Exam 1: An Introduction to Accounting

Indicate whether each of the following statements about retained earnings is true or false.a)A dividend paid to stockholders decreases retained earnings.b)Issuing common stock for cash increases retained earnings.c)The amount of net income for a period must equal retained earnings.d)The purchase of a truck decreases retained earnings.e)Net income increases retained earnings.

Indicate whether each of the following statements about accounting information is true or false.a)Financial accounting is primarily intended to satisfy the information needs of internal stakeholders.b)Managerial accounting information includes financial and nonfinancial information.c)The accounting information intended to satisfy the needs of a company's employees is managerial accounting information.d)GAAP requires that companies adhere to financial accounting standards.e)Managerial accounting information is usually less detailed than financial accounting information.

Indicate whether each of the following statements about equity is true or false.a)Expenses decrease retained earnings.b)Stockholders' equity and liabilities can be viewed either as sources of assets or claims to assets of the business.c)Retained earnings is increased by loans received from a bank.d)Dividends paid to stockholders decrease common stock.e)Generally, assets are reported at the actual price paid for them when purchased regardless of subsequent changes in market value.

Which of the following is an accurate definition of the term asset?

Yowell Company began operations on January 1, Year 1. During Year 1, the company engaged in the following cash transactions: 1)issued stock for $40,0002)borrowed $25,000 from its bank3)provided consulting services for $39,0004)paid back $15,000 of the bank loan5)paid rent expense for $9,0006)purchased equipment costing $12,0007)paid $3,000 dividends to stockholders8)paid employees' salaries for work completed during the year, $21,000 What is Yowell's net cash flow from operating activities?

In which section of a statement of cash flows would the payment of cash dividends be reported?

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?

Tandem Company borrowed $32,000 of cash from a local bank. Which of the following choices accurately reflects how this event affects the accounting equation?

Which term describes assets earned from operations that have been reinvested into the business?

Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter dollar amounts. If an event increases one account and decreases another account equally within the same element, record I/D. If an event has no impact on the element, record NA.Increase = IDecrease = DNot Affected = NA Nguyen Company borrowed $50,000 cash from Metropolitan Bank.

An asset use transaction does not affect the total amount of claims to a company's assets.

Garrison Company acquired $23,000 by issuing common stock. Which of the following accurately reflects how this event affects the company's accounting equation?

Packard Company engaged in the following transactions during Year 1, its first year of operations: (Assume all transactions are cash transactions.) 1)Acquired $1,050 cash from the issue of common stock.2)Borrowed $520 from a bank.3)Earned $750 of revenues.4)Paid expenses of $270.5)Paid a $70 dividend. During Year 2, Packard engaged in the following transactions: (Assume all transactions are cash transactions.) 1)Issued an additional $425 of common stock.2)Repaid $290 of its debt to the bank.3)Earned revenues of $850.4)Incurred expenses of $400.5)Paid dividends of $120. The amount of total liabilities on Packard's Year 1 balance sheet is

Lexington Company engaged in the following transactions during Year 1, its first year in operation: (Assume all transactions are cash transactions.)Acquired $6,000 cash from issuing common stock.Borrowed $4,400 from a bank.Earned $6,200 of revenues.Incurred $4,800 in expenses.Paid dividends of $800. Lexington Company engaged in the following transactions during Year 2: (Assume all transactions are cash transactions.)Acquired an additional $1,000 cash from the issue of common stock.Repaid $2,600 of its debt to the bank.Earned revenues, $9,000.Incurred expenses of $5,500.Paid dividends of $1,280. What was the amount of liabilities on Lexington's balance sheet at the end of Year 2?

Which term describes a distribution of the Company's assets back to the owners of the business?

On January 1, Year 2, Chavez Company had beginning balances as follows: total assets of $12,500, total liabilities of $4,500, and common stock of $3,000. During Year 2, Chavez paid dividends to its stockholders of $2,000. Given that retained earnings amounted to $6,000 at the end of Year 2, what was Chavez's net income for Year 2?

Indicate whether each of the following statements about financial statements is true or false.a)A cash dividend paid to stockholders is reported in the investing activities section of the statement of cash flows.b)A cash dividend paid to stockholders is reported on the statement of changes in stockholders' equity.c)A cash dividend paid to stockholders is reported on the income statement.d)The balance sheet reports the ending balances of permanent accounts as of the last day of the accounting period.e)Changes in retained earnings during the accounting period are reported on the income statement.

Chow Company earned $3,300 of cash revenue, paid $1,900 for cash expenses, and paid a $650 cash dividend to its owners. Which of the following statements is true?

Which of the following would not describe the effects of an asset source transaction on the accounting equation?

Perez Company paid a $300 cash dividend. Which of the following accurately reflects how this event affects the company's financial statements?