Test Bank for Survey of Accounting, 7th Edition ISBN10: 1264442971 | ISBN13: 9781264442973 By Christopher Edmonds and Philip Olds 2024

Test Bank for Survey of Accounting, 7th Edition ISBN10: | ISBN13: 9781264442973 By Christopher Edmonds and Philip Olds 2024 Chap 01 7e Edmonds 1) Which of the following groups has the primary responsibility for establishing generally accepted accounting principles for business entities in the United States? A) Securities and Exchange Commission B) U.S. Congress C) International Accounting Standards Board D) Financial Accounting Standards Board 2) The Heritage Company is a manufacturer of office furniture. Which term best describes Heritage's role in society? A) Business B) Regulatory agency C) Consumer D) Resource owner 3) Which resource providers lend financial resources to a business with the expectation of repayment with interest? A) Consumers B) Creditors C) Investors D) Owners 4) Which type of accounting information is intended to satisfy the needs of external users of accounting information? A) Cost accounting B) Managerial accounting C) Tax accounting D) Financial accounting 5) Which of the following is false regarding managerial accounting information? A) It is often used by investors. B) It is more detailed than financial accounting information. C) It can include nonfinancial information. D) It focuses on divisional rather than overall profitability. 1 6) Financial accounting standards are known collectively as GAAP. What does that acronym stand for? A) Generally Accepted Accounting Principles B) Generally Applied Accounting Procedures C) Governmentally Approved Accounting Practices D) Generally Authorized Auditing Principles 7) International accounting standards are formulated by the IASB. What does that acronym stand for? A) Internationally Accepted Standards Board B) International Accounting Standards Board C) International Accountability Standards Bureau D) International Accounting and Sustainability Board 8) Jack Henry borrowed $800,000 from Walt Bank to open a new bike store called Wooden Wheels. Jack transferred $650,000 of the cash that he borrowed to the store on the first day of the year. How many reporting entities exist in this scenario? A) One reporting entity B) Two reporting entities C) Three reporting entities D) Four reporting entities 2 9) Jack Henry borrowed $800,000 from Walt Bank to open a new bike store called Wooden Wheels. Jack transferred $650,000 of the cash he borrowed to Wooden Wheels on the first day of the year. Which of the following appropriately reflects the cash transactions between these reporting entities? Option A. B. C. D. Jack Henry $ 150,000 increase $ 800,000 increase $ 800,000 decrease $ 650,000 increase A) Option A B) Option B C) Option C D) Option D Wooden Wheels $ 650,000 increase $ 650,000 increase $ 800,000 increase $ 150,000 increase Walt Bank $ 800,000 decrease $ 150,000 decrease $ 650,000 decrease $ 800,000 decrease 10) Ellen Gatsby and her siblings, Ben and Sarah, started Gatsby Company when they each invested $100,000 in the company. After the investments there will be A) one reporting entity. B) two reporting entities. C) three reporting entities. D) four reporting entities. 11) John Hamilton borrowed $528,000 from Stone Creek Bank to open a new restaurant called Sauce-It-Up. John transferred $475,200 of the cash he borrowed to the restaurant on the first day of the year. How many reporting entities exist in this scenario? A) Two reporting entities B) Three reporting entities C) One reporting entity D) Four reporting entities 3 12) John Hamilton borrowed $540,000 from Stone Creek Bank to open a new restaurant called Sauce-It-Up. John transferred $486,000 of the cash he borrowed to the Company on the first day of the year. Which of the following appropriately reflects the cash transactions between these reporting entities? John Hamilton Sauce-It-Up Stone Creek Bank A. $ 54,000 increase $ 486,000 increase $ 540,000 decrease B. $ 540,000 increase $ 486,000 increase $ 540,000 decrease C. $ 540,000 decrease $ 540,000 increase $ 540,000 decrease D. $ 486,000 increase $ 54,000 increase $ 540,000 decrease A) Option A B) Option B C) Option C D) Option D 13) Which of the following is an accurate definition of the term “asset?” A) An obligation to creditors B) A resource that will be used to produce revenue C) A transfer of wealth from the business to its stockholders D) A sacrifice incurred from operating the business 14) Which of the following is (are) source(s) of assets to a business? A) Creditors B) Investors C) Operations D) All the answers represent sources of assets. 15) If total assets decrease, then which of the following statements is true? A) Liabilities must increase and retained earnings must decrease. B) Common stock must decrease and retained earnings must increase. C) Liabilities, common stock, or retained earnings must decrease. D) Liabilities, common stock, or retained earnings must increase. 4 16) Which of the following statements about liabilities is true? A) They represent obligations to repay debts. B) They may increase when assets increase. C) They are found on the claims side of the accounting equation. D) All of the answers are characteristics of liabilities. 17) Which term describes assets generated through operations that have been reinvested into the business? A) Liability B) Dividend C) Common stock D) Retained earnings 18) Which of the following is an accurate depiction of the accounting equation? A) Assets = Liabilities + Common Stock + Retained Earnings B) Assets = Liabilities + Common Stock − Expenses C) Assets = Liabilities + Retained Earnings − Dividends D) Assets = Liabilities + Common Stock + Dividends 19) Which term describes a distribution of the business’s assets back to the owners of the business? A) Liability B) Dividend C) Retained earnings D) Common stock 20) Finn Company reported assets of $1,000 and stockholders’ equity of $600. What amount will Finn report for liabilities? A) $400 B) $600 C) $1,600 D) Cannot be determined 5 21) Which of the following items is an example of revenue? A) Cash received from a bank loan B) Cash received from investors from the sale of common stock C) Cash received from customers at the time services were provided D) Cash received from the sale of land for its original selling price 22) Which of the following is not an element of the accounting equation? A) Stockholders’ Equity B) Liabilities C) Assets D) Net income 23) The balance sheet of the Algonquin Company reported assets of $50,000, liabilities of $22,000 and common stock of $15,000. Based on this information only, what is the amount of retained earnings? A) $7,000. B) $57,000. C) $13,000. D) $87,000. 