Exam 1: An Introduction to Accounting

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 amounts. $\text { Increase }=\mathrm{I} \quad \text { Decrease }=\mathrm{D} \quad \text { No Effect }=\mathrm{N}$ Rodriguez Co. borrowed $20,000 cash from Century Bank. Assets Liabilities Equity Revenues Expenses Net Income Cash

Tandem Company acquired $23,000 by issuing common stock. Which of the following choices accurately reflects how this event affects the company's financial statements?

At the beginning of 2012, Gratiot Company's accounting records had the general ledger accounts and balances shown in the table below. During 2012, the following transactions occurred: 1. received $95,000 cash for providing services to customers 2. paid salaries expense, $50,000 3. purchased land for $12,000 cash 4. paid $4,000 on note payable 5. paid operating expenses, $22,000 6. paid cash dividend, $2,500 Required: a) Record the transactions in the appropriate general ledger accounts. Record the amounts of revenue, expense, and dividends in the retained earnings column. Provide appropriate titles for these accounts in the last column of the table. b) What is the amount of total assets as of December 31, 2012? c) What is the amount of total stockholders' equity as of December 31, 2012?

Vantage Corporation invested $800 cash in Tandem Company stock. Which of the following could describe the effects of an asset source transaction on a company's financial statements? Assets = Liab. + Equity Rev. - Exp. = Net Inc. Cash Flow

Both liabilities and equity are sources of a business's assets.

During 2013, Saranac Company earned $12,000 of cash revenue and paid $8,200 of cash expenses and $600 in dividends to the company's owners. Enter each of these three events into the horizontal financial statements model, below. Indicate dollar amounts of increases and decreases. For cash flows, show whether they are operating activities (OA), investing activities (IA), or financing activities (FA).

Stinespring Company was founded in 2012. It acquired $35,000 cash by issuing stock to investors and an additional $20,000 cash by borrowing from creditors. During 2012 it received $15,000 cash revenues and paid $22,000 in cash expenses. The company then went out of business. Required: a) Explain the term, "business liquidation." b) What amount of cash should Stinespring Company have had on hand immediately before going out of business? c) What amount of cash will Stinespring's creditors receive? d) What amount of cash will Stinespring's stockholders receive?

Name and briefly describe each of the four financial statements.

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?

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) The amount of net income for a period increases retained earnings.

The value created by a business may be called income or earnings.

A business's creditors have a priority claim to its assets in the event of liquidation.

Treadwell 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?

Flagstone Company was founded on January 1, 2013. During 2013, the company experienced the following events: 1. earned cash revenue of $25,000 2. paid cash expenses of $20,500 3. issued common stock for $15,000 cash 4. paid cash dividend of $1,000 to owners. Required: a) Write an accounting equation and record effects of each accounting event under appropriate general ledger account headings, showing dollar amounts of increases and decreases and totals at the end of the year. b) Prepare the 2013 income statement and balance sheet for Flagstone Company.

Indicate whether each of the following statements about equity is true or false. _______ a) Operating expenses reported on the income statement increase retained earnings. _______ b) Common Stock is a part of contributed or paid-in capital for a corporation. _______ c) Retained earnings is increased by loans received from a bank. _______ d) Dividends paid to stockholders decrease retained earnings. _______ e) Owners' equity is the residual interest in the company resulting from the difference between assets and liabilities.

Rosemont Company began operations on January 1, 2013, and on that date issued stock for $60,000 cash. In addition, Rosemont borrowed $50,000 cash from the local bank. The company provided services to its customers during 2013 and received $35,000. It purchased land for $70,000. During the year, it paid $10,000 cash for salaries and $9,000 cash for supplies that were used up in its operations. Stockholders were paid cash dividends of $8,000 during the year. Required: a) List the transactions from the information above (for example, issued common stock for $60,000) and indicate in which section of the statement of cash flows each transaction would be reported. b) What would the amount be for net cash flows from operating activities? c) What would be the amount of the total assets for the Rosemont Company at the end of 2013? d) What would the end-of-year balance be for the retained earnings account? e) What would the end-of-year balance be for the cash account?

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 net cash flow from financing activities on La Paz's 2013 statement of cash flows was

During 2013, Wynona Company issued common stock to stockholders for $12,000, purchased land for $3,200 cash, and paid cash dividends of $1,000 to the company's owners. Enter each of these three events into the horizontal financial statements model, below. Indicate dollar amounts of increases and decreases. For cash flows, show whether they are operating activities (OA), investing activities (IA), or financing activities (FA).

If the total equity claimed by owners of Ping Construction is $50,000 and liabilities are $25,000, what are total assets?

The following events occurred for Jarvis Company during 2012, its first year in operation: 1. issued stock to investors for $35,000 cash 2. borrowed $15,000 cash from the local bank 3. provided services to its customers and received $22,000 cash 4. paid expenses of $18,000 5. paid $12,000 cash for land 6. paid dividend of $2,000 to stockholders 7. repaid $2,000 of the loan listed in item 2 Required: Show the effects of the above transactions on the accounting equation, below. Include dollar amounts of increases and decreases. The first is done for you. After entering all the events, calculate the total amounts of assets, liabilities, and equity at the end of the year.