Yi Company began operations on January 1, 2013. During 2013, the company engaged
in the following cash transactions:
1) issued stock for $40,000
2) borrowed $25,000 from its bank
3) provided consulting services for $38,000
4) paid back $15,000 of the bank loan
5) paid rent expense for $9,000
6) purchased equipment costing $12,000
7) paid $3,000 dividends to stockholders
8) paid employees’ salaries, $21,000
What is Yi’s cash flow from financing activities?
A.Inflow of $37,000
B.Outflow of $15,000
C.Inflow of $47,000
D.Outflow of $3,000
Which one of the following regulates the initial offering of securities by a company or
underwriter?
A.The Securities Act of 1933
B.The Securities Exchange Act of 1934
C.The Investment Company Act of 1940
D.The Investment Advisers Act of 1940
E.The Sarbanes-Oxley Act of 2002
Which of the following could represent the effects of an asset source transaction on a
company’s financial statements?
A.
B.
C.
D.
An asset source transaction increases assets and can either increase liabilities(in the
case of borrowing cash) or equity (in the case of issuing stock or earning revenue). It
may or may not affect revenue and net income. If the asset that increases is cash, it is
reported as a cash inflow on the statement of cash flows, and can be either an operating
or a financing activity.
Jerry Mathers started his business by issuing $4,000 of common stock on January 1,
2013. Jerry performed $8,500 of service on account in 2013, and he collected $6,200 of
this amount by year end. He paid operating expenses of $6,900 and paid a $900
dividend to the stockholders.
Required:
a) What is the amount of total assets at the end of 2013?
b) What is the amount of cash on hand at the end of 2013?
c) What is net income for 2013?
d) Prepare a balance sheet for 2013.
La Paz Company engaged in the following transactions during 2012, its first year in
operation: (Assume all transactions are cash transactions)
1) Acquired $3,000 cash from issuing common stock.
2) Borrowed $2,200 from a bank.
3) Earned $3,100 of revenues.
4) Incurred $2,400 in expenses.
5) Paid dividends of $400.
La Paz Company engaged in the following transactions during 2013:
1) Acquired an additional $500 cash from the issue of common stock.
2) Repaid $1,300 of its debt to the bank.
3) Earned revenues, $4,500.
4) Incurred expenses of $2,750.
5) Paid dividends of $640.
The amount of total assets on La Paz’s 2012 balance sheet was
A.$6,000.
B.$5,500.
C.$800.
D.$3,800.
The transactions listed below apply to Lovell Company for its first year in business.
Assume that all transactions involve the receipt or payment of cash.
Transactions for the year 2012:
1) Issued common stock to investors for $15,000 cash.
2) Borrowed $8,000 from the local bank.
3) Provided services to customers for $18,000.
4) Paid expenses amounting to $11,400.
5) Purchased a plot of land costing $12,000.
6) Paid a dividend of $6,000 to its stockholders.
7) Repaid $4,000 of the loan listed in item 2.
Required:
(a) Fill in the headings to the accounting equation shown below.
(b) Show the effects of the above transactions on the accounting equation.
Which of the following is a claims exchange transaction?
A.Purchased machine for cash.
B.Issued common stock.
C.Invested cash in an interest earning account.
D.Recognized revenue earned on a contract where the cash had been collected at an
earlier date.
Franklin Trash Removal Company received a cash advance of $9,000 on December 1,
2013 to provide services during the months of December, January, and February. The
year-end adjustment to recognize the partial expiration of the contract will
A.increase equity by $3,000
B.increase assets by $3,000
C.increase liabilities by $3,000
D.Increase Equity by $3,000 and assets by $3,000.
Which of the following is not an element of the financial statements?
A.Cash
B.Revenue
C.Assets
D.Distributions
Which of the following groups has the primary responsibility for establishing generally
accepted accounting principles for business entities in the United States?
A.Internal Revenue Service.
B.U.S. Congress.
C.Financial Accounting Standards Board.
D.International Accounting Standards Board.
Which of the following financial statement elements is closed at the end of an
accounting cycle?
A.Liabilities
B.Common stock
C.Assets
D.Revenues
Kirsten believes her company’s overhead costs are driven (affected) by the number of
direct labor hours because the production process is very labor intensive. During the
period, the company produced 5,000 units of Product A requiring a total of 1,600 labor
hours and 2,500 units of Product B requiring a total of 400 labor hours. What allocation
rate should be used if the company incurs overhead costs of $20,000?
A.$10 per labor hour
B.$2.67 per unit
C.$12.50 per labor hour for Product A and $50 per labor hour for Product B
D.None of these.
The entry to recognize work completed on unearned revenue involves which of the
following?