24) Stosch Company's balance sheet reported assets of $87,000, liabilities of $24,000 and common stock of $21,000 as of December 31, Year 1. If Retained Earnings on the balance sheet as of December 31, Year 2, amount to $54,000 and Stosch paid a $23,000 dividend during Year 2, then the amount of net income for Year 2 was which of the following? A) $42,000 B) $35,000 C) $12,000 D) $23,000 6 25) Stosch Company's balance sheet reported assets of $40,000, liabilities of $15,000 and common stock of $12,000 as of December 31, Year 1. If Retained Earnings on the balance sheet as of December 31, Year 2, amount to $18,000 and Stosch paid a $14,000 dividend during Year 2, then the amount of net income for Year 2 was which of the following? A) $17,000 B) $19,000 C) $13,000 D) $21,000 26) Hazeltine Company issued common stock for $200,000 cash. As a result of this event, which of the following statements is true? A) Assets increased. B) Stockholders’ equity increased. C) Claims increased. D) Assets, claims, and stockholders’ equity all increased. 27) If Ballard Company reported assets of $500 and liabilities of $200, Ballard's stockholders' equity equals: A) $300. B) $500. C) $700. D) Cannot be determined. 28) If a company's total assets increased while liabilities and common stock were unchanged, then which of the following statements is true? A) Revenues were greater than expenses. B) Retained earnings were less than net income during the period. C) No dividends were paid during the period. D) The company must have purchased assets with cash. 7 29) Li Company paid cash to purchase land. As a result of this accounting event, which of the following statements is true? A) Total assets decreased. B) Total assets were unaffected. C) Total stockholders’ equity decreased. D) Both assets and total stockholders’ equity decreased. 30) Wyatt Company was formed on January 1, Year 1, when it acquired $50,000 cash from issuing common stock. Which of the following shows the impact of this transaction on Wyatt’s accounting equation? Assets = Liabilities + Stockholders’ Equity A. +/− NA NA B. + NA + C. − NA − D. + + NA A) Option A B) Option B C) Option C D) Option D 31) Wing Company borrowed $70,000 cash from Metropolitan Bank. Which of the following shows the impact of this transaction on Wing’s accounting equation? Assets = Liabilities + Stockholders’ Equity A. +/− NA NA B. + NA + C. − NA − D. + + NA A) Option A B) Option B C) Option C D) Option D 8 32) Wing Company provided services for $30,000 cash. Which of the following shows the impact of this transaction on Wing’s accounting equation? Assets = Liabilities + Stockholders’ Equity A. +/− NA NA B. + NA + C. − NA − D. + + NA A) Option A B) Option B C) Option C D) Option D 33) Wing Company paid $20,000 cash in salaries to its employees. Which of the following shows the impact of this transaction on Wing’s accounting equation? Assets = Liabilities + Stockholders’ Equity A. +/− NA NA B. + NA + C. − NA − D. + + NA A) Option B B) Option A C) Option C D) Option D 9 34) Wing Company paid $5,000 cash to purchase land. Which of the following shows the impact of this transaction on Wing’s accounting equation? Assets = Liabilities + Stockholders’ Equity A. +/− NA NA B. + NA + C. − NA − D. + + NA A) Option A B) Option B C) Option C D) Option D 35) Juarez Company acquired $1,680 from the issue of common stock. Which of the following shows how this event will affect the company’s accounting equation? The letters “NA” indicate that the component of the equation is not affected. Assets = Liabilities + Common Stock + Retained Earnings A. $ 1,680 = $ 560 + $ 560 + $ 560 B. $ 1,680 = $ 1,680 + NA + NA C. $ 1,680 = NA + $ 1,680 + NA D. $ 1,680 = NA + $ 840 + $ 840 A) B) Option A Option B C) D) Option C Option D 36) Smokey Enterprises began operations by receiving $130,000 cash from its sole owner, Jessica Jones. During its first year of operations, the business earned $26,000 in cash from operations and paid $19,500 in cash expenses. What is Smokey Enterprises’ net income for its first year of operations? A) $6,500 B) $136,500 C) $26,000 D) $19,500 10 37) The land that Martin Company paid $89,000 to purchase in the prior year had an appraised market value of $128,000 at the end of the current reporting period. Which of the following shows how the change in market value will affect the company’s accounting equation? The letters “NA” indicate that the component of the equation is not affected. Assets = Liabilities + Common Stock + Retained Earnings A. $ 89,000 = NA + NA + $ 89,000 B. $ 39,000 = NA + NA + $ 39,000 C. NA = NA + NA + NA D. $ 128,000 = NA + NA + $ 128,000 A) Option A B) Option B C) Option C D) Option D 38) Turner Company reported assets of $20,000 (including cash of $9,000), liabilities of $8,000, common stock of $7,000, and retained earnings of $5,000. Based on this information, what can be concluded? A) 25% of Turner's assets are the result of prior earnings. B) $5,000 is the maximum dividend that can be paid to shareholders. C) 40% of Turner's assets are the result of borrowing from creditors. D) 25% of Turner's assets are from prior earnings, $5,000 is the maximum possible dividend, and 40% of assets are the result of borrowed resources. 39) At the time of liquidation, Fairchild Company reported assets of $200,000, liabilities of $120,000, common stock of $90,000 and retained earnings of ($10,000). What amount of Fairchild's assets are the shareholders entitled to receive? A) $200,000 B) $80,000 C) $90,000 D) $100,000 11 40) As of December 31, Year 2, Bristol Company had $100,000 of assets, $40,000 of liabilities and $25,000 of retained earnings. What percentage of Bristol's assets were obtained from investors? A) 60% B) 25% C) 40% D) 35% 41) The accounting records of Coastal Company contained the following account balances. Cash Land Notes Payable Common Stock $580 $950 $210 $520 The records also contained an account titled Retained Earnings. Based on this information the balance of the retained earnings account must be A) $950. B) $580. C) $520. D) $800. 42) The following accounting equation represents the financial position of Qualtro Company. Assets = Liabilities + Stockholders' Equity Cash + Land = Notes Payable + Common Stock + 780 + 4,100 = 1,560 Based on this equation, Qualtro: A) can pay a $585 cash dividend. B) can pay off its note payable. C) can pay only $1,170 of its note payable. D) can pay a $1,170 cash dividend. + 2,150 + Retained Earnings 1,170 12 43) The following accounting equation represents the financial position of Bentley Company. Assets = Liabilities + Stockholders' Equity Cash + Land = Notes Payable + Common Stock + 730 + 2,330 = 1,260 Based on this equation, Bentley: A) can pay a cash dividend of $710. B) can pay off its note payable. C) can pay only $640 of its note payable. D) None of the answers is correct. + 1,140 + Retained Earnings 640 44) Alexis Company was started in Year 1. At the end of Year 1, the Company had the following accounting equation. Assets = Liabilities + Stockholders' Equity Cash + Land = Notes Payable + Common Stock + 800 + 2,400 = 1,400 + 1,000 + During Year 2, the company experienced the following accounting events. ◻ Paid off $700 of its notes payable. ◻ Earned $900 of cash revenue. ◻ Paid $600 of cash expenses. ◻ Paid a $300 cash dividend. Retained Earnings 800 Based on this information alone, what percent of the company's assets at the end of Year 2 was provided by creditors? A) 28.0% B) 32.0% C) 64.0% D) Some other percentage 13 45) Alexis Company was started in Year 1. At the end of Year 