77. Which of the following activities would NOT be classified as an investing activity?
78. Which of the following activities would be classified as a financing activity?
79. Exhibit 2-3
During the month, Meridian Company had the following cash transactions:
Cash collected from customers
$ 12,500
Cash received from a loan
8,000
Cash paid for wages payable
(5,750)
Cash paid for the purchase of a building
(15,000)
Cash received for the issuance of new shares of stock
2,600
Cash received from sale of land
6,400
Cash paid for rent
(2,500)
Cash paid for dividends
(1,500)
Refer to Exhibit 2-3. Given the above information, compute cash flow from operating activities.
80. Exhibit 2-3
During the month, Meridian Company had the following cash transactions:
Cash collected from customers
$ 12,500
Cash received from a loan
8,000
Cash paid for wages payable
(5,750)
Cash paid for the purchase of a building
(15,000)
Cash received for the issuance of new shares of stock
2,600
Cash received from sale of land
6,400
Cash paid for rent
(2,500)
Cash paid for dividends
(1,500)
Refer to Exhibit 2-3. Given the above information, compute cash flow from investing activities.
81. Exhibit 2-3
During the month, Meridian Company had the following cash transactions:
Cash collected from customers
$ 12,500
Cash received from a loan
8,000
Cash paid for wages payable
(5,750)
Cash paid for the purchase of a building
(15,000)
Cash received for the issuance of new shares of stock
2,600
Cash received from sale of land
6,400
Cash paid for rent
(2,500)
Cash paid for dividends
(1,500)
Refer to Exhibit 2-3. Given the above information, compute cash flow from financing activities.
82. The idea that certain figures on an operating statement help to explain changes in figures on comparative
balance sheets is referred to as
83. During 2013, Genoa Corporation had revenues of $198,000 and expenses of $156,000. Dividends of
$28,000 were paid during the year and additional stock was issued for $21,400. If total assets and total liabilities
on January 1, 2013, were $130,000 and $56,000, respectively, how much is owners’ equity on December 31,
2013?
84. In 2012, Rodney Corporation’s balance sheet had the following balances: cash, $306,500; accounts
receivable, $471,400; and accounts payable, $390,800. During 2013, Rodney had a net increase in cash of
$68,600 and net income of $47,800. Given this information, what is the cash balance that will be reported on
Rodney’s 2013 balance sheet?
85. The following data were taken from the records of Mendez Corporation for the year ended December 31,
2013:
01/01/13
12/31/13
Assets
$3,750
?
Liabilities
2,860
$3,455
Owners’ Equity
?
3,455
Dividends Paid
0
1,230
Given the above information and assuming that no additional stock was added for the year, net income for the year ended December 31, 2013, is
86. If a company has assets of $460,000, liabilities of $100,000, and capital stock of $210,000, what is the
amount of retained earnings?
87. The transactions carried out by Blue Waters Corporation during the year caused an increase in total assets of
$25,650 and a decrease in total liabilities of $12,250. If no additional stock was issued during the year and
dividends of $7,850 were paid, what was the net income for the year?
88. Vital information that CANNOT be captured solely by dollar amounts is reported in a firm’s
89. Which of the following is NOT one of the four general types of financial statement notes?
90. Which of the following is an example of a significant accounting policy that would be explained in the notes
to the financial statements?
91. Which of the following is an example of a disclosure of information NOT recognized that would be
explained in the notes to the financial statements?
92. Which of the following is an example of additional information about summary totals that would be
explained in the notes to the financial statements?
93. An independent audit report is usually issued by
94. In completing an audit of a company’s financial statements, auditors
95. The accuracy of the information contained in the financial statements is the responsibility of the
96. Which of the following are the two economic factors that enable us to trust an independent auditor despite
the fact that the auditor was hired by the company being audited?
