Question 1

Yowell Company began operations on January 1, Year 1. During Year 1, the company engaged in the following cash transactions:
1) issued stock for $40,000 2) borrowed $25,000 from its bank
3) provided consulting services for $39,000 cash
4) paid back $15,000 of the bank loan
5) paid rent expense for $9,000
6) purchased equipment for $12,000 cash
7) paid $3,000 dividends to stockholders
8) paid employees' salaries of $21,000
What is Yowell's net income for Year 1?
A) $9,000
B) $30,000
C) $18,000
D) $6,000

Accepted Answer

The answer of Yowell Company began operations on January 1,...

Question 2

Retained Earnings at the beginning and ending of the period were $300 and $800, respectively. If revenues were $1,100 and dividends paid to stockholders were $200, what was the amount of expenses for the period?
A) $500
B) $400
C) $900
D) $700

Accepted Answer

The change in retained earnings is calculated as the ending balance minus the beginning balance, which equals $800 - $300 = $500. This change is due to net income minus dividends paid. Given that dividends paid were $200, we can deduce that net income was $500 + $200 = $700. Since net income is revenues minus expenses, and revenues were $1,100, the expenses must have been $1,100 - $700 = $400.

Question 3

Yi Company provided services to a customer for $5,500 cash. As a result of this event:
A) total assets increased and total stockholders' equity decreased.
B) total assets were unchanged and cash flows from operating activities increased.
C) liabilities decreased and net income increased.
D) total assets increased and net income increased.

Accepted Answer

The revenue earned from providing services to a customer for $5,500 would increase total assets and net income. The cash received would also increase cash flows from operating activities but would have no impact on total assets. There would be no change in liabilities. Therefore, option D is the best choice.

Question 4

Yowell Company began operations on January 1, Year 1. During Year 1, the company engaged in the following cash transactions: 
1) issued stock for $48,0002) borrowed $29,000 from its bank3) provided consulting services for $47,000 cash4) paid back $19,000 of the bank loan5) paid rent expense for $11,0006) purchased equipment for $16,000 cash7) paid $3,400 dividends to stockholders8) paid employees' salaries of $25,000
What is Yowell's notes payable balance at the end of Year 1?
A) $29,000
B) $0
C) $19,000
D) $10,000

Accepted Answer

The notes payable balance at the end of Year 1 is $10,000, calculated by subtracting the amount paid back ($19,000) from the original loan amount ($29,000).

Question 5

Yowell Company began operations on January 1, Year 1. During Year 1, the company engaged in the following cash transactions:
1) issued stock for $40,000 2) borrowed $25,000 from its bank
3) provided consulting services for $39,000 cash
4) paid back $15,000 of the bank loan
5) paid rent expense for $9,000
6) purchased equipment for $12,000 cash
7) paid $3,000 dividends to stockholders
8) paid employees' salaries of $21,000
What is Yowell's net cash flow from operating activities?
A) Inflow of $6,000
B) Inflow of $9,000
C) Inflow of $18,000
D) Inflow of $30,000

Accepted Answer

The net cash flow from operating activities is calculated by adding up the cash inflows and subtracting the cash outflows from providing consulting services and paying employees' salaries. 
Cash inflow from consulting services = $39,000 
Cash outflow for employees' salaries = ($21,000) 
Net cash flow from operating activities = $39,000 - $21,000 = $18,000 
Therefore, the correct answer is B.

Question 6

Yowell Company began operations on January 1, Year 1. During Year 1, the company engaged in the following cash transactions
 1) issued stock for $56,0002) borrowed $33,000 from its bank3) provided consulting services for $55,000 cash4) paid back $23,000 of the bank loan5) paid rent expense for $13,0006) purchased equipment for $20,000 cash7) paid $3,800 dividends to stockholders8) paid employees' salaries of $29,000
What is Yowell's net cash flow from operating activities?
A) Inflow of $13,000
B) Inflow of $42,000
C) Inflow of $9,200
D) Inflow of $26,000

Accepted Answer

Net cash flow from operating activities = Cash inflows from operating activities - Cash outflows from operating activitiesCash inflows from operating activities = Consulting services revenue = $55,000Cash outflows from operating activities = Rent expense + Salaries expense + Dividends paid = $13,000 + $29,000 + $3,800 = $45,800Net cash flow from operating activities = $55,000 - $45,800 = $9,200

Question 7

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?
A) $1,750.
B) $750.
C) $1,950.
D) $1,200.

Accepted Answer

The answer of Retained Earnings at the beginning and ending...

Question 8

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 was the amount of total stockholders' equity on Packard's balance sheet at the end of Year 1?
A) $1,350
B) $900
C) $250
D) $1,300

Accepted Answer

Stockholders' equity at the end of Year 1 is calculated as follows: Initial equity from issuing common stock ($950) + Net income (Revenues $650 - Expenses $250) - Dividends paid ($50) = $950 + $400 - $50 = $1,300.

