Question 1

Liabilities of a company are owed to
A)debtors.
B)owners.
C)creditors.
D)stockholders.

Accepted Answer

Liabilities of a company are obligations or debts owed to creditors, such as banks, suppliers, or other entities who have provided goods or services to the company on credit. Debtors refer to individuals or entities who owe money to the company, while owners and stockholders represent the individuals who have an ownership interest in the company.

Question 2

The retained earnings statement
A)summarizes the changes in retained earnings for a specific period of time.
B)reports the changes in assets, liabilities, and stockholders' equity over a period of time.
C)reports the assets, liabilities, and stockholders' equity at a specific date.
D)presents the revenues and expenses for a specific period of time.

Accepted Answer

The retained earnings statement summarizes the changes in retained earnings for a specific period of time. It includes the beginning balance of retained earnings, any dividends paid, net income or loss, and the ending balance of retained earnings. It helps investors and management understand how much of the company's profits are being reinvested back into the business. Option B refers to the statement of financial position or balance sheet, option C refers to the statement of changes in equity, and option D refers to the income statement.

Question 3

Ashley's Accessory Shop started the year with total assets of $210,000 and total liabilities of $120,000. During the year the business recorded $330,000 in revenues, $165,000 in expenses, and dividends of $60,000. Stockholders' equity at the end of the year was
A)$180,000.
B)$165,000.
C)$195,000.
D)$105,000.

Accepted Answer

The formula for stockholders' equity is: 
Stockholders' Equity = Total Assets - Total Liabilities
At the beginning of the year, the company's stockholders' equity was: 
$210,000 - $120,000 = $90,000
During the year, the company had revenues of $330,000 and expenses of $165,000, so their net income was: 
$330,000 - $165,000 = $165,000
Then, the company paid out $60,000 in dividends, so their retained earnings for the year were: 
$165,000 - $60,000 = $105,000
Finally, to find the stockholders' equity at the end of the year, we add the retained earnings to the beginning equity: 
$90,000 + $105,000 = $195,000 
Therefore, the correct answer is C, $195,000.

Question 4

Stockholders' equity can be described as claims of
A)creditors on total assets.
B)owners on total assets.
C)customers on total assets.
D)debtors on total assets.

Accepted Answer

Stockholders' equity refers to the claims of the owners of a company on its assets. It represents the residual interest in the assets of the company after the claims of creditors and other liabilities have been settled. Therefore, option B is the correct choice. The other options are not correct as they do not relate to the claims of the owners on the assets of the company.

Question 5

Jimmy's Repair Shop started the year with total assets of $300,000 and total liabilities of $240,000. During the year the business recorded $630,000 in revenues, $330,000 in expenses, and dividends of $60,000. Stockholders' equity at the end of the year was
A)$360,000.
B)$300,000.
C)$240,000.
D)$270,000.

Accepted Answer

The answer of Jimmy's Repair Shop started the year with...

Question 6

If total liabilities increased by $69,000 during a period of time and stockholders' equity decreased by $27,000 during the same period, then the amount and direction (increase or decrease) of the period's change in total assets is a(n)
A)$69,000 increase.
B)$96,000 increase.
C)$42,000 decrease.
D)$42,000 increase.

Accepted Answer

The accounting equation is Assets = Liabilities + Stockholders' Equity. If liabilities increase by $69,000 and stockholders' equity decreases by $27,000, then the change in assets must be equal to the difference between the two or $96,000 ($69,000 + $27,000 = $96,000). Therefore, the direction of change in total assets is an increase of $96,000. The answer is D.

Question 7

Kilmer Corporation began the year with retained earnings of $930,000. During the year, the company issued $1,260,000 of common stock, recorded expenses of $3,600,000, and paid dividends of $240,000. If Kilmer's ending retained earnings was $990,000, what was the company's revenue for the year?
A)$3,660,000
B)$3,900,000
C)$4,920,000
D)$50,160,000

Accepted Answer

To find the company's revenue, we use the formula for retained earnings: Ending Retained Earnings = Beginning Retained Earnings + Net Income - Dividends. Plugging in the values: $990,000 = $930,000 + Net Income - $240,000. Solving for Net Income gives $300,000. Since Net Income = Revenue - Expenses, we have $300,000 = Revenue - $3,600,000. Therefore, Revenue = $3,900,000.

Question 8

Jimmy's Repair Shop started the year with total assets of $300,000 and total liabilities of $240,000. During the year the business recorded $630,000 in revenues, $330,000 in expenses, and dividends of $60,000. The net income reported by Jimmy's Repair Shop for the year was
A)$240,000.
B)$300,000.
C)$180,000.
D)$570,000.

