Scheduled maintenance: Wednesday, February 8 from 10PM to 11PM PST
Upgrade to remove ads
Only $35.99/year

QUIZ CH 1

Terms in this set (15)

Which type of accounting information is intended to satisfy the needs of external users of accounting information?

-Cost accounting
-Managerial accounting
-Tax accounting
-Financial accounting
Financial accounting
Explanation
Financial accounting is intended to satisfy the needs of external users of accounting information. Managerial accounting, including cost accounting, is intended for the needs of internal users, or managers, of a business. Tax accounting is specifically intended for tax regulatory agencies.
Li Company paid cash to purchase land. What happened as a result of this business event?

-Total assets decreased.
-Total assets were unaffected.
-Total equity decreased.
-Both assets and total equity decreased.
Total assets were unaffected.
Explanation
Paying cash for land is an asset exchange transaction that increases one asset (land) and decreases another asset (cash). The result is no overall change in total assets.
During Year 2, Millstone Company provided $6,500 of services for cash, paid cash dividends of $1,000 to owners, and paid $4,000 cash for expenses. Liabilities were unchanged. Which of the following statements accurately describes the effect of these events on the elements of the company's financial statements?

-Assets increased by $6,500.
-Assets increased by $1,500.
-Stockholders' equity increased by $2,500.
-Assets increased by $5,500.
Assets increased by $1,500.
Explanation
Cash, an asset, increased by $1,500 (calculated as receipts of $6,500 − payment of $1,000 − payment of $4,000). Stockholders' equity also increased by $1,500 (calculated as revenue of $6,500 − dividends of $1,000 − expenses of $4,000).
Chow Company earned $1,500 of cash revenue, paid $1,200 for cash expenses, and paid a $200 cash dividend to its owners. Which of the following statements is true?

-The net cash inflow from operating activities was $100.
-The net cash outflow for investing activities was $200.
-The net cash inflow from operating activities was $300.
-The net cash outflow for investing activities was $100.
The net cash inflow from operating activities was $300.
Explanation
Cash revenue and cash expenses are operating activities. Paying dividends is a financing activity. $1,500 revenue − $1,200 expense = $300 cash inflow from operating activities.
Glavine Company repaid a bank loan with cash. The cash flow from this event should be reported as:

-an outflow for investing activities on the Statement of Cash Flows
-an outflow for financing activities on the Statement of Cash Flows
-an inflow for investing activities on the Statement of Cash Flows
-an inflow for operating activities on the Statement of Cash Flows
an outflow for financing activities on the Statement of Cash Flows
Explanation
Repaying a bank loan is a cash outflow for financing activities that decreases assets (cash) and decreases liabilities (notes payable).
Packard Company engaged in the following transactions during Year 1, its first year of operations:
1) Acquired $950 cash from the issue of common stock.
2) Borrowed $420 from a bank.
3) Earned $650 of revenues.
4) Paid expenses of $250.
5) Paid a $50 dividend.
During Year 2, Packard engaged in the following 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.
What is Packard Company's net cash flow from financing activities for Year 2?
-$220 outflow
-$320 outflow
-$5 inflow
-$225 inflow
$5 inflow
Explanation
Net cash flow from financing activities =
$325 inflow from stock − $220 outflow for loan repayment − $100 outflow for dividends = $5
Packard Company engaged in the following transactions during Year 1, its first year of operations:
1) Acquired $950 cash from the issue of common stock.
2) Borrowed $420 from a bank.
3) Earned $650 of revenues.
4) Paid expenses of $250.
5) Paid a $50 dividend.
During Year 2, Packard engaged in the following 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.
The amount of total liabilities on Packard's Year 1 balance sheet is
-$200
-$340
-$420
-$670
$420
Explanation
$0 beg. balance + $420 borrowed from the bank = $420 total liabilities
Packard Company engaged in the following transactions during Year 1, its first year of operations:
1) Acquired $950 cash from the issue of common stock.
2) Borrowed $420 from a bank.
3) Earned $650 of revenues.
4) Paid expenses of $250.
5) Paid a $50 dividend.
During Year 2, Packard engaged in the following 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.
What is the amount of total stockholders' equity that will be reported on Packard's balance sheet at the end of Year 1?
-$1,350
-$900
-$250
-$1,300
$1,300
Explanation
Stockholders' equity = Common stock + Retained earnings at end of Year 1:Stockholders' equity = $950 common stock issued + ($0 beg. balance + $650 revenue − $250 expenses − $50 dividend) = $1,300
Packard Company engaged in the following transactions during Year 1, its first year of operations:
1) Acquired $950 cash from the issue of common stock.
2) Borrowed $420 from a bank.
3) Earned $650 of revenues.
4) Paid expenses of $250.
5) Paid a $50 dividend.
During Year 2, Packard engaged in the following 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.
The amount of assets on Packard's Year 2 balance sheet is
-$2,115.
-$440.
-$2,215.
-$395.
$2,215
Explanation
$1,720 beg. balance + $325 - $220 + $750 - $360 - $100 = $2,115
Packard Company engaged in the following transactions during Year 1, its first year of operations:
1) Acquired $950 cash from the issue of common stock.
2) Borrowed $420 from a bank.
3) Earned $650 of revenues.
4) Paid expenses of $250.
5) Paid a $50 dividend.
During Year 2, Packard engaged in the following 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.
What is the net cash inflow from operating activities that will be reported on Packard's statement of cash flows for Year 1?
-$400
-$650
-$350
-$820
$400
Explanation
$650 inflow from revenue − $250 outflow for expenses = $400 inflow
Robertson Company paid $1,850 cash for rent expense. What happened as a result of this business event?

-Total equity decreased.
-Liabilities decreased.
-The net cash flow from operating activities decreased.
-Both total equity and net cash flow for operating activities decreased.
-Both total equity and net cash flow for operating activities decreased.
Explanation
Paying cash for rent expense decreases assets (cash) and decreases equity (expense decreases retained earnings). Liabilities are not affected. It is reported as a cash outflow for operating activities on the statement of cash flows.
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 will be reported on the balance sheet at the end of Year 2?
-$900
-$400
-$1,700
-$2,500
$900
Explanation
$500 beginning balance + $1,200 revenue − $800 expenses = $900
Expenses are reported on which of the following financial statement(s)?
-Income statement
-Balance sheet
-Statement of changes in stockholders' equity
-Income statement and statement of changes in stockholders' equity
Income statement
Explanation
Expenses and revenues are reported on the income statement. Net income is reported on the statement of stockholders' equity, but expenses are not.
Garrison Company acquired $23,000 by issuing common stock. Which of the following accurately reflects how this event affects the company's accounting equation?
Assets=Liabilities+CommonStock+RetainedEarnings
A.23,000 = NA + 23,000 + NA
B.NA = 23,000 + (23,000) + NA
C.NA = NA + 23,000 + (23,000)
D. 23,000 = NA + NA + 23,000
Option A
Assets=Liabilities+CommonStock+RetainedEarnings
A.23,000 = NA + 23,000 + NA
Which of the financial statements are required by the Generally Accepted Accounting Principles (GAAP)?

-Income Statement
-Statement of Changes in Stockholders' Equity
-Statement of Cash Flows
-Balance Sheet
-All of these financial statements are required by GAAP
ALL
Explanation
GAAP requires all four financial statements.
Students also viewed