Question 9

Packard Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.)1) Acquired $1,250 cash from the issue of common stock.2) Borrowed $720 from a bank.3) Earned $900 of revenues cash.4) Paid expenses of $310.5) Paid a $110 dividend.During Year 2, Packard engaged in the following transactions. (Assume all transactions are cash transactions.)1) Issued an additional $625 of common stock.2) Repaid $430 of its debt to the bank.3) Earned revenues of $1,050 cash.4) Incurred expenses of $480.5) Paid dividends of $160.What was the amount of total stockholders' equity on Packard's balance sheet at the end of Year 1?
A) $1,840
B) $310
C) $1,730
D) $1,140

Accepted Answer

To find the total stockholders' equity at the end of Year 1, we need to determine: 
- How much cash did Packard acquire from issuing common stock? 
- How much cash did Packard borrow from the bank? 
- How much cash did Packard earn in revenues? 
- How much cash did Packard pay in expenses? 
- How much cash did Packard pay in dividends?

We can use the accounting equation to calculate the total stockholders' equity:

Assets = Liabilities + Stockholders' Equity

We know that all transactions are cash transactions, so we can simplify the equation to:

Cash = Liabilities + Stockholders' Equity

At the beginning of Year 1, there was no cash, liabilities, or stockholders' equity, so we start with:

Cash = $0 
Liabilities = $0 
Stockholders' Equity = $0

1) Packard acquired $1,250 cash from the issue of common stock, so:

Cash = $1,250 
Liabilities = $0 
Stockholders' Equity = $1,250

2) Packard borrowed $720 from a bank, so:

Cash = $1,250 + $720 = $1,970 
Liabilities = $720 
Stockholders' Equity = $1,250

3) Packard earned $900 of revenues cash, so:

Cash = $1,970 + $900 = $2,870 
Liabilities = $720 
Stockholders' Equity = $1,250 + $900 = $2,150

4) Packard paid $310 in expenses, so:

Cash = $2,870 - $310 = $2,560 
Liabilities = $720 
Stockholders' Equity = $2,150

5) Packard paid a $110 dividend, so:

Cash = $2,560 - $110 = $2,450 
Liabilities = $720 
Stockholders' Equity = $2,150 - $110 = $2,040

Therefore, at the end of Year 1, the total stockholders' equity on Packard's balance sheet was $2,040.

The only option that matches this calculation is C: $1,730. The other options do not take into account all of the transactions that occurred in Year 1.

Question 10

Chow Company earned $1,500 of cash revenue, paid $1,200 for cash expenses, and paid a $200 cash dividend to its stockholders. Which of the following statements is true?
A) The net cash inflow from operating activities was $100.
B) The net cash outflow for investing activities was $200.
C) The net cash inflow from operating activities was $300.
D) The net cash outflow for investing activities was $100.

Accepted Answer

The net cash inflow from operating activities is calculated as cash revenue minus cash expenses, which is $1,500 - $1,200 = $300. There is no information given about investing activities, so options B and D can be ruled out. Option A is incorrect because the net cash inflow from operating activities is $300, not $100. Therefore, the correct answer is option C.

Question 11

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 the amount of Packard Company's net cash flow from financing activities for Year 2?
A) Net outflow of $220
B) Net outflow of $320
C) Net inflow of $5
D) Net inflow of $225

Accepted Answer

Net cash flow from financing activities for Year 2 is calculated as: Issuance of common stock ($325) - Repayment of debt ($220) - Dividends paid ($100) = $5.

Question 12

Packard Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.)
1) Acquired $1,850 cash from the issue of common stock.2) Borrowed $1,320 from a bank.3) Earned $1,500 of revenues cash.4) Paid expenses of $430.5) Paid a $230 dividend.During Year 2, Packard engaged in the following transactions. (Assume all transactions are cash transactions.)1) Issued an additional $1,225 of common stock.2) Repaid $850 of its debt to the bank.3) Earned revenues of $1,650 cash.4) Incurred expenses of $720.5) Paid dividends of $280.What is the amount of Packard Company's net cash flow from financing activities for Year 2?
A) Net inflow of $945.
B) Net outflow of $1,130.
C) Net outflow of $850.
D) Net inflow of $95.

Accepted Answer

Financing activities include issuing common stock, repaying bank debt, and paying dividends. In Year 2, Packard issued $1,225 of common stock (inflow), repaid $850 of its debt (outflow), and paid dividends of $280 (outflow). The net cash flow from financing activities is $1,225 - $850 - $280 = $95 (net inflow).

Question 13

During Year 2, Chico Company earned $1,950 of cash revenue, paid $1,600 of cash expenses, and paid a $150 cash dividend to its stockholders. Based on this information alone, which of the following statements is not true?
A) Net income amounted to $350.
B) Total assets increased by $200.
C) Cash inflow from operating activities was $350.
D) Cash outflow from financing activities was $200.

Accepted Answer

The cash outflow from financing activities was $150, not $200, as the only financing activity mentioned is the payment of a $150 cash dividend.

