Question 1

Sing Tao Inc. began operations on June 2, 2014. During June, Sing Tao sold ordinary shares for HK$17,175,000, earned revenue of HK$3,030,000, incurred expenses of HK$1,545,000, and paid dividends of HK$45,000. Retained earnings at June 30, 2014
A) HK$1,440,000.
B) HK$1,485,000.
C) HK$18,615,000.
D) HK$20,206,000.

Accepted Answer

Retained earnings are calculated as: Beginning Retained Earnings + Net Income - Dividends. Since the company began operations in June, the beginning retained earnings are HK$0. Net income is HK$3,030,000 (revenue) - HK$1,545,000 (expenses) = HK$1,485,000. After paying dividends of HK$45,000, the retained earnings are HK$1,485,000 - HK$45,000 = HK$1,440,000.

Question 2

Le Bateau Company began operations on March 1, 2014. During March, Le Bateau sold ordinary shares for €6,750,000 and incurred a net loss of €915,000. Equity at the end of March is
A) (€915,000).
B) €5,835,000.
C) €7,665,000.
D) cannot be determined from the information given.

Accepted Answer

The equity at the end of March is the sum of the proceeds from the sale of ordinary shares and the net loss incurred. Therefore, equity at the end of March is €6,750,000 - €915,000 = €5,835,000.

Question 3

Net income for the month of December is
A) £54,000.
B) £84,000.
C) £112,000.
D) £132,000.

Accepted Answer

The answer of Net income for the month of December...

Question 4

During October, Mica Inc. sold ordinary shares for €600,000, earned revenue of €66,000, incurred expenses of €36,000, and paid dividends of €3,000. Net income for the month is
A) €27,000.
B) €30,000.
C) €627,000.
D) €630,000.

Accepted Answer

Net income is calculated as total revenue minus total expenses. Therefore, €66,000 (revenue) - €36,000 (expenses) = €30,000.

Question 5

At October 1, Smithson Enterprises reported equity of $210,000. During October, capital shares of $30,000 were issued and the company posted a net loss of $18,000. If equity at October 31 totals $210,000, what amount of dividends were paid during the month?
A) $0
B) $12,000
C) $18,000
D) $30,000

Accepted Answer

The equity increased by $30,000 from issuing shares but decreased by $18,000 due to the net loss. To maintain the same equity of $210,000 at the end of October, dividends of $12,000 must have been paid.

Question 6

During May, Brunhilde Company earned revenue of €212,000, incurred expenses of €136,000, of which €96,000 were on account, and paid dividends of €32,000. Net income (loss) for the month is
A) (€40,000).
B) €44,000.
C) €76,000.
D) €116,000.

Accepted Answer

Net income (loss) = Revenue – Expenses
Expenses = €136,000 – €96,000 (paid on account) = €40,000
Net income (loss) = €212,000 – €40,000 = €172,000
Dividends paid = €32,000
Net income after dividends = €172,000 – €32,000 = €140,000
Therefore, the net income for the month of May is €76,000 (€140,000 – €96,000 of expenses paid on account).

Question 7

During June, Sing Tao Inc. sold ordinary shares for HK$17,175,000, earned revenue of HK$3,030,000, incurred expenses of HK$1,545,000, and paid dividends of HK$45,000. Net income for June is
A) HK$1,485,000.
B) HK$1,490,000.
C) HK$18,615,000.
D) HK$20,205,000.

Accepted Answer

Net income is calculated as Revenue minus Expenses. Therefore, HK$3,030,000 (revenue) - HK$1,545,000 (expenses) = HK$1,485,000. Dividends and share sales do not affect net income calculation.

Question 8

Bruni Corporation began operations on January 1, 2014. During January, Bruni earned revenue of €90,000, incurred expenses of €44,000, and paid dividends of €6,000. Retained earnings at the end the month is
A) €40,000.
B) €46,000.
C) €52,000.
D) €90,000.

Accepted Answer

Retained earnings = Beginning retained earnings + Net income - DividendsBeginning retained earnings = €0Net income = Revenue - Expenses = €90,000 - €44,000 = €46,000Dividends = €6,000Retained earnings = €0 + €46,000 - €6,000 = €40,000

Question 9

At December 31, 2014, liabilities total
A) £32,000.
B) £52,000.
C) £74,000.
D) £82,000.

Accepted Answer

The answer of At December 31, 2014, liabilities total
A) £32,000.
B)...

Question 10

During January, Bruni Corporation earned revenue of €90,000, incurred expenses of €44,000, and paid dividends of €6,000. The income statement will report net income for the month of
A) €40,000.
B) €46,000.
C) €52,000.
D) €90,000.