97. The idea that the activities of the entity are to be separated from those of the individual owner is the
98. The idea that both parties to a transaction must be rational and free to act independently is the
99. The idea that transactions are recorded at their exchange prices at the transaction date is referred to as the
100. The accounting idea that only items quantifiable in terms of U.S. currency are recorded is the
101. The idea that businesses must be accounted for as though they will exist at least for the foreseeable future
is the
102. Which of the following is an essential characteristic of the traditional accounting model?
103. Suppose you decide to purchase a stereo and an independent store dealer offers to sell you a system that
retails for $4,000 for a price of $3,695. After some negotiation, you purchase the system for $3,400. The $3,400
is considered the accounting measurement for the transaction because of the
104. Markanich Company purchased land for $90,000 in 2010. In 2013, the land is valued at $115,000. The
land would appear on the company’s books in 2013 at
105. The following financial statement was prepared by Schenck Corporation’s accountant:
Schenck Corporation
Balance Sheet
December 31, 2012
Assets
Liabilities and
Stockholders’
Equity
Cash
Accounts Payable
$ 4,000
Accounts Receivable
Notes Payable
?
Inventory
Total Liabilities
$ 9,500
Building
Capital Stock (10,000
Total Assets
shares @ $10 per share)
$120,000
Retained Earnings
?
Total Stockholders’ Equity
?
Total Liabilities and
Stockholders’ Equity
?
Based on the above Balance Sheet for Schenck Corporation, what are the correct balances for the accounts listed below:
a.
Building
b.
Notes Payable
c.
Total Liabilities and Stockholders’ Equity
d.
Total Stockholders’ Equity
e.
Retained Earnings
106. The comparative balance sheet for Earthwork Company is presented below:
Earthwork Company
Comparative Balance Sheet
December 31, 2013 and 2012
Assets
12/31/13
12/31/12
Cash
$39,000
$32,500
Supplies
?
9,100
Land
52,000
52,000
Equipment
32,500
26,000
Liabilities and Stockholders’ Equity
Accounts payable
$23,400
$19,500
Notes payable
26,000
28,600
Capital stock
52,000
52,000
Retained earnings
35,100
?
a.
$137,500
($165,000 – $6,000 – $6,500 – $15,000)
$5,500
($9,500 – $4,000)
c.
$165,000
(same as Total Assets)
d.
$155,500
($165,000 – $9,500)
e.
$35,500
($155,500 – $120,000)
Additional information for Earthwork’s 2013 operations revealed that the company had revenues of $65,000 for the year and no dividends were paid.
Based on this information, compute the account balances below.
a.
Retained Earnings balance at 12/31/12
b.
Supplies balance at 12/31/13
c.
Total Current Assets as of 12/31/13
d.
Total expenses incurred for 2013
107. List the three categories of the balance sheet. For each category, provide the definition and examples of
two types of accounts that are found in that particular category.
Definition:
economic resources that are owned or controlled by a company
Examples:
Cash, Accounts Receivable, Inventory, Buildings (answers may vary)
Definition:
obligations to pay cash, transfer other assets, or provide services to someone else
Examples:
Accounts Payable, Taxes Payable, Mortgage Payable, Unearned Revenue (answers may vary)
Definition:
the ownership interest in the net assets of an entity
Examples:
Capital Stock, Retained Earnings (answers may vary)
108. On December 31, 2012, Pipe Company had the following account balances:
Mortgage payable
$150,000
Taxes payable
15,000
Accounts receivable
35,000
Cash
25,000
Land
125,000
Capital stock
75,000
Inventory
75,000
Building
200,000
Accounts payable
50,000
Notes payable (due in 9 months)
45,000
Retained earnings
125,000
Given the above information, compute the following items:
a.
Current assets
b.
Total assets
c.
Current liabilities
d.
Total liabilities
e.
Total owners’ equity
a.
$19,500 = (Total Assets at 12/31/12 of $119,600 – [$19,500 + $28,600 + $52,000])
b.
$13,000 = (Total Liabilities and Stockholders’ Equity at 12/31/13 of $136,500 – [$39,000 + $52,000 + $32,500])
c.
$52,000 = ($39,000 + $13,000)
d.
$49,400 = (R/E at 12/31/12 + revenue – income at 12/31/13) = ($19,500 + $65,000 – $35,100)
109. The following information was taken from Hemp Corporation’s books as of December 31, 2013:
Accounts receivable
$ 80,000
Salaries payable
$ 32,000
Mortgage payable
175,000
Accounts payable
40,000
Cash
57,000
Inventory
95,000
Service revenue
360,000
Buildings
325,000
Accumulated depreciation
105,000
Retained earnings
140,000
Notes payable (due in 5 months)
15,000
Capital stock
50,000
Prepare a classified balance sheet for the year ended December 31, 2013.
