Exam 2: Financial Statements and the Annual Report

Hindsville Company reported revenues of $165,000 and net income of $20,000 for 2014. Cash generated by operations was $40,000. In addition, Hindsville Company borrowed $24,000 from a bank. During 2014, Hindsville purchased new equipment for $30,000 cash and paid cash dividends of $15,000 to stockholders. Hindsville's cash balance at the beginning of 2014 was $22,000. A Identify the amount of cash flows for financing, investing, and operating activities for 2014 by filling in the amounts below. Financing Cash Flows: Investing Cash Flows: Operating Cash Flows: B Did Hindsville Company's operating activities generate enough cash to cover its investing and financing activities? Explain. C How much did Hindsville Company's cash balance increase or decrease during 2014?

Potential stockholders and lenders are interested in a company's financial statements. Several financial statement items appear below. Answer the questions that follow. A Which two items would stockholders be most interested in that can either be computed from the above data or are included in the items listed above? Explain why the two you selected are important to stockholders. B In which one item would lenders be most interested? Explain why this item is important.

Companies prepare classified financial statements because they are required by international accounting principles.

Hopper, Inc. Use the information from Hopper Inc. to answer the following questions. -Read the information about Hopper, Inc. Which ratio are you able to calculate given only the information provided by Hopper?

Madden Company applies the consistency convention. What does this mean?

Powder Corporation began operations on January 2, 2013, with a total investment of $150,000 by its stockholders. Net income for its first year of business was $90,000. During 2014 and 2015, net income increased to $188,000 and to $217,000, respectively. Powder paid $85,000 in dividends to its shareholders in each of the three years. A In good form, prepare a statement of retained earnings for the year ended December 31, 2014. B How much is total retained earnings on December 31, 2015? C Explain the link between the statement of retained earnings and the balance sheet.

Match the selected items from a classified balance sheet and multiple-step income statement to the section in which they would appear on the classified balance sheet or the income statement. -Income taxes payable

Identify each of the following items as operating O, investing I, or financing F activities on the statement of cash flowsassuming the indirect method. If an item is not on the statement, please mark it as none of these N. If the item is an inflow, please indicate by a +, e.g. O+, I+ or F+. If the item is an outflow, please indicate by brackets, e.g., <O> for operating outflow, <I> for investing outflow, and <F> for financing outflow: a Paid an account payable for inventory purchased in the previous accounting period. b Amortization of debt issuance costs c Paid a dividend to stockholders. d Paid the interest on a note payable to National Street Bank. e Paid the principal amount due on the note payable to National Street Bank. f Transferred cash from a checking account into a money market fund. g Purchased equipment for cash.

From the following list, select the proper section from the statement of cash flows in which it would be classified. -Received cash from selling goods to customers

The following information is given for Sego Company: What are the company's current assets?

The purpose of financial reporting is to provide economic information to external decision makers only.

On the statement of cash flows, the section involves the issuance and repayment of long term liabilities and stock transactions.

Cory Harper, a newly hired accountant, wanted to impress his boss, so he stayed late one night to analyze the office supplies expense account. He determined the cost by month, for the past 12 months, of each of the following: computer paper, copy paper, fax paper, pencils and pens, note pads, postage, corrections supplies, stationery, and miscellaneous items. Why do companies not include information of this nature in published financial statements?

On the statement of cash flows, the section involves the purchase and sale of products and services.

Read the information about Cargo Corporation. Required: Prepare the current assets section of the balance sheet for Cargo Corp. at December 31, 2015. You may omit the heading. How does the concept of liquidity apply?

Read the information about Fasoli, Inc. Required: Prepare the Stockholders' Equity section of the classified balance sheet, including the total stockholders' equity amount.

Match the selected items from a classified balance sheet and multiple-step income statement to the section in which they would appear on the classified balance sheet or the income statement. -Buildings

Which of the following is not an objective of financial reporting?

From the following list, select the proper section from the statement of cash flows in which it would be classified. -Paid a cash dividend on capital stock

have claims to an entity's economic resources.