39) Assume 2011 is the company’s first year of business. There were no dividends declared in
2011 and $100 of dividends declared in 2012.
For the year ended For the year ended
December 31, 2011 December 31, 2012
Revenues $ 300 $ 2,500
Expenses $ $ (1,400)
Net Income $ 1. $ __
December 31, 2011 December 31, 2012
Assets $ 1,000 $ 2,500
Liabilities $ ___ 2. $
Contributed capital $ 300 $ 300
Retained earnings $ ______________ 3. $ _____________
Determine the missing amounts, 1. Net income, 2. Liabilities of $200, and 3. Retained earnings
of $1,400, in the condensed income statement and balance sheet for the year ended December 31,
2012.
A) 1. Net income of $1,100; 2. Liabilities of $200; 3. Retained earnings of $1,400
B) 1. Net income of $3,900; 2. Liabilities of $1,000; 3. Retained earnings of $1,300
C) 1. Net income of $1,100; 2. Liabilities of $1,000; 3. Retained earnings of $1,200
D) 1. Net income of $1,100; 2. Liabilities of $200; 3. Retained earnings of $1,200
40) It is Dives, Inc.’s first year of business. Dives’ net income for its first year is $200,000. Dives
declared and paid dividends of $50,000. The balance in retained earnings at the end of the first
year equals:
A) $200,000.
B) $50,000.
C) $150,000.
D) $250,000.
41) The missing name (a.) of Lox Stock & Bagel Company’s financial statement above is the
________.
A) Balance sheet
B) Income statement
C) Statement of changes in shareholders’ equity
D) Statement of cash flows
42) The Cash balance (b.) in Lox Stock & Bagel Company’s financial statement above is
________.
A) the same as the retained earnings
B) $39,910
C) $3,000
D) $10,910
43) The Retained earnings balance (c.) in Lox Stock & Bagel Company’s is ________.
A) the same as the Cash balance
B) $21,910
C) $10,910
D) $11,910
44) Using Lox Stock & Bagel Company’s financial statement above, determine the amount of the
creditors’ claims to the company’s resources.
A) $10,910
B) $38,910
C) $18,000
D) $28,910
45) Using Lox Stock & Bagel Company’s financial statement above, determine the amount
of the company’s largest resource.
A) $11,910
B) $39,910
C) $18,000
D) $25,000
46) Using Lox Stock & Bagel Company’s financial statement above, determine the amount of the
owners’ claims that have been contributed to the company.
A) $10,000
B) $39,910
C) $11,910
D) $21,910
47) Using Lox Stock & Bagel Company’s financial statement above, determine the amount that
represents the earnings kept in the company.
A) the Cash balance
B) $21,910
C) $10,910
D) $11,910
48) Use this financial statement to answer the following question:
Cash $ 3,000 Liabilities $ 2,500
Accounts receivable 2,000
Inventory A Common stock B
Supplies 1,000 Retained earnings 500
Total $11,000 Total C
The Inventory balance (A above) equals ________.
A) $17,000
B) $13,000
C) $ 5,000
D) $ 6,000
Use this financial statement to answer the following question(s):
Cash $ 3,000 Liabilities $ 2,500
Accounts receivable 2,000
Inventory A Common stock B
Supplies 1,000 Retained earnings 500
Total $10,000 Total C
49) Refer to the financial statement above. The Common stock balance (B above) equals
________.
A) $10,000
B) $ 7,000
C) $13,000
D) $ 3,000
50) Refer to the financial statement above. The total shareholders’ equity equals ________.
A) $13,000
B) $10,000
C) $ 7,500
D) $ 9,000
51) Refer to the financial statement above. This financial statement is a(n) ________.
A) income statement
B) statement of changes in shareholders’ equity
C) balance sheet
D) statement of cash flows
52) Refer to the financial statement above. Assume that this is the company’s first year of
business. During the year, the company paid $1,000 in dividends to its owner. Net income for the
year must have been ________.
A) $500
B) $2,000
C) $1,500
D) $3,000
53) The financial statement above shows ________.
A) the company’s financial position at a single point in time
B) the changes that took place in the company’s cash account during the period
C) the changes that took place in shareholders’ equity during the period
D) expenses matched with revenues earned for a period of time
54) Dividends are a type of expense shown on the balance sheet.
55) Net income on the income statement will always be greater than net income on the statement
of changes in shareholders’ equity.
56) The change in cash on the statement of cash flows will always equal net income on the
statement of changes in shareholders’ equity.