2013
Current assets:
Cash
$ 57,000
Accounts receivable
80,000
Inventory
95,000
Total current assets
232,000
Buildings
325,000
Less accumulated depreciation
(105,000)
Total property, plant, and equipment
220,000
Total assets
$452,000
Current liabilities:
Accounts payable
$ 40,000
Salaries payable
32,000
Notes payable
15,000
Total current liabilities
87,000
Long-term liabilities:
Mortgage payable
175,000
Total long-term liabilities
175,000
Total liabilities
262,000
Stockholders’ equity:
Capital stock
50,000
Retained earnings
140,000
Total stockholders’ equity
190,000
$135,000 = ($25,000 + $35,000 + $75,000)
$110,000 = ($15,000 + $50,000 + $45,000)
$260,000 = ($15,000 + $50,000 + $45,000 + $150,000)
$200,000 = ($75,000 + $125,000)
110. The income statement for Highline Corporation is presented below:
Highline Corporation
Income Statement
For the Year Ended December 31, 2013
Sales revenue
$ ?
Expenses:
Advertising expense
$ 28,800
Salaries expense
264,000
Supplies expense
73,600
Utilities expense
4,800
Rent expense
19,200
?
Income before taxes
?
Income tax expense
99,200
Net income
$230,400
Earnings per Share
$ ?
Additional information for Highline’s 2013 operations revealed that the company had beginning retained earnings of $65,000 for the year, $60,000
dividends were paid, and 10,000 shares of capital stock were outstanding. Based on this information, compute the items below.
a.
Net income before taxes
b.
Total expense
c.
Sales revenue
d.
Earnings per share
111. For the year ended December 31, 2012, Southern Company had the following account balances:
Sales revenue
$445,000
Rent expense
60,000
Salary expense
200,000
Utility expense
45,000
Retained earnings (1/1/2012)
130,000
Dividends paid
75,000
Interest expense
25,000
Given the above information, compute the following items:
a.
Total sales revenue
b.
Total expenses
c.
Net income
d.
Retained earnings at 12/31/2012
a.
$329,600 = ($230,400 + $99,200)
b.
$390,400 = ($28,800 + $264,000 + $73,600 + $4,800 + 19,200)
c.
$720,000 = ($329,600 + $390,400)
d.
$23.04 = ($230,400/10,000 shares)
112. The following information was taken from the Hall Corporation’s books:
Accounts receivable
$ 78,400
Salaries expense
$132,000
Income tax expense
49,600
Accounts payable
40,000
Retained earnings
201,600
Supplies expense
36,800
Service revenue
360,000
Utilities expense
2,400
Advertising expense
14,400
Rent expense
9,600
Prepare an income statement for the year ended December 31, 2013 (assume that 10,000 shares of stock are outstanding).
Service revenue
$360,000
Expenses:
Advertising expense
$ 14,400
Salaries expense
132,000
Supplies expense
36,800
Utilities expense
2,400
Rent expense
9,600
195,200
Income before taxes
164,800
Income tax expense
49,600
Net income
$115,200
Earnings per Share ($115,200/10,000 shares)
$11.52
113. On January 1, 2013, Sorenson Company had a retained earnings balance of $780,000. During 2013,
Sorenson Company earned a net income of $145,000. Cash dividends of $50,000 were paid during the year.
Using this information, prepare a Statement of Retained Earnings, in good form, for the year 2013.
Retained earnings, January 1, 2013
$780,000
Plus net income for the year
145,000
Less dividends
(50,000)
Retained earnings, December 31, 2013
$875,000
$445,000
$115,000 = ($445,000 – $330,000)
$170,000 = ($130,000 + $115,000 – $75,000)
114. For each of the following items, indicate whether it would be classified as an operating activity, an
investing activity, or a financing activity on the statement of cash flows.
a.
Cash payments for taxes
b.
Cash proceeds from the sale of land
c.
Cash receipts from providing services
d.
Cash proceeds from a long-term loan
e.
Issuance of stock for cash
f.
Cash payments for interest
g.
Cash payments for the purchase of equipment
h.