Question 14

Yowell Company began operations on January 1, Year 1. During Year 1, the company engaged in the following cash transactions:
1) issued stock for $40,000 2) borrowed $25,000 from its bank
3) provided consulting services for $39,000 cash
4) paid back $15,000 of the bank loan
5) paid rent expense for $9,000
6) purchased equipment for $12,000 cash
7) paid $3,000 dividends to stockholders
8) paid employees' salaries of $21,000
What is Yowell'snotes payable balance at the end of Year 1?
A) $0
B) $25,000
C) ($15,000)
D) $10,000

Accepted Answer

Yowell Company borrowed $25,000 and paid back $15,000, leaving a balance of $10,000 in notes payable at the end of Year 1.

Question 15

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?
A) $1,110.
B) $0
C) $870.
D) $1,210.

Accepted Answer

Retained Earnings is the accumulation of all earnings (revenues minus expenses) since the company's inception minus any dividends paid. Packard has only been in operation for Year 1, so at the end of Year 1, there are no accumulated earnings to be retained. Therefore, the retained earnings account balance is $0.

Question 16

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?
A) $400
B) $0
C) $350
D) $450

Accepted Answer

Retained earnings represent the cumulative profits of a company that have not been distributed as dividends to shareholders. At the end of Year 1, Packard Company did not have any profits since its expenses ($250) exceeded its revenues ($650). Therefore, the retained earnings account balance at the end of Year 1 is $0.

Question 17

Which of the following items would appear in the financing activities section of the statement of cash flows?
A) Cash outflow for the purchase of land.
B) Cash inflow from sales revenue
C) Cash inflow from issuance of common stock
D) Cash outflow for the payment of accounts payable

Accepted Answer

Cash inflow from issuance of common stock is an activity related to financing.

Question 18

Yowell Company began operations on January 1, Year 1. During Year 1, the company engaged in the following cash transactions: 
1) issued stock for $76,0002) borrowed $43,000 from its bank3) provided consulting services for $75,000 cash4) paid back $33,000 of the bank loan5) paid rent expense for $18,0006) purchased equipment for $30,000 cash7) paid $4,800 dividends to stockholders8) paid employees' salaries of $39,000
What is Yowell's net income for Year 1?
A) $57,000
B) $18,000
C) $13,200
D) $34,200

Accepted Answer

To calculate net income, we need to subtract all expenses from revenue. The revenue for Yowell is $75,000 from providing consulting services. 
Expenses are: 
- Rent expense of $18,000 
- Salaries of $39,000 
- Dividends paid of $4,800 
- Cost of equipment of $30,000 (this is not an expense as it is a purchase of an asset) 
So the total expenses are $91,800. 
To calculate net income, we subtract expenses from revenue: 
$75,000 - $91,800 = -$16,800 
This means that Yowell had a loss, not a net income for Year 1. The correct answer is B, $18,000.

Question 19

During Year 2, Chico Company earned $3,500 of cash revenue, paid $1,450 of cash expenses, and paid a $950 cash dividend to its stockholders. Based on this information alone, which of the following statements is not true?
A) Net income amounted to $2,050.
B) Total assets increased by $1,100.
C) Cash inflow from operating activities was $2,050.
D) Cash outflow from financing activities was $1,100.

Accepted Answer

The cash outflow from financing activities was $950, not $1,100, as it only includes the cash dividend paid to stockholders.

Question 20

Glavine Company repaid a bank loan with cash. How should the cash flow from this event be shown on the horizontal financial statements model?
A) As an operating activity that decreases cash, decreases stockholders' equity, and decreases net income.
B) As a financing activity that decreases cash and decreases liabilities.
C) As a financing activity that decreases cash, decreases stockholders' equity, and decreases net income.
D) As an investing activity that decreases cash and decreases liabilities.

Accepted Answer

Repaying a bank loan is considered a financing activity because it involves the repayment of a liability. The cash flow from this event should be shown as a decrease in cash on the statement of cash flows under the financing activities section. It does not affect the stockholders' equity or net income, and therefore should not be included in the operating activities section. It is also not considered an investing activity because it does not involve the acquisition or disposal of long-term assets.

Quiz 1: An Introduction to Accounting

Retained Earnings at the beginning and ending of the period were $300 and $800, respectively. If revenues were $1,100 and dividends paid to stockholders were $200, what was the amount of expenses for the period?

Yi Company provided services to a customer for $5,500 cash. As a result of this event:

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?

Chow Company earned $1,500 of cash revenue, paid $1,200 for cash expenses, and paid a $200 cash dividend to its stockholders. Which of the following statements is true?

During Year 2, Chico Company earned $1,950 of cash revenue, paid $1,600 of cash expenses, and paid a $150 cash dividend to its stockholders. Based on this information alone, which of the following statements is not true?

Which of the following items would appear in the financing activities section of the statement of cash flows?

During Year 2, Chico Company earned $3,500 of cash revenue, paid $1,450 of cash expenses, and paid a $950 cash dividend to its stockholders. Based on this information alone, which of the following statements is not true?

Glavine Company repaid a bank loan with cash. How should the cash flow from this event be shown on the horizontal financial statements model?