1, the Company had the following accounting equation. Assets = Liabilities + Stockholders' Equity Cash + Land = Notes Payable + Common Stock + 770 + 2,370 = 1,340 + 1,060 + During Year 2, the company experienced the following accounting events. ◻ Paid off $670 of its note payable ◻ Earned $870 of cash revenue. ◻ Paid $570 of cash expenses. ◻ Paid a $270 cash dividend. Retained Earnings 740 Based on this information alone, what percent of the company's assets at the end of Year 2 was provided by earnings? A) 26.8% B) 30.8% C) 62.8% D) Some other percentage 46) Watt Company was established in January, Year 1. During Year 1 the company experienced the following events. ◻ Collected $6,200 cash from the issue of common stock. ◻ Borrowed $3,700 cash from the state bank. ◻ Earned $4,400 of cash revenue. ◻ Paid $3,200 cash expenses. The company was liquidated at the end of Year 1. Based on this information: A) the creditor (the bank) would receive $1,200. B) the stockholders would receive $7,400. C) the creditor (the bank) would receive $6,200. D) the stockholders would receive $6,200. 14 47) Emerald Company was established in January, Year 1. During Year 1 the company experienced the following events: ◻ Collected $50,000 cash from the issue of common stock. ◻ Borrowed $46,000 cash from the state bank. ◻ Earned $150,000 of cash revenue. ◻ Paid $210,000 cash expenses. The company was liquidated at the end of Year 1. Based on this information: A) the creditor (the bank) would receive $36,000. B) the creditor (the bank) would receive $46,000. C) the stockholders would receive $50,000. D) the stockholders would receive $140,000. 48) On January 1, Year 2, Chavez Company had beginning balances as follows: Assets Liabilities Common Stock = $12,500 = $ 4,500 = $ 3,000 During Year 2, Chavez paid dividends to its stockholders of $2,000. Given that ending retained earnings was $6,000, what was Chavez's net income for the Year 2? A) $3,000 B) $5,000 C) $7,000 D) $2,000 49) The transaction, "provided services for cash," affects which two accounts? A) Revenue and Expense B) Cash and Revenue C) Cash and Expense D) Cash and Dividends 15 50) During the year, Millstone Company earned $6,500 of cash revenue, paid cash dividends of $1,000 to stockholders and paid $4,000 for cash expenses. Liabilities were unchanged. Which of the following accurately describes the effect of these events on the elements of the company's financial statements? A) Assets increased by $6,500. B) Assets increased by $1,500. C) Stockholders’ equity increased by $2,500. D) Assets increased by $5,500. 51) At the end of Year 2, retained earnings for the Baker Company was $2,350. Revenue earned by the company in Year 2 was $2,600, expenses paid during the period were $1,400, and dividends paid during the period were $800. Based on this information alone, what was the amount of retained earnings at the beginning of Year 2? A) $1,950 B) $1,150 C) $5,200 D) $2,750 52) At the end of Year 2, retained earnings for the Baker Company was $3,500. Revenue earned by the company in Year 2 was $1,500, expenses paid during the period were $800, and dividends paid during the period were $500. Based on this information alone, what was the amount of retained earnings at the beginning of Year 2? A) $3,300 B) $3,700 C) $2,800 D) $3,800 53) Which of the following is not an asset use transaction? A) Paying cash dividends B) Paying cash expenses C) Paying off the principal of a loan D) Paying cash to purchase land 16 54) Borrowing cash from the bank is an example of which type of transaction? A) Asset source B) Claims exchange C) Asset use D) Asset exchange 55) Which of the following could describe the effects of an asset exchange transaction on the accounting equation? Assets = Liabilities + Stockholders’ Equity A. +/− B. + C. − D. + NA NA NA + NA + − NA A) Option A B) Option B C) Option C D) Option D 56) Which of the following does not describe the effects of an asset use transaction on the accounting equation? Balance Sheet Income Statement Statement Assets = Liabilities + Equity Revenue − Expense = Net Income of Cash Flow A. − = − + NA NA − NA = NA −OA B. − = − + NA NA − NA = NA −FA C. − = NA + − NA − + = − −OA D. NA = + + NA + − + = − NA A) Option A B) Option B C) Option C D) Option D 17 57) Which of the following cash transactions results in an increase to one asset account and a decrease to another asset account? A) Borrowing cash from a bank B) Issuing common stock for cash C) Purchasing land for cash D) Providing services for cash 58) Which of the following items appears in the investing activities section of the statement of cash flows? A) Cash inflow from interest revenue B) Cash inflow from the issuance of common stock C) Cash outflow for the payment of dividends D) Cash outflow for the purchase of land 59) Jackson Company had a net increase in cash from operating activities of $8,400 and a net decrease in cash from financing activities of $1,600. If the beginning and ending cash balances for the company were $3,400 and $11,800, respectively, what is the net cash change from investing activities? A) An outflow or decrease of $1,600 B) An inflow or increase of $1,800 C) An inflow or increase of $1,600 D) Zero 60) Jackson Company had a net increase in cash from operating activities of $10,000 and a net decrease in cash from financing activities of $2,000. If the beginning and ending cash balances for the company were $4,000 and $11,000, respectively, what is the net cash change from investing activities? A) An outflow or decrease of $1,000 B) An inflow or increase of $2,000 C) An inflow or increase of $1,000 D) Zero 18 61) The year-end financial statements of Calloway Company contained the following elements and corresponding amounts: Assets = $39,000; Liabilities = ?; Common Stock = $6,900; Revenue = $14,800; Dividends = $1,700; Beginning Retained Earnings = $4,700; Ending Retained Earnings = $8,900. Based on this information, the amount of expenses on Calloway's income statement was A) $8,900. B) $500. C) $11,600. D) $4,200. 62) The year-end financial statements of Calloway Company contained the following elements and corresponding amounts: Assets = $50,000; Liabilities = ?; Common Stock = $15,000; Revenue = $22,000; Dividends = $1,500; Beginning Retained Earnings = $3,500; Ending Retained Earnings = $7,500. Based on this information, the amount of expenses on Calloway's income statement was: A) $18,500. B) $13,000. C) $16,500. D) $10,000. 63) The year-end financial statements of Calloway Company contained the following elements and corresponding amounts: Assets = $25,000; Liabilities = ?; Common Stock = $5,500; Revenue = $12,000; Dividends = $1,000; Beginning Retained Earnings = $4,000; Ending Retained Earnings = $7,500. The amount of liabilities reported on the end-of-period balance sheet was: A) $19,500. B) $15,500. C) $12,000. D) $17,500. 19 64) The year-end financial statements of Calloway Company contained the following elements and corresponding amounts: Assets = $50,000; Liabilities = ?; Common Stock = $15,000; Revenue = $22,000; Dividends = $1,500; Beginning Retained Earnings = $3,500; Ending Retained Earnings = $7,500. The amount of liabilities reported on the end-of-period balance sheet was: A) $27,500. B) $31,500. C) $35,000. D) $42,500. 