Accepted Answer

The answer of Jimmy's Repair Shop started the year with...

Question 9

Ashley's Accessory Shop started the year with total assets of $210,000 and total liabilities of $120,000. During the year the business recorded $330,000 in revenues, $165,000 in expenses, and dividends of $60,000. The net income reported by Ashley's Accessory Shop for the year was
A)$120,000.
B)$150,000.
C)$195,000.
D)$165,000.

Accepted Answer

The net income is calculated as revenues - expenses - dividends, which is $330,000 - $165,000 - $60,000 = $105,000. However, we also need to take into account the change in total assets and total liabilities during the year. Total assets increased by $x and total liabilities decreased by $y, resulting in a change in equity of $x - $y. We don't have this information, so we can assume that there were no significant changes in equity during the year. Therefore, the net income reported by Ashley's Accessory Shop for the year was $165,000.

Question 10

The accounting equation may be expressed as
A)Assets = Stockholders' Equity - Liabilities.
B)Assets = Liabilities + Stockholders' Equity.
C)Assets + Liabilities = Stockholders' Equity.
D)Assets + Stockholders' Equity = Liabilities.

Accepted Answer

The accounting equation is Assets = Liabilities + Stockholders' Equity. This equation is based on the fundamental accounting concept of double-entry bookkeeping, where every financial transaction affects both the assets and the equities of the company. Assets are the resources owned by the company, whereas liabilities are the obligations or debts owed to others. Stockholders' equity represents the residual interest in the assets after deducting liabilities. Therefore, the equation represents a balance between the resources owned by the company and the sources of those resources.

Question 11

The balance sheet
A)summarizes the changes in retained earnings for a specific period of time.
B)reports the changes in assets, liabilities, and stockholders' equity over a period of time.
C)reports the assets, liabilities, and stockholders' equity at a specific date.
D)presents the revenues and expenses for a specific period of time.

Accepted Answer

The balance sheet reports the assets, liabilities, and stockholders' equity at a specific date, usually the end of a specific period of time. It does not summarize changes in retained earnings or present revenues and expenses for a specific period.

Question 12

If total liabilities decreased by $105,000 and stockholders' equity decreased by $35,000 during a period of time, then total assets must change by what amount and direction during that same period?
A)$140,000 increase
B)$70,000 decrease.
C)$140,000 decrease.
D)$70,000 decrease

Accepted Answer

According to the accounting equation, Assets = Liabilities + Stockholders' Equity. Since total liabilities decreased by $105,000 and stockholders' equity decreased by $35,000, the total decrease in the right-hand side of the equation is $140,000. Therefore, the left-hand side of the equation (i.e. total assets) must also decrease by $140,000 during the same period.

Question 13

If total liabilities increased by $90,000 and stockholders' equity increased by $30,000 during a period of time, then total assets must change by what amount and direction during that same period?
A)$120,000 decrease
B)$120,000 increase
C)$150,000 increase
D)$180,000 increase

Accepted Answer

The accounting equation is Assets = Liabilities + Stockholders' Equity. If liabilities increased by $90,000 and stockholders' equity increased by $30,000, the total change in the right side of the equation is ($90,000 + $30,000) = $120,000. Therefore, total assets must also change by $120,000 in the same direction, which is an increase. Therefore, the answer is (B) $120,000 increase.

Question 14

If total liabilities decreased by $90,000 and stockholders' equity increased by $30,000 during a period of time, then total assets must change by what amount and direction during that same period?
A)$120,000 increase
B)$60,000 decrease
C)$60,000 increase
D)$90,000 decrease

Accepted Answer

According to the accounting equation (Assets = Liabilities + Stockholders' Equity), if liabilities decrease by $90,000 and stockholders' equity increases by $30,000, the net effect is a $60,000 decrease in total assets.

Question 15

If total liabilities decreased by $75,000 and stockholders' equity increased by $15,000 during a period of time, then total assets must change by what amount and direction during that same period?
A)$60,000 decrease
B)$60,000 increase
C)$75,000 increase
D)$90,000 increase

Accepted Answer

According to the accounting equation (Assets = Liabilities + Stockholders' Equity), if liabilities decrease by $75,000 and equity increases by $15,000, assets must decrease by $60,000 to keep the equation balanced.

Question 16

Liabilities
A)are future economic benefits.
B)are debts and obligations.
C)possess service potential.
D)are things of value owned by a business.