Accepted Answer

Net income is calculated by subtracting expenses from revenue. Therefore, net income for Bruni Corporation in January would be €90,000 - €44,000 = €46,000. Dividends do not affect net income as they are paid out of profits after net income has already been calculated.

Question 11

Nigiri Inc. began operations on October 1, 2014. During October, Nigiri sold ordinary shares for ¥440,000,000, earned net income of ¥64,000,000, and paid dividends of ¥1,978,000. Retained earnings at the end of October is
A) ¥504,000,000.
B) ¥502,022,000.
C) ¥64,000,000.
D) ¥62,022,000.

Accepted Answer

Retained earnings at the end of October is calculated as net income minus dividends. Thus, ¥64,000,000 (net income) - ¥1,978,000 (dividends) = ¥62,022,000.

Question 12

Sing Tao inc. began operations on June 2, 2014. During June, Sing Tao sold ordinary shares for HK$17,175,000, earned revenue of HK$3,030,000, incurred expenses of HK$1,545,000, and paid dividends of HK$45,000. Equity at the end of June is
A) HK$1,440,000.
B) HK$1,485,000.
C) HK$18,615,000.
D) HK$20,205,000.

Accepted Answer

Equity at the end of June can be calculated as:
Equity = (Total amount of equity issued + Revenue - Expenses - Dividends paid)
= (HK$17,175,000 + HK$3,030,000 - HK$1,545,000 - HK$45,000)
= HK$18,615,000. Therefore, the correct answer is C.

Question 13

During 2014, Li & Fung Corporation earned revenue of HK$9,225,000, incurred expenses of expenses of HK$6,945,000, and paid dividends of HK$630,000. Net income for 2014 is
A) HK$1,650,000.
B) HK$2,280,000.
C) HK$8,595,000.
D) HK$9,225,000.

Accepted Answer

Net income is calculated as revenue minus expenses, which is HK$2,280,000 (HK$9,225,000 - HK$6,945,000). Dividends paid out are not included in the calculation of net income.

Question 14

At December 31, 2014, assets total
A) £108,000.
B) £140,000.
C) £162,000.
D) £194,000.

Accepted Answer

The correct total for assets at December 31, 2014, is £162,000.

Question 15

During March, Bindi Company earned revenue of €270,000 on account of which €178,000 had been collected by the end of the month. The company incurred expenses of €156,000. The company paid all of its expenses in cash as well as paying dividends of €46,000. Net income (loss) for the month is
A) (€24,000).
B) €22,000.
C) €68,000.
D) €114,000.

Accepted Answer

The answer of During March, Bindi Company earned revenue of...

Question 16

During July, its first period of operations, Aju Inc. sold ordinary shares for W960,000,000, earned net income of W130,000,000, and paid dividends of W27,000,000. Equity at the end of July is
A) W1,090,000,000.
B) W1,063,000,000.
C) W933,000,000.
D) W103,000,000.

Accepted Answer

Equity at the end of the period can be calculated using the formula:
Equity = Beginning Shares + Net Income - Dividends
Beginning Shares are not provided, so we assume it to be zero. 
Therefore, Equity = 0 + W130,000,000 - W27,000,000 = W103,000,000
Adding the total amount raised from share issuance, we get:
Equity = W960,000,000 + W103,000,000 = W1,063,000,000. 
Hence, the correct answer is B.

Question 17

Mica Inc. began operations in October, 2014. During October, Mica sold ordinary shares for €600,000, earned revenue of €66,000, incurred expenses of €36,000, and paid dividends of €3,000. Equity at the end of the month is
A) €27,000.
B) €30,000.
C) €627,000.
D) €630,000.

Accepted Answer

Equity at the end of the month is calculated as: Initial equity from shares (€600,000) + Revenue (€66,000) - Expenses (€36,000) - Dividends (€3,000) = €627,000.

Question 18

Nigiri Inc. began operations on October 1, 2014. During October, Nigiri sold ordinary shares for ¥440,000,000, earned net income of ¥64,000,000, and paid dividends of ¥1,978,000. Equity at the end of October is
A) ¥504,000,000.
B) ¥502,022,000.
C) ¥64,000,000.
D) ¥62,022,000.

Accepted Answer

Equity at the end of October = Total equity as of September 30, 2014 + Net Income - Dividends
Total equity as of September 30, 2014 = 0 as it is the beginning of operations
Net Income = ¥64,000,000
Dividends = ¥1,978,000
Therefore, equity at the end of October = 0 + ¥64,000,000 - ¥1,978,000 = ¥62,022,000
Hence, the correct answer is option B.