65) Which of the following financial statements provides information about a company as of a specific point in time? A) Income statement B) Balance sheet C) Statement of cash flows D) Statement of changes in stockholders' equity 66) Kelly Company experienced the following events during its first accounting period. (1) Issued common stock for $10,000 cash. (2) Earned $8,000 of cash revenue. (3) Paid $1,000 cash to purchase land. (4) Paid cash dividends amounting to $500. (5) Paid $4,400 of cash expenses. Based on this information, what is the amount of net income? A) $2,100 B) $2,600 C) $3,600 D) $5,600 20 67) Which of the following shows the effects of paying a cash dividend on the balance sheet and income statement? Balance Sheet Income Statement Assets = Liabilities + Stockholders' Equity Revenue Expense = Net Income A. − + NA NA NA NA B. − NA − NA + − C. − NA + NA + − D. − NA − NA NA NA A) Option A B) Option B C) Option C D) Option D 68) Which of the following shows the effects of providing services for cash on the balance sheet and income statement? Balance Sheet Income Statement Assets = Liabilities + Stockholders' Equity Revenue Expense = Net Income A. + NA NA + NA + B. + NA + + NA + C. − NA + NA + − D. + NA + NA NA NA A) Option A B) Option B C) Option C D) Option D 21 69) The statement of changes in stockholders’ equity shows changes in which of the following accounts? A) Retained Earnings and Assets B) Assets and Liabilities C) Common Stock and Retained Earnings D) Liabilities and Common Stock 70) Which of the following transactions would be reported on the statement of changes in stockholders’ equity? A) Borrowed $5,000 cash from the bank B) Paid a $100 cash dividend to the stockholders C) Purchased land for $2,000 cash D) Paid $1,500 cash to pay off a portion of its note payable 71) Dividends are reported on which financial statement? A) Balance Sheet B) Income Statement C) Statement of Changes in Stockholders’ Equity D) Both the income statement and statement of changes in stockholders’ equity 72) Salaries expense appears in the: A) liabilities section of the balance sheet. B) financing activities section of the statement of cash flows. C) asset section of the balance sheet. D) expense section of the income statement. 22 73) At the beginning of Year 2, Jones Company had a balance in common stock of $300,000 and a balance of retained earnings of $15,000. During Year 2, the following transactions occurred: ◻ Issued common stock for $90,000 ◻ Earned net income of $50,000 ◻ Paid dividends of $8,000 ◻ Issued a note payable for $20,000 Based on the information provided, what is the total stockholders' equity on December 31, Year 2? A) $147,000 B) $357,000 C) $427,000 D) $447,000 74) Kilgore Company experienced the following events during its first accounting period. 1. (1) Issued common stock for $6,400 cash. 2. (2) Earned $4,400 of cash revenue. 3. (3) Paid $5,400 cash to purchase land. 4. (4) Paid cash dividends amounting to $470. 5. (5) Paid $2,340 of cash expenses. Based on this information the amount of net income is: A) $2,060. B) $2,340. C) $4,680. D) $1,030. 75) Kilgore Company experienced the following events during its first accounting period. 1. (1) Borrowed $13,000 cash from a creditor. 2. (2) Earned $6,500 of cash revenue. 3. (3) Paid $2,600 cash to pay off a portion of its note payable. 4. (4) Paid cash dividends amounting to $400. 5. (5) Paid $2,950 cash for operating cash expenses. Based on this information, what is the amount of expense shown on the income statement? A) $3,350 B) $5,550 C) $5,950 D) $2,950 23 76) At the end of Year 1, Clayton Company had $9,200 of cash, $11,800 land, $3,600 of liabilities, $6,200 of common stock, and $11,200 of retained earnings. During Year 2, Clayton experienced the following events. 1. Borrowed $4,700 cash. 2. Earned $9,700 of cash revenue. 3. Paid $7,200 of cash expenses. 4. Paid $8,200 cash to purchase land. Based on this information the amount of total assets, total liabilities, and retained earnings appearing on the Year 2 financial statements is Total Assets A. B. C. D. A) Option A B) Option B C) Option C D) Option D $ 8,200 $ 28,200 $ 17,400 $ 17,400 Total Liabilities 77) Which of the following accounts are permanent? A) Retained earnings B) All income statement accounts C) Dividends D) All balance sheet accounts including dividends. Retained Earnings $ 8,700 $ 8,300 $ 3,600 $ 2,500 $ 14,900 $ 13,700 $ 13,700 $ 8,700 78) In which section of a statement of cash flows would the payment of cash dividends be reported? A) Investing activities B) Operating activities C) Financing activities D) Dividends are not reported on the statement of cash flows. 24 79) The following information was drawn from Gore, Incorporated’s statement of cash flows. 1. (1) $3,300 net cash outflow from investing activities. 2. (2) $4,300 net cash inflow from financing activities. 3. (3) $7,300 net increase in the cash balance. Based on this information, the amount of cash flow from operating activities appearing on the statement of cash flows must be a(n): A) $6,300 net cash inflow. B) $10,600 net cash outflow. C) $8,300 net cash inflow. D) $1,000 net cash outflow. 80) At the end of Year 1 Bowers Company had $7,400 of assets, $2,000 of liabilities, $3,100 of common stock, and $2,300 of retained earnings. During Year 2 Bowers experienced the following events. 1. (1) Borrowed $5,400 cash. 2. (2) Earned $5,200 of cash revenue. 3. (3) Paid $4,000 of cash expenses. 4. (4) Paid $7,300 cash to purchase land Based on this information, the amount of net income, cash flow from investing activities, and total liabilities appearing on the Year 2 financial statements is: A) Net Income $7,400 B) Net Income $5,200 C) Net Income $1,200 D) Net Income $1,200 Cash Flow from Investing Activities $7,300 Cash Flow from Investing Activities Cash Flow from Investing Activities $8,000 Cash Flow from Investing Activities ($7,300) Total Liabilities $2,000 Total Liabilities Zero $5,400 Total Liabilities Zero Total Liabilities $7,400 25 81) Which financial statement matches asset increases from operating a business with asset decreases from operating the business? A) Balance sheet B) Statement of changes in stockholders' equity C) Income statement D) Statement of cash flows 82) The amount of retained earnings is shown on the A) income statement. B) balance sheet. C) statement of cash flows. D) statement of changes in stockholders' equity. E) balance sheet and statement of changes in stockholders' equity. 83) Chow Company earned $2,700 of cash revenue, paid $1,600 for cash expenses, and paid a $500 cash dividend to its stockholders. Which of the following statements is true? A) The net cash inflow from operating activities was $600. B) The net cash outflow for investing activities was $500. C) The net cash inflow from operating activities was $1,100. D) The net cash outflow for investing activities was $600. 