A.An increase in assets and a decrease in liabilities
B.An increase in liabilities and a decrease in equity
C.A decrease in assets and a decrease in liabilities
D.A decrease in liabilities and an increase in equity
Dover Company experienced an accounting event that affected its financial statements
as indicated below:
Which of the following accounting events could have caused these effects on Dover’s
statements?
A.Paid a cash dividend.
B.Earned cash revenue.
C.Borrowed money from a bank.
D.Incurred a cash expense.
Petras Company engaged in the following transactions during 2012, its first year in
operations: (Assume all transactions are cash transactions)
1) Acquired $950 cash from the issue of common stock.
2) Borrowed $420 from a bank.
3) Earned $600 of revenues.
4) Paid expenses of $250.
5) Paid a $50 dividend.
During 2013, Petras engaged in the following transactions: (Assume all transactions are
cash transactions)
1) Issued an additional $325 of common stock.
2) Repaid $220 of its debt to the bank.
3) Earned revenues of $750.
4) Incurred expenses of $360.
5) Paid dividends of $100.
Petras Company’s net cash inflow from operating activities for 2012 is
A.$600.
B.$550.
C.$350.
D.$300.
Which one of the following regulates the subsequent trading of securities through
brokers and exchanges?
A.The Securities Act of 1933
B.The Securities Exchange Act of 1934
C.The Investment Company Act of 1940
D.The Investment Advisers Act of 1940
E.The Sarbanes-Oxley Act of 2002
Which of the following is not a major cash inflow from a capital investment?
A.Incremental revenue
B.Increase in working capital
C.Cost savings
D.Salvage value
On June 1, 2014, Siebens Enterprises loaned $20,000 to Tyler Company for one year at
8 percent interest. Under the terms of the promissory note, Tyler will repay the principal
and pay one year’s interest on May 31, 2015.
What amounts will Siebens report on its 2015 statement of cash flows?
A.An operating cash inflow of $1,600 and a cash inflow of $20,000 shown as an
investing activity
B.An operating cash inflow of $1,600 and a financing cash inflow of $20,000
C.An investing activity cash inflow of $20,000 and a financing cash inflow of $1,600
D.$21,600 cash inflow from financing activities
Which of the following could be used as a basis to allocate profits among partners who
are active in the management of the partnership?
1) allocation of salaries.
2) the number of years with the partnership.
3) the amount of time each partner works.
4) the average capital invested.
A.1 and 2
B.1 and 3
C.1, 2, and 4
D.1, 3, and 4
E.1, 2, 3, and 4
When the hybrid method is used to record the withdrawal of a partner, the partnership
A.revalues assets and liabilities and records goodwill to the continuing partner but not
to the withdrawing partner.
B.revalues liabilities but not assets, and no goodwill is recorded.
C.can recognize goodwill but does not revalue assets and liabilities.
D.revalues assets but not liabilities, and records goodwill to the continuing partner but
not to the withdrawing partner.
E.revalues assets and liabilities but does not record goodwill.
The following transactions apply to the Grant Corporation for 2013, its first year in
business.
1) Issued stock to investors, $24,000.
2) The company borrowed $21,000 cash from the bank.
3) Services were provided to customers and $24,000 cash was received.
4) The company loaned $5,000 to another company.
5) The company acquired land for $22,000.
6) The company paid $12,000 rent for the building where it does its business.
7) The company paid $1,600 for supplies that were used during the period.
8) The company sold the land acquired in item 5 for $22,000.
9) A dividend of $5,000 was made to the owners.
10) Repaid $10,000 of the loan described in item 2.
Required:
Prepare a statement of cash flows for 2013.
Name five securities offerings exempt from registration with the SEC.
Briefly distinguish between financial accounting and managerial accounting.
The ABCD Partnership has the following balance sheet at January 1, 2012, prior to the
admission of new partner, Eden.
Eden contributes $49,000 into the partnership for a 25% interest. The four original
partners share profits and losses equally. Using the bonus method, determine the
balances for each of the five partners after Eden joins the partnership.
The Carson Company was started at the beginning of the current year when it acquired
$20,000 by issuing common stock to its owners. During the year, the company incurred
the following cash costs:
The company produced 5,000 units of product and sold 4,500 units. The average selling
price was $7.00 per unit. The accountant who prepared the firm’s financial statements
misclassified the selling and administrative costs as product costs.
Required:
Demonstrate the impact of the error on the company’s financial statements by
completing the following schedule.
A company that was to be liquidated had the following liabilities:
The company had the following assets:
Total payment on notes payable is calculated to be what amount? (Round the payout
percentage to one decimal place.)
What financial statement elements are reported on a balance sheet?
How did the early International Accounting Standards (IAS) obtain support from a
sufficient number of board members?
Under what circumstances does a partner’s balance in his or her capital account have
practical consequences for the partner?