Cash payments for dividends paid to stockholders
115. On December 31, 2013, Skidmore Company had the following cash flow data:
Cash paid for dividends
$ 20,000
Cash collected from sale of building
90,000
Cash paid for wages
50,000
Cash received from issuing new shares of stock
600,000
Cash collected from customers
1,000,000
Cash paid to purchase inventory
500,000
Cash paid for income taxes
100,000
Cash paid for advertising
30,000
Cash paid for purchase of equipment
200,000
Cash paid on principal of loan
300,000
Cash paid for rent
60,000
Skidmore Company had a cash balance of $750,000 on January 1, 2013. Given the above information, compute the following items:
a.
Net cash flow provided (used) by operating activities
b.
Net cash flow provided (used) by investing activities
c.
Net cash flow provided (used) by financing activities
d.
Net increase (decrease) in cash during 2013
e.
The cash balance at the end of 2013
a.
Cash payments for taxes
Operating
b.
Cash proceeds from the sale of land
Investing
Cash receipts from providing services
Operating
d.
Cash proceeds from a long-term loan
Financing
e.
Issuance of stock for cash
Financing
f.
Cash payments for interest
Operating
g.
Cash payments for the purchase of equipment
Investing
h.
Cash payments for dividends paid to stockholders
Financing
116. On December 31, 2013, Halloway Company had the following financial information on its books:
Total assets
$365,000
Net increase in operating activities
425,000
Total liabilities
185,000
Net decrease in financing activities
250,000
Sales revenue
680,000
Total expenses
605,000
Net decrease in investing activities
135,000
Capital stock
30,000
Additional information for Halloway’s 2013 operations revealed that the company had beginning retained earnings of $120,000 for the year, a
beginning cash balance of $35,000, and dividends paid of $45,000. Based on this information, compute the following items at December 31, 2013:
a.
Net increase/decrease in cash
b.
Total owner’s equity
c.
Net income
d.
Cash balance
e.
Retained earnings
a.
Operating activities:
Cash collected from customers
1,000,000
Cash paid to purchase inventory
(500,000)
Cash paid for income taxes
(100,000)
Cash paid for advertising
(30,000)
Cash paid for rent
(60,000)
Net operating activities
$ 260,000
b.
Investing activities:
Cash collected from sale of building
$ 90,000
Cash paid for purchase of equipment
(200,000)
Net investing activities
$ (110,000)
c.
Financing activities:
Cash paid for dividends
$ (20,000)
Cash paid on principal of loan
(300,000)
Net financing activities
$ 280,000
d.
Net change in cash:
Operating activities
$ 260,000
Investing activities
(110,000)
Financing activities
280,000
Net increase in cash during 2013
$ 430,000
e.
Cash balance at end of 2013:
Beginning cash balance
$ 750,000
Increase in cash during 2013
430,000
Ending cash balance
$1,180,000
117. While the three financial statements contain a lot of information, they don’t tell the readers everything they
may need to know about a company. Additional information can be found in the notes to the financial
statements. Identify the four types of notes (be specific).
1.
Summary of significant accounting policies.
2.
Additional information about the summary totals found in the financial statements.
3.
Disclosure of important information that is not recognized in the financial statements.
4.
Supplementary information required by the FASB or the SEC.
118. Financial accounting is based on certain fundamental concepts and assumptions. The importance of these
items is that they allow the accountant to determine which events to account for and in what manner. Define the
following:
a.
Separate entity concept
b.
Arm’s-length transactions
c.
Cost principle
d.
Monetary measurement concept
e.
Going concern assumption
a.
The idea that the activities of an entity are to be separated from those of the individual owners.
b.
Business dealings between independent and rational parties who are looking out for their own interests.
c.
The idea that transactions are recorded at their historical costs or exchange prices at the transaction date.
e.
The idea that an accounting entity will have a continuing existence for the foreseeable future.
a.
$40,000 = ($425,000 – $135,000 – $250,000)
b.
$180,000 = ($365,000 – $185,000)
$75,000 = ($680,000 – $605,000)
d.
$75,000 = ($35,000 + $40,000)
e.
$150,000 = ($120,000 + $75,000 – $45,000) or ($180,000 – $30,000)