84) Chow Company earned $1,500 of cash revenue, paid $1,200 for cash expenses, and paid a $200 cash dividend to its stockholders. Which of the following statements is true? A) The net cash inflow from operating activities was $100. B) The net cash outflow for investing activities was $200. C) The net cash inflow from operating activities was $300. D) The net cash outflow for investing activities was $100. 85) Yi Company provided services to a customer for $5,500 cash. As a result of this event: A) total assets increased and total stockholders' equity decreased. B) total assets were unchanged and cash flows from operating activities increased. C) liabilities decreased and net income increased. D) total assets increased and net income increased. 26 86) During Year 2, Chico Company earned $2,900 of cash revenue, paid $1,250 of cash expenses, and paid a $750 cash dividend to its stockholders. Based on this information alone, which of the following statements is not true? A) Net income amounted to $1,650. B) Total assets increased by $900. C) Cash inflow from operating activities was $1,650. D) Cash outflow from financing activities was $900. 87) During Year 2, Chico Company earned $1,950 of cash revenue, paid $1,600 of cash expenses, and paid a $150 cash dividend to its stockholders. Based on this information alone, which of the following statements is not true? A) Net income amounted to $350. B) Total assets increased by $200. C) Cash inflow from operating activities was $350. D) Cash outflow from financing activities was $200. 88) Which of the following items would appear in the financing activities section of the statement of cash flows? A) Cash outflow for the purchase of land B) Cash inflow from sales revenue C) Cash inflow from issuance of common stock D) Cash outflow for the payment of accounts payable 89) Glavine Company repaid a bank loan with cash. How should the cash flow from this event be shown on the horizontal financial statements model? A) As an operating activity that decreases cash, decreases stockholders' equity, and decreases net income. B) As a financing activity that decreases cash and decreases liabilities. C) As a financing activity that decreases cash, decreases stockholders' equity, and decreases net income. D) As an investing activity that decreases cash and decreases liabilities. 27 90) Retained Earnings at the beginning and ending of the period were $500 and $1,100, respectively. If revenues were $1,900 and dividends paid to stockholders were $400, what was the amount of expenses for the period? A) $1,500. B) $600. C) $1,300. D) $900. 91) Retained Earnings at the beginning and ending of the period were $300 and $800, respectively. If revenues were $1,100 and dividends paid to stockholders were $200, what was the amount of expenses for the period? A) $500 B) $400 C) $900 D) $700 92) Yowell Company began operations on January 1, Year 1. During Year 1, the company engaged in the following cash transactions: 1. 1) issued stock for $44,000 2. 2) borrowed $27,000 from its bank 3. 3) provided consulting services for $43,000 cash 4. 4) paid back $17,000 of the bank loan 5. 5) paid rent expense for $10,000 6. 6) purchased equipment for $14,000 cash 7. 7) paid $3,200 dividends to stockholders 8. 8) paid employees' salaries of $23,000 What is Yowell's net cash flow from operating activities? A) Inflow of $20,000 B) Inflow of $10,000 C) Inflow of $33,000 D) Inflow of $6,800 28 93) Yowell Company began operations on January 1, Year 1. During Year 1, 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 $39,000 cash 4) paid back $15,000 of the bank loan 5) paid rent expense for $9,000 6) purchased equipment for $12,000 cash 7) paid $3,000 dividends to stockholders 8) paid employees' salaries of $21,000 What is Yowell's net cash flow from operating activities? A) Inflow of $6,000 B) Inflow of $9,000 C) Inflow of $18,000 D) Inflow of $30,000 94) Yowell Company began operations on January 1, Year 1. During Year 1, the company engaged in the following cash transactions: 1. 1) issued stock for $42,000 2. 2) borrowed $26,000 from its bank 3. 3) provided consulting services for $41,000 cash 4. 4) paid back $16,000 of the bank loan 5. 5) paid rent expense for $9,500 6. 6) purchased equipment for $13,000 cash 7. 7) paid $3,100 dividends to stockholders 8. 8) paid employees' salaries of $22,000 What is Yowell's notes payable balance at the end of Year 1? A) $16,000 B) $10,000 C) $26,000 D) $0 29 95) Yowell Company began operations on January 1, Year 1. During Year 1, 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 $39,000 cash 4) paid back $15,000 of the bank loan 5) paid rent expense for $9,000 6) purchased equipment for $12,000 cash 8) paid employees' salaries of $21,000 What is Yowell's notes payable balance at the end of Year 1? A) $0 B) $25,000 C) ($15,000) D) $10,000 96) Yowell Company began operations on January 1, Year 1. During Year 1, the company engaged in the following cash transactions: 1. 1) issued stock for $58,000 2. 2) borrowed $34,000 from its bank 3. 3) provided consulting services for $57,000 cash 4. 4) paid back $24,000 of the bank loan 5. 5) paid rent expense for $13,500 6. 6) purchased equipment for $21,000 cash 7. 7) paid $3,900 dividends to stockholders 8. 8) paid employees' salaries of $30,000 What is Yowell's net income for Year 1? A) $26,100 B) $13,500 C) $43,500 D) $9,600 30 97) Yowell Company began operations on January 1, Year 1. During Year 1, 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 $39,000 cash 4) paid back $15,000 of the bank loan 5) paid rent expense for $9,000 6) purchased equipment for $12,000 cash 7) paid $3,000 dividends to stockholders 8) paid employees' salaries of $21,000 What is Yowell's net income for Year 1? A) $9,000 B) $30,000 C) $18,000 D) $6,000 98) Packard Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.) 1. 1) Acquired $1,000 cash from the issue of common stock. 2. 2) Borrowed $470 from a bank. 3. 3) Earned $650 of revenues cash. 4. 4) Paid expenses of $260. 5. 5) Paid a $60 dividend. 6. 1) Issued an additional $375 of common stock. 7. 2) Repaid $255 of its debt to the bank. 8. 3) Earned revenues of $800 cash. 9. 4) Incurred expenses of $380. 10. 5) Paid dividends of $110. A) Net inflow of $265. B) Net outflow of $255. C) Net outflow of $365. D) Net inflow of $10. 31 99) Packard Company engaged in the following transactions during Year 1, its first year of 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 $650 of revenues cash. 4) Paid expenses of $250. 5) Paid a $50 dividend. During Year 2, Packard 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 cash. 4) Incurred expenses of $360. 5) Paid dividends of $100. What is the amount of Packard Company's net cash flow from financing activities for Year 2? A) Net outflow of $220 B) Net outflow of $320 C) Net inflow of $5 D) Net inflow of $225 100) Packard Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.) 1. 1) Acquired $1,950 cash from the issue of common stock. 2. 2) Borrowed $1,420 from a bank. 3. 3) Earned $1,600 of revenues cash. 4. 4) Paid expenses of $450. 5. 5) Paid a $250 dividend. 6. 1) Issued an additional $1,325 of common stock. 7. 2) Repaid $920 of its debt to the bank. 8. 