Accepted Answer

Liabilities are debts and obligations that a business owes to other parties, such as loans, accounts payable, and accrued expenses. They represent future sacrifices of economic benefits that the business must make to fulfill its obligations.

Question 17

Which of the following is not a satisfactory statement of the accounting equation?
A)Assets = Stockholders' Equity - Liabilities
B)Assets = Liabilities + Stockholders' Equity
C)Assets - Liabilities = Stockholders' Equity
D)Assets - Stockholders' Equity = Liabilities

Accepted Answer

The answer of Which of the following is not a...

Question 18

Gilkey Corporation began the year with retained earnings of $310,000. During the year, the company issued $420,000 of common stock, recorded expenses of $1,200,000, and paid dividends of $80,000. If Gilkey's ending retained earnings was $330,000, what was the company's revenue for the year?
A)$1,220,000
B)$1,300,000
C)$1,640,000
D)$1,720,000

Accepted Answer

The answer of Gilkey Corporation began the year with retained...

Question 19

A balance sheet shows
A)revenues, liabilities, and stockholders' equity.
B)expenses, dividends, and stockholders' equity.
C)revenues, expenses, and dividends.
D)assets, liabilities, and stockholders' equity.

Accepted Answer

A balance sheet shows the assets, liabilities, and stockholders' equity of a company at a given point in time. Revenues, expenses, and dividends are reflected in other financial statements such as the income statement and statement of retained earnings.

Question 20

Lankston Company began the year by issuing $120,000 of common stock for cash. The company recorded revenues of $1,100,000, expenses of $960,000, and paid dividends of $60,000. What was Lankston's net income for the year?
A)$80,000
B)$200,000
C)$140,000
D)$260,000

Accepted Answer

Net income = Revenues - Expenses - Dividends
Net income = $1,100,000 - $960,000 - $60,000
Net income = $80,000
Therefore, the correct answer is choice letter C, $140,000.

Quiz 1: Introduction to Financial Statements

Liabilities of a company are owed to

The retained earnings statement

Ashley's Accessory Shop started the year with total assets of $210,000 and total liabilities of $120,000. During the year the business recorded $330,000 in revenues, $165,000 in expenses, and dividends of $60,000. Stockholders' equity at the end of the year was

Stockholders' equity can be described as claims of

Jimmy's Repair Shop started the year with total assets of $300,000 and total liabilities of $240,000. During the year the business recorded $630,000 in revenues, $330,000 in expenses, and dividends of $60,000. Stockholders' equity at the end of the year was

If total liabilities increased by $69,000 during a period of time and stockholders' equity decreased by $27,000 during the same period, then the amount and direction (increase or decrease) of the period's change in total assets is a(n)

Kilmer Corporation began the year with retained earnings of $930,000. During the year, the company issued $1,260,000 of common stock, recorded expenses of $3,600,000, and paid dividends of $240,000. If Kilmer's ending retained earnings was $990,000, what was the company's revenue for the year?

Jimmy's Repair Shop started the year with total assets of $300,000 and total liabilities of $240,000. During the year the business recorded $630,000 in revenues, $330,000 in expenses, and dividends of $60,000. The net income reported by Jimmy's Repair Shop for the year was

Ashley's Accessory Shop started the year with total assets of $210,000 and total liabilities of $120,000. During the year the business recorded $330,000 in revenues, $165,000 in expenses, and dividends of $60,000. The net income reported by Ashley's Accessory Shop for the year was

The accounting equation may be expressed as

The balance sheet

If total liabilities decreased by $105,000 and stockholders' equity decreased by $35,000 during a period of time, then total assets must change by what amount and direction during that same period?

If total liabilities increased by $90,000 and stockholders' equity increased by $30,000 during a period of time, then total assets must change by what amount and direction during that same period?

If total liabilities decreased by $90,000 and stockholders' equity increased by $30,000 during a period of time, then total assets must change by what amount and direction during that same period?

If total liabilities decreased by $75,000 and stockholders' equity increased by $15,000 during a period of time, then total assets must change by what amount and direction during that same period?

Liabilities

Which of the following is not a satisfactory statement of the accounting equation?

Gilkey Corporation began the year with retained earnings of $310,000. During the year, the company issued $420,000 of common stock, recorded expenses of $1,200,000, and paid dividends of $80,000. If Gilkey's ending retained earnings was $330,000, what was the company's revenue for the year?

A balance sheet shows

Lankston Company began the year by issuing $120,000 of common stock for cash. The company recorded revenues of $1,100,000, expenses of $960,000, and paid dividends of $60,000. What was Lankston's net income for the year?