57) The notes to financial statements (also called footnotes) are an integral part of the financial
statements and help users to understand what is in the statements.
58) Revenues minus cost of goods sold equals net income.
59) Cash flows from financing activities include contributions from owners.
60) In a corporation, dividends distributed to owners are treated as expenses.
61) An income statement lists assets, liabilities, and shareholders’ equity.
62) The statement of cash flows is divided into three sections: assets, liabilities, and
shareholders’ equity.
63) The statement of cash flows is divided into three sections: operating, investing, and
financing.
64) Retained earnings and cash on the balance sheet will always be equal.
65) Explain the purpose of each financial statement and the type of information found in each
statement.
66) Describe the format of the balance sheet.
67) Describe the format of the income statement.
68) Describe the format of the statement of changes in shareholders’ equity.
69) Describe the format of the statement of cash flows.
70) What are the four financial statements? What information does each provide?
71) Wok ‘N’ Roll, Inc., has assets of $500,000 and liabilities of $350,000. Calculate the amount
of shareholder’s equity.
72) Up Against the Wall, Inc., has liabilities of $350,000 and $300,000 worth of shareholders’
equity. Calculate the value of its assets.
73) Sea the World Cruises has assets of $450,000 and shareholders’ equity of $300,000.
Calculate the amount of its liabilities.
74) Shelby’s Music reported net income of $35,000 for the year. During the year, it received
$125,000 in revenues. Calculate the amount of expenses for the year.
75) Seminole Company had a net cash inflow of $80,000 from operating activities. It spent
$40,000 on investing activities. Seminole received $50,000 in cash from issuing stock. Given no
other cash activity, calculate the net increase or decrease in cash.
76) At the beginning of the year, Anudu had $220,000 in liabilities. During the year, assets
increased by $150,000, and at year-end they totaled $450,000. Liabilities decreased $20,000
during the year. Calculate the amount of both the beginning and ending value of shareholders’
equity.
77) Fill in the missing income statement amounts in the spaces below:
Company 1 Company 2 Company 3
Revenues $920 2. $________ $2,750
Expenses $380 $775 $2,980
Net income (Net loss) 1. $_________ $300 3. $__________
78) For each of the following transactions, determine whether there is an increase, decrease, or
no change in net income.
a. Purchased inventory for $8,700.
b. Earned $15,000 in sales for the month.
c. The cost of inventory sold was $6,000.
d. Dividends paid to shareholders were $1,000.
e. Paid employees $1,300.
79) For each of the following transactions, determine whether or not there is an increase,
decrease, or no change in total assets.
a. The owners each contributed $4,000 to start the business.
b. Paid monthly rent of $1,200.
c. Received $11,300 in cash from sales.
d. Recorded a decrease in inventory of $4,500 for the amounts sold.
e. Purchased equipment worth $7,500 with cash.
f. Borrowed $9,000 from the bank.
g. Paid employees $860.
h. Purchased $4,400 worth of inventory for cash.
80) Identify the effects of each transaction on total assets, total liabilities, and total shareholders’
equity by writing increase or decrease.
Shareholders’ equity
Transaction Total assets Total liabilities Contributed capital
Retained earnings
a. Received cash and issued common stock.
b. Purchased inventory for cash.
c. Purchased supplies for cash.
d. Sold inventory to customers for cash.
e. Paid advertising for the month.
81) Analyze each of the following cash transactions and show the effect of each transaction on
the accounting equation by writing the dollar amounts and account titles in the appropriate
columns. If amount is negative put the amount in “()” or put a “-” in front of the amount.
Shareholders’ equity
Transaction Total assets Total liabilities Contributed capital
Retained earnings
a. Issued $10,000 of stock.
b. Paid $11,000 for inventory.
c. Paid $2,500 in advertising expense.
d. Earned $18,000 in sales revenues.
e. The cost of the goods sold in d. was $10,000.
82) Review the following balance sheet and answer the following questions.
Barry Rich, CPA
Balance Sheet
April 30, 2012
Assets Liabilities
Cash $2,430 Note Payable $3,000
Supplies 1,690 Shareholders’ equity
Equipment 7,500 Contributed capital $5,000
Retained Earnings 3,620
Total Sharheolders’ equity 8,620
Total assets $11,620 Total liabilities and shareholders’ equity $11,620
1. Is this business a sole proprietorship, partnership, or corporation? How do you know?
2. Who has claims to the assets owned by the business and how much are they?
3. Assume that April is the first month of operations and no dividends were given to the owner.
How much net income was earned during April?