3) Earned revenues of $1,750 cash. 9. 4) Incurred expenses of $760. 10. 5) Paid dividends of $300. A) $1,150. B) $0 C) $900. D) $1,250. 32 101) Packard Company engaged in the following transactions during Year 1, its first year of 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 $650 of revenues cash. 4) Paid expenses of $250. 5) Paid a $50 dividend. During Year 2, Packard 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 cash. 4) Incurred expenses of $360. 5) Paid dividends of $100. What is Packard's retained earnings account balance at the end of Year 1 before the process of closing the accounts has been undertaken? A) $400 B) $0 C) $350 D) $450 102) Packard Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.) 1. 1) Acquired $1,850 cash from the issue of common stock. 2. 2) Borrowed $1,320 from a bank. 3. 3) Earned $1,500 of revenues cash. 4. 4) Paid expenses of $430. 5. 5) Paid a $230 dividend. 6. 1) Issued an additional $1,225 of common stock. 7. 2) Repaid $850 of its debt to the bank. 8. 3) Earned revenues of $1,650 cash. 9. 4) Incurred expenses of $720. 10. 5) Paid dividends of $280. A) $430 B) $2,690 C) $1,620 D) $2,920 33 103) Packard Company engaged in the following transactions during Year 1, its first year of 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 $650 of revenues cash. 4) Paid expenses of $250. 5) Paid a $50 dividend. During Year 2, Packard 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 cash. 4) Incurred expenses of $360. 5) Paid dividends of $100. What was the amount of total stockholders’ equity on Packard's balance sheet at the end of Year 1? A) $1,350 B) $900 C) $250 D) $1,300 104) Packard Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.) 1. 1) Acquired $1,700 cash from the issue of common stock. 2. 2) Borrowed $1,170 from a bank. 3. 3) Earned $1,350 of revenues cash. 4. 4) Paid expenses of $400. 5. 5) Paid a $200 dividend. 6. 1) Issued an additional $1,075 of common stock. 7. 2) Repaid $745 of its debt to the bank. 8. 3) Earned revenues of $1,500 cash. 9. 4) Incurred expenses of $660. 10. 5) Paid dividends of $250. A) $1,590 B) $1,700 C) $1,340 D) $985 34 105) Packard Company engaged in the following transactions during Year 1, its first year of 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 $650 of revenues cash. 4) Paid expenses of $250. 5) Paid a $50 dividend. During Year 2, Packard 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 cash. 4) Incurred expenses of $360. 5) Paid dividends of $100. What is the amount of retained earnings that will be reported on Packard's Year 2 balance sheet? A) $640 B) $800 C) $290 D) $740 106) Packard Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.) 1. 1) Acquired $1,700 cash from the issue of common stock. 2. 2) Borrowed $1,170 from a bank. 3. 3) Earned $1,350 of revenues cash. 4. 4) Paid expenses of $400. 5. 5) Paid a $200 dividend. 6. 1) Issued an additional $1,075 of common stock. 7. 2) Repaid $745 of its debt to the bank. 8. 3) Earned revenues of $1,500 cash. 9. 4) Paid expenses of $660. 10. 5) Paid dividends of $250. A) $4,790 B) $920 C) $4,540 D) $840 35 107) Packard Company engaged in the following transactions during Year 1, its first year of 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 $650 of revenues cash. 4) Paid expenses of $250. 5) Paid a $50 dividend. During Year 2, Packard 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 cash. 4) Paid expenses of $360. 5) Paid dividends of $100. What is the amount of total assets that will be reported on Packard's balance sheet at the end of Year 2? A) $2,115 B) $440 C) $2,215 D) $395 108) Packard Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.) 1. 1) Acquired $1,450 cash from the issue of common stock. 2. 2) Borrowed $920 from a bank. 3. 3) Earned $1,100 of revenues cash. 4. 4) Paid expenses of $350. 5. 5) Paid a $150 dividend. 6. 1) Issued an additional $825 of common stock. 7. 2) Repaid $570 of its debt to the bank. 8. 3) Earned revenues of $1,250 cash. 9. 4) Incurred expenses of $560. 10. 5) Paid dividends of $200. A) $690 B) $600 C) $1,505 D) $1,100 36 109) Packard Company engaged in the following transactions during Year 1, its first year of 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 $650 of revenues cash. 4) Paid expenses of $250. 5) Paid a $50 dividend. During Year 2, Packard 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 cash. 4) Incurred expenses of $360. 5) Paid dividends of $100. What is the net cash inflow from operating activities on Packard's statement of cash flows for Year 2? A) $390 B) $650 C) $350 D) $820 110) Which of the following items would appear in the cash flow from financing activities section of a statement of cash flows? A) Paid cash for dividends B) Received cash for common stock C) Sold land for cash D) Paying cash for dividends as well as receiving cash from common stock 37 111) Santa Fe Company was started on January 1, Year 1, when it acquired $8,700 cash by issuing common stock. During Year 1, the company earned cash revenues of $4,550, paid cash expenses of $3,100, and paid a cash dividend of $650. Based on this information, which of the following statements is true? A) The balance sheet at December 31, Year 1 would show total stockholders’ equity of $13,250. B) The Year 1 statement of cash flows would show net cash inflow from operating activities of $8,700. C) The Year 1 income statement would show net income of $800. D) The Year 1 statement of cash flows would show a net cash flow from financing activities of $8,050. 112) Santa Fe Company was started on January 1, Year 1, when it acquired $9,000 cash by issuing common stock. During Year 1, the company earned cash revenues of $4,500, paid cash expenses of $3,750, and paid a cash dividend of $250. Based on this information, which of the following statements is true? A) The balance sheet at December 31, Year 1 would show total stockholders’ equity of $8,750. B) The Year 1 income statement would show net income of $500. C) The Year 1 statement of cash flows would show net cash inflow from operating activities of $4,500. D) The Year 1 statement of cash flows would show a net cash flow from financing activities of $8,750. 113) Robertson Company paid $1,850 cash for rent expense. As a result of this business event: A) total stockholders’ equity decreased. B) liabilities decreased. C) the net cash flow from operating activities decreased. D) both total stockholders’ equity and net cash flow for operating activities decreased. 38 114) Mayberry Company paid $30,000 cash to purchase land. As a result of this business event: A) total stockholders’ equity was not affected. B) the net cash flow from investing activities decreased. C) total assets were not affected. D) total assets and total stockholders’ equity were not affected, and net cash flow from investing activities decreased. 115) Lexington Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.) 1. 1) Acquired $3,900 cash from issuing common stock. 2. 2) Borrowed $2,650 from a bank. 3. 3) Earned $3,550 of revenues. 4. 4) Incurred $2,490 in expenses. 5. 5) Paid dividends of $490. 6. 1) Acquired an additional $950 cash from the issue of common stock. 