following amounts: Assets =
$50,000; Liabilities = $28,000; Dividends = $4,000; Revenues = $22,000; Expenses =
$16,000. Calculate net income and stockholders’ equity at the end of the period.
183.
At the end of the current period, Rogers Company reports the following amounts: Assets =
$25,000; Liabilities = $15,000; Dividends = $3,000; Revenues = $20,000; Expenses =
$13,000. Calculate net income and stockholders’ equity at the end of the period.
184.
Below are the account balances for Huffman Corporation at the end of December. Use
only the appropriate accounts to prepare an income statement.
Accounts
Balances
Cash
$5,200
Salaries expense
2,300
Retained earnings
2,500
Advertising expense
1,200
Equipment
12,400
Service revenue
9,400
Common stock
8,000
Accounts payable
2,200
Service revenue
Expenses:
Total expenses
Net income
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Topic: Communicating through Financial Statements
185.
At the beginning of the year (January 1), Maurice and Sons has $12,000 of common stock
outstanding and retained earnings of $4,200. During the year, the company reports net
income of $3,200 and pays dividends of $1,200. In addition, the company issues additional
common stock for $5,000. Prepare the statement of stockholders’ equity at the end of the
year (December 31).
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186.
Klein Interiors has the following account balances at the end of the year. Use only the
appropriate accounts to prepare a balance sheet.
Accounts
Balances
Equipment
$78,000
Accounts Payable
12,000
Common Stock
20,000
Service Revenue
62,000
Cash
8,000
Retained Earnings
?
Salaries Expense
38,000
Notes Payable
25,000
Cash
Accounts payable
Equipment
Notes payable
25,000
Total liabilities
37,000
Common stock
20,000
Retained earnings
29,000
49,000
187.
Thomason Financial has the following cash transactions for the year. Assume cash at the
beginning of the period is $6,000. Prepare a statement of cash flows.
Accounts
Amounts
Cash received for sale of services to customers
$42,000
Cash received from issuance of common stock
33,000
Cash paid to purchase office equipment
(49,000)
Cash paid to building maintenance
(7,000)
Cash paid for advertisement
(8,000)
Cash paid to workers
(18,000)
Cash paid for dividends to stockholders
(3,000)
Cash received from sale of land
7,000
Cash received from borrowing
14,000
Cash inflows:
From sale of services to customers
Cash outflows:
For building maintenance
(7,000)
For advertisement
(8,000)
For workers
Net cash flows from operating activities
Purchase office equipment
Sale of land
7,000
188.
Each of the following independent situations represents amounts shown on the four basic
financial statements. Fill in the missing blanks using your knowledge of amounts that
appear on the financial statements.
1. Revenues = $27,000; Expenses = $18,000; Net income = __________.
2. Increase in stockholders’ equity = $20,000; Issuance of common stock = $12,000;
Dividends = $5,000; Net income = __________.
3. Assets = $25,000; Liabilities = $13,000; Stockholders’ equity = __________.
4. Total change in cash = +$28,000; Net operating cash flows = +$30,000; Net financing
cash flows = +$18,000; Net investing cash flows = __________.
189.
During its first five years of operations, Della Manufacturing reports net income and pays
dividends as follows. Calculate the balance of retained earnings at the end of each year.
Note that retained earnings will always equal $0 at the beginning of year 1.
Year
Net
Income
Dividends
Retained
Earnings
1
$1,700
$1,000
___________
2
2,700
1,000
___________
3
3,200
2,000
___________
4
5,400
2,000
___________
5
7,600
3,000
___________
Income
190.
Below is information related to retained earnings for five independent situations. Calculate
the answer to each.
1. A company reports an increase in retained earnings of $3,200 and net income of $4,800.
What is the amount of dividends?
2. A company reports beginning retained earnings of $1,800, net income of $1,200, and
$200 dividends. What is the amount of ending retained earnings?
3. A company reports an increase in retained earnings of $2,500 and dividends of $1,500.
What is the amount of net income?
4. A company reports ending retained earnings of $2,700, net income of $900, and
dividends of $500. What is the amount of beginning retained earnings?
5. A company reports an increase in retained earnings of $500 and net income of $1,200.
What is the amount of dividends?
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191.
Below is balance sheet information for five independent situations. Calculate the answer
to each.
1. A company reports total assets of $2,000 and total liabilities of $900. What is the
amount of stockholders’ equity?
2. A company reports total liabilities of $2,400 and stockholders’ equity of $1,100. What is
the amount of total assets?
3. A company reports total assets of $2,700 and total stockholders’ equity of $700. What is
the amount of total liabilities?
4. A company reports an increase in assets of $1,700 and an increase in liabilities of $400.
What is the amount of the change in stockholders’ equity?
5. A company reports an increase in liabilities of $300 and a decrease in stockholders’
equity of $800. What is the amount of the change in total assets?
192.
Below is cash flow information for five independent situations. Calculate the answer to
each.
1. A company reports operating cash flows of $3,200, investing cash flows of $700, and
financing cash flows of -$400. What is the amount of the change in total cash?
2. A company reports operating cash flows of $1,800, investing cash flows of -$400, and
financing cash flows of -$1,100. If the beginning cash amount is $500, what is the ending
cash amount?
3. A company reports operating cash flows of $700, investing cash flows of $300, and a
change in total cash of $100. What is the amount of cash flows from financing activities?
4. A company reports operating cash flows of $600, financing cash flows of $400, and a
change in total cash of $100. What is the amount of cash flows from investing activities?
5. A company reports investing cash flows of -$1,400, financing cash flows of $900, and a
change in total cash of $200. What is the amount of cash flows from operating activities?
193.
Riley Incorporated reports the following amounts at the end of the year:
Cash
$3,200
Service Revenue
$92,500
Buildings
60,000
Salaries Expense
72,800
Accounts Payable
8,500
Equipment
72,000
Interest Expense
4,000
Supplies
6,400
Advertising
Expense
11,300
Notes payable
40,000
In addition, the company had common stock of $65,000 at the beginning of the year and
issued an additional $5,000 during the year. The company also had retained earnings of
$20,700 at the beginning of the year and paid dividends of $2,000 during the year. Prepare
the income statement, statement of stockholders’ equity, and balance sheet.
Total expenses
Net income