4. Using this balance sheet, describe what Barry Rich did during the first month of running his
business.
83) Below is a balance sheet for Daily Grind Coffee Shop. Fill in the missing amounts.
Daily Grind Coffee Shop
Balance Sheet
September 30, 2012
Assets Liabilities and shareholders’ equity
Cash $350,000 Accounts payable b. ________
Inventory a. ________ Salaries payable $50,000
Supplies 25,000 Total liabilities $250,000
Equipment 500,000 Contributed capital c. ________
Total shareholders’ equity d. ________
Total assets $950,000 Total liabilities and shareholders’ equitye. ________
84) Mia Hero started her own catering business called Hero’s Catering. Analyze each of the
following transactions for the first month of business. Prepare an income statement for the month
of March.
a. Mia contributed $10,000 of her own money to start Mia’s catering.
b. The business borrowed another $5,000 from the local bank.
c. The business rented a kitchen for $1,500 for the month.
d. The business spent $1,200 on food, spices and other supplies used during the month.
e. The business hired Betty Foit as an assistant chef and paid her $500 for the month.
f. The business earned $7,000 in revenues during the month.
85) Mia Hero started her own catering business called Hero’s Catering. Analyze each of the
following transactions for the first month of business. Prepare the statement of changes in
shareholders’ equity for the month of March.
a. Mia contributed $10,000 of her own money to start Mia’s catering.
b. The business borrowed another $5,000 from the local bank.
c. The business rented a kitchen for $1,500 for the month.
d. The business spent $1,200 on food, spices and other supplies used during the month.
e. The business hired Betty Foit as an assistant chef and paid her $500 for the month.
f. The business earned $7,000 in revenues during the month.
86) Mia Hero started her own catering business called Hero’s Catering. Analyze each of the
following transactions for the first month of business. Prepare the statement of cash flows for the
month of March.
a. Mia contributed $10,000 of her own money to start Mia’s catering.
b. The business borrowed another $5,000 from the local bank.
c. The business rented a kitchen for $1,500 for the month.
d. The business spent $1,200 on food, spices and other supplies used during the month.
e. The business hired Betty Foit as an assistant chef and paid her $500 for the month.
f. The business earned $7,000 in revenues during the month.
87) Mia Hero started her own catering business called Hero’s Catering. Analyze each of the
following transactions for the first month of business. Prepare the balance sheet at March 31.
88) Eddie Bells started her own catering business called Delectable Edibles. Analyze each of the
following transactions for the first month of business. Prepare a complete set of financial
statements for the month of March (Income Statement, Statement of Changes in Shareholders’
Equity, Statement of Cash Flows and Balance Sheet). Eddie contributed $13,000 of her own
money to start Delectable Edibles, which is organized as a corporation.
a. The business borrowed another $5,500 from her mother.
b. The business rented a kitchen for $1,500 for the month.
c. The business spent $1,260 on food, spices and other supplies.
d. The business hired Sue Saute as an assistant chef and paid her $500 for the month.
e. The business earned $7,940 in revenues during the month.
89) Match each of the following with the appropriate definitions.
a. Statement of cash flows
b. Balance sheet
c. Income statement
d. Statement of changes in shareholders’ equity
_____ 1. A financial statement that presents assets, liabilities, and shareholders’ equity.
_____ 2. A financial statement that presents revenues minus expenses to show either a profit or
loss.
_____ 3. A financial statement that presents the changes in shareholder’s equity for an
accounting period.
_____ 4. A financial statement that presents all the cash collected and all the cash disbursed
during an accounting period.
_____ 5. A financial statement that reports the financial position of the company at a point in
time.
90) Match each of the following accounts with the appropriate financial statement.
(Remember that certain accounts may be found on more than one statement.)
a. Balance sheet
b. Income statement
c. Statement of changes in shareholders’ equity
d. Statement of cash flows
_____ 1. Cash
_____ 2. Dividends
_____ 3. Advertising expense
_____ 4. Inventory
_____ 5. Contributed capital
_____ 6. Revenues
91) Match each of the following accounts with the appropriate financial statement.
(Remember that certain accounts may be found on more than one statement.)
a. Balance sheet
b. Income statement
c. Statement of changes in shareholders’ equity
d. Statement of cash flows
_____ 1. Sales revenue
_____ 2. Retained earnings
_____ 3. Rent expense
_____ 4. Cash
_____ 5. Contributed capital