7. 2) Repaid $1,615 of its debt to the bank. 8. 3) Earned revenues, $4,950. 9. 4) Incurred expenses of $2,930. 10. 5) Paid dividends of $1,180. A) $230 outflow B) $1,845 inflow C) $950 inflow D) $1,845 outflow 39 116) Lexington Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.) 1. Acquired $6,000 cash from issuing common stock. 2. Borrowed $4,400 from a bank. 3. Earned $6,200 of revenues. 4. Incurred $4,800 in expenses. 5. Paid dividends of $800. 6. Acquired an additional $1,000 cash from the issue of common stock. 7. Repaid $2,600 of its debt to the bank. 8. Earned revenues, $9,000. 9. Incurred expenses of $5,500. 10. Paid dividends of $1,280. A) $2,880 outflow B) $2,880 inflow C) $1,000 outflow D) $1,000 inflow 117) Lexington Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.) 1. 1) Acquired $4,100 cash from issuing common stock. 2. 2) Borrowed $2,750 from a bank. 3. 3) Earned $3,650 of revenues. 4. 4) Incurred $2,510 in expenses. 5. 5) Paid dividends of $510. 6. 1) Acquired an additional $1,050 cash from the issue of common stock. 7. 2) Repaid $1,685 of its debt to the bank. 8. 3) Earned revenues, $5,050. 9. 4) Incurred expenses of $2,970. 10. 5) Paid dividends of $1,300. A) $3,910. B) $7,480. C) $7,540. D) $1,350. 40 118) Lexington Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.) 1. Acquired $6,000 cash from issuing common stock. 2. Borrowed $4,400 from a bank. 3. Earned $6,200 of revenues. 4. Incurred $4,800 in expenses. 5. Paid dividends of $800. 6. Acquired an additional $1,000 cash from the issue of common stock. 7. Repaid $2,600 of its debt to the bank. 8. Earned revenues, $9,000. 9. Incurred expenses of $5,500. 10. Paid dividends of $1,280. A) $11,000. B) $12,000. C) $1,600. D) $7,600. 119) Lexington Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.) 1. 1) Acquired $3,700 cash from issuing common stock. 2. 2) Borrowed $2,550 from a bank. 3. 3) Earned $3,450 of revenues. 4. 4) Incurred $2,470 in expenses. 5. 5) Paid dividends of $470. 6. 1) Acquired an additional $850 cash from the issue of common stock. 7. 2) Repaid $1,545 of its debt to the bank. 8. 3) Earned revenues, $4,850. 9. 4) Incurred expenses of $2,890. 10. 5) Paid dividends of $1,060. A) $510. B) $2,980. C) $980. D) $3,450. 41 120) Lexington Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.) 1. Acquired $6,000 cash from issuing common stock. 2. Borrowed $4,400 from a bank. 3. Earned $6,200 of revenues. 4. Incurred $4,800 in expenses. 5. Paid dividends of $800. 6. Acquired an additional $1,000 cash from the issue of common stock. 7. Repaid $2,600 of its debt to the bank. 8. Earned revenues, $9,000. 9. Incurred expenses of $5,500. 10. Paid dividends of $1,280. A) $6,200. B) $5,400. C) $1,400. D) $600. 121) Lexington Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.) 1. 1) Acquired $3,100 cash from issuing common stock. 2. 2) Borrowed $2,250 from a bank. 3. 3) Earned $3,150 of revenues. 4. 4) Incurred $2,410 in expenses. 5. 5) Paid dividends of $410. 6. 1) Acquired an additional $550 cash from the issue of common stock. 7. 2) Repaid $1,335 of its debt to the bank. 8. 3) Earned revenues, $4,550. 9. 4) Incurred expenses of $2,770. 10. 5) Paid dividends of $700. A) $550. B) ($1,335). C) $290. D) $2,250. 42 122) Lexington Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.) 1. Acquired $6,000 cash from issuing common stock. 2. Borrowed $4,400 from a bank. 3. Earned $6,200 of revenues. 4. Incurred $4,800 in expenses. 5. Paid dividends of $800. 6. Acquired an additional $1,000 cash from the issue of common stock. 7. Repaid $2,600 of its debt to the bank. 8. Earned revenues, $9,000. 9. Incurred expenses of $5,500. 10. Paid dividends of $1,280. A) $1,000. B) $4,400. C) ($2,600). D) $480. 123) As of December 31, Year 1, Mason Company had $500 cash. During Year 2, Mason earned $1,200 of cash revenue and paid $800 of cash expenses. What is the amount of cash that would be reported on the balance sheet at the end of Year 2? A) $900 B) $400 C) $1,700 D) $2,500 124) Expenses are shown on the: A) income statement. B) balance sheet. C) statement of changes in stockholders' equity. D) the income statement and statement of changes in stockholders' equity. 43 125) At the beginning of Year 2, X Company had assets of $300, liabilities of $150, and common stock of $50. During Year 2, the company earned revenue of $500, incurred expenses of $200, and paid dividends of $50. All transactions were cash transactions The amount of net income reported on X Company's December 31, Year 2 income statement would be A) $500. B) $300. C) $250. D) None of these answers are correct. 126) At the beginning of Year 2, X Company had assets of $300, liabilities of $150, and common stock of $50. During Year 2, the company earned revenue of $500, incurred expenses of $200, and paid dividends of $50. All transactions were cash transactions The amount of retained earnings reported on X Company's December 31, Year 2 balance sheet would be A) $100. B) $250. C) $350. D) None of these answers are correct. 127) At the beginning of Year 2, X Company had assets of $300, liabilities of $150, and common stock of $50. During Year 2, the company earned revenue of $500, incurred expenses of $200, and paid dividends of $50. All transactions were cash transactions The amount of total assets reported on X Company's December 31, Year 2 balance sheet would be A) $550. B) $250. C) $300. D) None of these answers are correct. 128) Dividends paid by a company are shown on the: A) income statement. B) statement of changes in stockholders' equity. C) statement of cash flows. D) statement of changes in stockholders' equity and statement of cash flows. 44 129) Liabilities are shown on the: A) income statement. B) balance sheet. C) statement of cash flows. D) statement of changes in stockholders' equity. 130) Which of the following would appear in the investing activities section of the statement of cash flows? A) Cash outflow for the purchase of supplies. B) Cash inflow from interest revenue. C) Cash inflow from issuance of common stock. D) Cash outflow for the purchase of land. 131) During its first year of operation, Cade Company experienced the following events. 1. (1) Issued common stock for $8,400 cash. 2. (2) Earned $6,700 of cash revenue. 3. (3) Paid $3,700 of cash expenses. 4. (4) Paid cash dividends amounting to $1,500. Before closing on December 31, the balance in the retained earning account would be A) zero. B) $1,500. C) $9,900. D) $1,700. 132) During its first year of operation, Cade Company experienced the following events. 1. (1) Issued common stock for $7,800 cash. 2. (2) Earned $6,800 of cash revenue. 3. (3) Paid $3,600 of cash expenses. 4. (4) Paid cash dividends amounting to $1,600. After closing on December 31, the balance in the retained earning account would be A) $9,400. B) zero. C) $1,600. D) $1,000. 45 133) At the beginning of Year 2, Clair Company had a $5,700 balance in its retained earnings account. During January of Year 2 Clair earned $2,300 of revenue and incurred $2,600 of expenses. Based on this information, the balance in retained earnings account on January 31, Year 2 is A) $5,400. B) $8,000. C) $5,700. D) $5,800. 