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Exam 1: An Introduction to Accounting

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Question 61

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Use the following information to prepare an income statement for Penelope Company for the period ending December 31, Year 1. All transactions were for cash.Received revenue from services provided to customers, $30,500Paid $19,000 cash for landIssued $16,000 of common stockPaid dividends to stockholders, $3,000Paid operating expenses, $25,400 Required: Prepare the income statement at the end of Year 1.

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Penelope Company
Income Statement
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Question 62

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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

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Question 63

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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?

The value created by a business may be called assets.

Wing Company paid $5,000 cash to purchase land. Which of the following shows the impact of this transaction on Wing's accounting equation? $\begin{array}{ccccc} \text { Assets} &=& \text { Liabilities} & + \text { stockholcers }{ }^{\prime} \text { equity } \\\end{array}$ A. $\begin{array}{llcc}&+/-&&&& \text {n/a }&&&&&& \text {n/a } \\\end{array}$ B. $\begin{array}{llcc}&+&&&&& \text {n/a } &&&&&&&+ \\\end{array}$ C. $\begin{array}{llcc} &-& &&&& \text { n/a } &&&&&&&-\\\end{array}$ D. $\begin{array}{llcc}&+&&&&&&+&&&&&&& \text {n/a } \\\end{array}$

Which of the following could describe the effects of an asset exchange transaction on the accounting equation? $\begin{array}{ccccc} \text { Assets} &=& \text { Liabilities} & + \text { stockholcers }{ }^{\prime} \text { equity } \\\end{array}$ A. $\begin{array}{llcc}&+/-&&&& \text {n/a }&&&&&& \text {n/a } \\\end{array}$ B. $\begin{array}{llcc}&+&&&&& \text {n/a } &&&&&&&+ \\\end{array}$ C. $\begin{array}{llcc} &-& &&&& \text { n/a } &&&&&&&-\\\end{array}$ D. $\begin{array}{llcc}&+&&&&&&+&&&&&&& \text {n/a } \\\end{array}$

Briefly distinguish between financial accounting and managerial accounting.

Indicate whether each of the following statements about stockholders' equity is true or false.Operating expenses reported on the income statement decrease retained earnings.Stockholders' equity and liabilities can be viewed either as sources of assets or claims to assets of the business.Retained earnings is increased by loans received from a bank.Dividends paid to stockholders decrease common stock.Stockholders' equity is the residual interest in the company resulting from the difference between assets and liabilities.

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?

What are some of the similarities and differences between not-for-profit organizations and for-profit businesses from an accounting standpoint?

Retained Earnings at the beginning and ending of the period were $650 and $1,400, respectively. If revenues were $2,500 and dividends paid to stockholders were $550, what was the amount of expenses for the period?

Li Company paid cash to purchase land. As a result of this accounting event, which of the following statements is true?

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 transactionsThe amount of retained earnings reported on X Company's December 31, Year 2 balance sheet would be

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

Packard Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.) 1) Acquired $1,900 cash from the issue of common stock.2) Borrowed $1,370 from a bank.3) Earned $1,550 of revenues cash.4) Paid expenses of $440.5) Paid a $240 dividend.During Year 2, Packard engaged in the following transactions. (Assume all transactions are cash transactions.) 1) Issued an additional $1,275 of common stock.2) Repaid $885 of its debt to the bank.3) Earned revenues of $1,700 cash.4) Incurred expenses of $740.5) Paid dividends of $290.What is Packard's retained earnings account balance at the end of Year 1 before the process of closing the accounts has been undertaken?

Indicate how this event affects the accounting equation. Use the following letters to record your answer in the box shown below each element. If an event increases one account and decreases another account within the same element, record I/D. If an event has no impact on the element, record NA. You do not need to enter amounts.Increase = I Decrease = D Not Affected = NABell Company provided consulting services for $20,000 cash. $\quad$ $\quad$ $\quad$ $\quad$$\text { Balance Sheet }$ $\text { Assets }=\text { Liabilities }+\quad \text { Stockholders' Ecuity }$

The year-end financial statements of Calloway Company contained the following elements and corresponding amounts: Assets = $30,000; Liabilities = ?; Common Stock = $6,000; Revenue = $13,000; Dividends = $1,250; Beginning Retained Earnings = $4,250; Ending Retained Earnings = $8,000. The amount of liabilities reported on the end-of-period balance sheet was:

Who are the three distinct types of participants in a market? Briefly describe the role of each group of participants.

The historical cost concept requires that most assets be recorded at the amount paid for them, regardless of increases in market value.

Borrowing money from the bank is an example of an asset source transaction.