Question 19

During July, its first period of operations, Aju Inc. sold ordinary shares for W960,000,000, earned net income of W130,000,000, and paid dividends of W27,000,000. Retained earnings at the end of July is
A) W1,090,000,000.
B) W1,063,000,000.
C) W933,000,000.
D) W103,000,000.

Accepted Answer

Retained earnings at the end of July is calculated as the net income minus dividends paid. Therefore, W130,000,000 (net income) - W27,000,000 (dividends) = W103,000,000.

Question 20

Mica Inc. began operations in October, 2014. During October, Mica sold ordinary shares for €600,000, earned revenue of €66,000, incurred expenses of €36,000, and paid dividends of €3,000. Retained earnings at the end the month is
A) €27,000.
B) €30,000.
C) €627,000.
D) €630,000.

Accepted Answer

Retained earnings are calculated as: Beginning Retained Earnings + Net Income - Dividends. Since the company began operations in October, the beginning retained earnings are €0. Net Income is Revenue (€66,000) - Expenses (€36,000) = €30,000. Retained earnings = €0 + €30,000 - €3,000 = €27,000.

Quiz 1: Accounting in Action

Sing Tao Inc. began operations on June 2, 2014. During June, Sing Tao sold ordinary shares for HK$17,175,000, earned revenue of HK$3,030,000, incurred expenses of HK$1,545,000, and paid dividends of HK$45,000. Retained earnings at June 30, 2014

Le Bateau Company began operations on March 1, 2014. During March, Le Bateau sold ordinary shares for €6,750,000 and incurred a net loss of €915,000. Equity at the end of March is

Net income for the month of December is

During October, Mica Inc. sold ordinary shares for €600,000, earned revenue of €66,000, incurred expenses of €36,000, and paid dividends of €3,000. Net income for the month is

At October 1, Smithson Enterprises reported equity of $210,000. During October, capital shares of $30,000 were issued and the company posted a net loss of $18,000. If equity at October 31 totals $210,000, what amount of dividends were paid during the month?

During May, Brunhilde Company earned revenue of €212,000, incurred expenses of €136,000, of which €96,000 were on account, and paid dividends of €32,000. Net income (loss) for the month is

During June, Sing Tao Inc. sold ordinary shares for HK$17,175,000, earned revenue of HK$3,030,000, incurred expenses of HK$1,545,000, and paid dividends of HK$45,000. Net income for June is

Bruni Corporation began operations on January 1, 2014. During January, Bruni earned revenue of €90,000, incurred expenses of €44,000, and paid dividends of €6,000. Retained earnings at the end the month is

At December 31, 2014, liabilities total

During January, Bruni Corporation earned revenue of €90,000, incurred expenses of €44,000, and paid dividends of €6,000. The income statement will report net income for the month of

Nigiri Inc. began operations on October 1, 2014. During October, Nigiri sold ordinary shares for ¥440,000,000, earned net income of ¥64,000,000, and paid dividends of ¥1,978,000. Retained earnings at the end of October is

Sing Tao inc. began operations on June 2, 2014. During June, Sing Tao sold ordinary shares for HK$17,175,000, earned revenue of HK$3,030,000, incurred expenses of HK$1,545,000, and paid dividends of HK$45,000. Equity at the end of June is

During 2014, Li & Fung Corporation earned revenue of HK$9,225,000, incurred expenses of expenses of HK$6,945,000, and paid dividends of HK$630,000. Net income for 2014 is

At December 31, 2014, assets total

During March, Bindi Company earned revenue of €270,000 on account of which €178,000 had been collected by the end of the month. The company incurred expenses of €156,000. The company paid all of its expenses in cash as well as paying dividends of €46,000. Net income (loss) for the month is

During July, its first period of operations, Aju Inc. sold ordinary shares for W960,000,000, earned net income of W130,000,000, and paid dividends of W27,000,000. Equity at the end of July is

Mica Inc. began operations in October, 2014. During October, Mica sold ordinary shares for €600,000, earned revenue of €66,000, incurred expenses of €36,000, and paid dividends of €3,000. Equity at the end of the month is

Nigiri Inc. began operations on October 1, 2014. During October, Nigiri sold ordinary shares for ¥440,000,000, earned net income of ¥64,000,000, and paid dividends of ¥1,978,000. Equity at the end of October is

During July, its first period of operations, Aju Inc. sold ordinary shares for W960,000,000, earned net income of W130,000,000, and paid dividends of W27,000,000. Retained earnings at the end of July is

Mica Inc. began operations in October, 2014. During October, Mica sold ordinary shares for €600,000, earned revenue of €66,000, incurred expenses of €36,000, and paid dividends of €3,000. Retained earnings at the end the month is