134) Which of following illustrates how earning $4,000 cash for providing services to customers affects the financial statements? Balance Sheet Income Statement Statement Assets = Liabilities + Stockholders' Revenue − Expense = Net of Cash Equity Income Flows A. 4,000 NA 4,000 NA NA NA 4,000 OA B. 4,000 NA 4,000 4,000 NA 4,000 NA C. 4,000 NA 4,000 4,000 NA 4,000 4,000 OA D. 4,000 4,000 NA 4,000 NA 4,000 4,000 OA A) Option A B) Option B C) Option C D) Option D 46 135) Jackson Company paid $500 cash for salary expenses. Which of the following choices accurately reflects how this event affects the company's financial statements? Balance Sheet Income Statement Statement Assets = Liabilities + Stockholders' Revenue − Expense = Net of Cash Equity Income Flows A. NA 500 (500) NA 500 (500) NA B. (500) NA (500) NA 500 (500) (500) OA C. (500) NA (500) NA NA NA (500) OA D. (500) NA (500) NA 500 (500) (500) IA A) Option A B) Option B C) Option C D) Option D 136) Perez Company paid a $300 cash dividend. Which of the following choices accurately reflects how this event affects the company's financial statements? Balance Sheet Income Statement Statement Assets = Liabilities + Stockholders' Revenue − Expense = Net of Cash Equity Income Flows A. NA 300 (300) NA 300 (300) NA B. (300) NA (300) NA 300 (300) (300) FA C. (300) NA (300) NA NA NA (300) FA D. (300) NA (300) NA NA NA (300) OA A) Option A B) Option B C) Option C D) Option D 47 137) Garrison Company acquired $23,000 by issuing common stock. Which of the following choices accurately reflects how this event affects the company's financial statements? Balance Sheet Income Statement Statement Assets = Liabilities + Stockholders' Revenue − Expense = Net of Cash Equity Income Flows A. 23,000 NA 23,000 NA NA NA 23,000 FA B. 23,000 NA 23,000 23,000 NA 23,000 23,000 FA C. 23,000 23,000 NA 23,000 NA NA 23,000 FA D. 23,000 23,000 NA 23,000 NA 23,000 23,000 OA A) Option A B) Option B C) Option C D) Option D 138) Tandem Company borrowed $32,000 of cash from a local bank. Which of the following choices accurately reflects how this event affects the company's financial statements? Balance Sheet Income Statement Statement Assets = Liabilities + Stockholders' Revenue − Expense = Net of Cash Equity Income Flows A. 32,000 32,000 NA 32,000 NA 32,000 32,000 FA B. 32,000 NA 32,000 NA NA NA 32,000 FA C. 32,000 NA 32,000 32,000 NA 32,000 32,000 FA D. 32,000 32,000 NA NA NA NA 32,000 FA A) Option A B) Option B C) Option C D) Option D 48 139) Which of following illustrates how selling land for cash affects the financial statements? Balance Sheet Income Statement Statement Assets = Liabilities + Stockholders' Revenue − Expense = Net of Cash Equity Income Flows A. NA NA NA NA NA NA + IA B. − NA − NA NA NA − IA C. + + NA NA NA NA + FA D. − NA − NA + − + IA A) Option A B) Option B C) Option C D) Option D 140) Which of the following could represent the effects of an asset source transaction on a company's financial statements? Balance Sheet Income Statement Statement Assets = Liabilities + Stockholders' Revenue − Expense = Net of Cash Equity Income Flows A. + NA + NA NA NA + OA B. + + NA NA + + + IA C. + NA + + NA + + OA D. − NA − NA NA NA − FA A) Option A B) Option B C) Option C D) Option D 49 141) Which of the following could represent the effects of an asset exchange transaction on a company's financial statements? Balance Sheet Income Statement Statement Assets = Liabilities + Stockholders' Revenue − Expense = Net of Cash Equity Income Flows A. +/− NA NA NA NA NA − IA B. +/− + NA NA + + NA C. − NA − NA NA NA − OA D. − NA − NA NA NA − FA A) Option A B) Option B C) Option C D) Option D 142) Which of the following represents effects of an asset use transaction on a company's financial statements? Balance Sheet Income Statement Statement Assets = Liabilities + Stockholders' Revenue − Expense = Net of Cash Equity Income Flows A. − NA − NA + − − OA B. +/− NA NA NA NA NA − IA C. + NA + + NA + + OA D. + + NA NA NA NA NA A) B) C) D) Option A Option B Option C Option D 50 143) Reynolds Company experienced an accounting event that affected its financial statements as indicated below: Balance Sheet Income Statement Statement Assets = Liabilities + Stockholders' Revenue − Expense = Net of Cash Equity Income Flows + NA + + NA + +OA Which of the following accounting events could have caused these effects on Reynolds' statements? A) Paid a cash dividend B) Earned cash revenue C) Borrowed money from a bank D) The information provided does not represent a completed event. 144) Chico Company experienced an accounting event that affected its financial statements as indicated below: Balance Sheet Income Statement Statement Assets = Liabilities + Stockholders' Revenue − Expense = Net of Cash Equity Income Flows + NA + NA NA NA FA Which of the following accounting events could have caused these effects on Chico's statements? A) Issued common stock B) Earned cash revenue C) Borrowed money from a bank D) Paid a cash dividend 51 145) Delta Company experienced an accounting event that affected its financial statements as indicated below: Balance Sheet Income Statement Statement Assets = Liabilities + Stockholders' Revenue − Expense = Net of Cash Equity Income Flows − NA − NA + − −OA Which of the following accounting events could have caused these effects on Delta's statements? A) Paid a cash dividend B) Incurred a cash expense C) Borrowed money from a bank D) Earned cash revenue 146) Northern Corporation invested $800 cash in South Company stock. Which of the following describes the effects of this transaction on Northern Corporation's books? Balance Sheet Income Statement Statement Assets = Liabilities + Stockholders' Revenue − Expense = Net of Cash Equity Income Flows A. − + NA NA − − −IA B. + NA + NA NA NA +FA C. NA NA NA + NA + −FA D. +/− NA NA NA NA NA −IA A) Option A B) Option B C) Option C D) Option D 52 147) Northern Corporation invested $800 cash in South Company stock. As a result of this transaction: A) the balance in the Cash account on Northern Corporation's books would decrease, while the balance in the Cash account on South Company's books would increase. B) South Company would have a cash inflow from investing activities. C) Northern Corporation would have a cash outflow from financing activities. D) All of these statements are true. 148) Which of the following would not describe the effects of an asset source transaction on a company's financial statements? Balance Sheet Income Statement Statement Assets = Liabilities + Stockholders' Revenue − Expense = Net of Cash Equity Income Flows A. + + NA NA NA NA +FA B. + NA + NA NA NA +FA C. + NA + + NA + +OA D. NA NA NA NA NA NA −IA A) Option A B) Option B C) Option C D) Option D 149) In a market, creditors are resource providers. ⊚ true ⊚ false 150) In a market, a company that manufactures cars would be referred to as a business. ⊚ true ⊚ false 53 151) The value created by a business may be called assets. ⊚ true ⊚ false 152) The stockholders of a business have a priority claim to its assets in the event of liquidation. ⊚ true ⊚ false 153) 154)