Quiz 1: Introduction to Accounting and Business
Business
Q 1Q 1
Continuing Company Analysis-Amazon and Best Buy: Ratio of liabilities to stockholders' equity
Amazon.com, Inc. is one of the largest Internet retailers in the world. We will use Amazon as a continuing company exercise to reinforce the various tools and techniques for analyzing financial statements. We will begin with the ratio of liabilities to stockholders' equity.
Ratios can be used to compare companies in the same industry. For Amazon, there are a number of competitors that sell media, electronic, and other merchandise. Best Buy, Inc. is one such company. The following total liabilities and stockholders' equity information (in millions) is provided for Amazon and Best Buy for the end of a recent year:
A. Compute the ratio of liabilities to stockholders' equity for each company. (Round to two decimal places.)
B. What conclusions regarding the margin of protection to creditors can you draw for these two companies?
Free
Essay
Liability to Stockholder's equity Ratio
This ratio depicts the link between the liabilities of a corporation and the equity of the owners of the corporation. This ratio is used by bankers, stockholders and creditors for analyzing the performance of the corporation financially. This ratio is calculated by using the below mentioned equation.
A.Total liabilities in case of A Inc. are $43,764 and the stockholder's equity is $10,741. The ratio for A Inc. can be calculated as shown below.
The ratio of liabilities to stockholder's equity in case of A Inc. is
.
Total liabilities in case of BB Inc. are $10,024 and the stockholder's equity is $3,989. The ratio for BB Inc. can be calculated as shown below.
The ratio of liabilities to stockholder's equity in case of BB Inc. is
.
B. Looking to the ratios of A Inc, it can be concluded that the ratio of liabilities to stockholders' is very high of 4.07 compared to normal ratio of 2. It indicates that the company is having a large amount of outsiders' funds than its own.
Looking to the ratios of A Inc, it can be concluded that the ratio of liabilities to stockholders' is not very high compared to normal ratio of 2. It is 2.51 which indicate that the company is having sufficient amount of stockholders' funds.
Q 2Q 2
Cost principle
On June 25, Ritts Roofing extended an offer of $250,000 for land that had been priced for sale at $300,000. On July 9, Ritts accepted the seller's counteroffer of $275,000. On October 1, the land was assessed at a value of $280,000 for property tax purposes. On December 22, Ritts was offered $305,000 for the land by a national retail chain. At what value should the land be recorded in Ritts Roofing's records?
Free
Essay
Cost Principle
This principle is the main pillar on which accounting is based. This principle requires the recognition of a transaction in the books at the cost that was incurred during the initial transaction. As per this principle this recorded cost will remain the same unless any other transaction takes place.
In the given case of RR, the initial cost that was incurred or at which the land was purchased on July 9 is $275,000. However, the same land had an assessed value of $280,000 for tax purposes. RR also received an offer on 22 nd December of $305,000 from one national retail chain for the same land. But these events cannot be considered as a transaction.
According to the Cost Principle concept, the historical cost will only be changed in case where another transaction takes place and in the present case there is no transaction that took place to change the value of the land.The land will be recorded in the books of RR at historical cost of
.
Q 3Q 3
Peyton Smith enjoys listening to all types of music and owns countless CDs. Over the years, Peyton has gained a local reputation for knowledge of music from classical to rap and the ability to put together sets of recordings that appeal to all ages.
During the last several months, Peyton served as a guest disc jockey on a local radio station. In addition, Peyton has entertained at several friends' parties as the host deejay.
On June 1, 2018, Peyton established a corporation known as PS Music. Using an extensive collection of music MP3 files, Peyton will serve as a disc jockey on a fee basis for weddings, college parties, and other events. During June, Peyton entered into the following transactions:
Instructions
1. Indicate the effect of each transaction and the balances after each transaction, using the following tabular headings:
2. Prepare an income statement for PS Music for the month ended June 30, 2018.
3. Prepare a retained earnings statement for PS Music for the month ended June 30, 2018.
4. Prepare a balance sheet for PS Music as of June 30, 2018.
Free
Essay
Accounts payables defined as the amounts owed to outsiders or creditors due to credit purchase. Accounts Payable is shown under the broad head liability (L). Whereas, Accounts receivable defined as the amounts that debtors of the company owes that is generally represented as amount of credit sales. Accounts receivables are shown under the head assets (A).
Amount of loan approved from the bank in respect of promissory notes is known as Notes payable. It is shown under head liability (L) in balance sheet (B/S).
Generation of income by selling goods or services in the market is known as sales revenue. It is shown in income statement (I/S) as a Revenue (R).
Amount paid to government authorities is represented as tax on net income is known as income tax expense. It is shown under Income statement (I/S) as an Expense (E).
Retained earnings (R/E) refer to the amount of net income which is retained by the company for future investments or business expansion. It is shown under the head stockholder equity (SE)
1.Accounting equation refers to an arithmetic expression used to illustrate the relationship between the assets, liabilities and shareholder's equity of the company.
Accounting equation effects of adjusting entries are shown as below:
2.Income statement also known as statement of operation refers to the financial statement which depicts the specified summary of how the corporation earns its revenues and incur the expenses to generate the revenue.
Income statement of PS for the year ended June 30 is given as below:
3.Retained earnings (R/E) refer to the amount of net income which is retained by the company for future investments or in order to stronger the financial position of the company.
Statement of retained earnings of PS Corporation for the year ended June 30:
4.Balance sheet refers to the type of statement which represents the financial position of the company for a given period of time. Balance sheet of the company is divided into three segments that are Liabilities, Assets and shareholder's Equity.
Free
Essay
Q 5Q 5
Types of businesses
The following is a list of well-known companies:
1. Alcoa Inc.
2. Boeing
3. Caterpillar
4. Citigroup Inc.
5. CVS
6. Dow Chemical Company
7. eBay Inc.
8. FedEx
9. Ford Motor Company
10. Gap Inc.
11. H R Block
12. Hilton Hospitality, Inc.
13. Procter Gamble
14. SunTrust
15. Walmart Stores, Inc.
A. Indicate whether each of these companies is primarily a service, merchandise, or manufacturing business. If you are unfamiliar with the company, use the Internet to locate the company's home page or use the finance Web site of Yahoo (finance.yahoo.com).
B. For which of the preceding companies is the accounting equation relevant?
Free
Essay
Q 6Q 6
Transactions
On September 1 of the current year, Joy Tucker established a business to manage rental property. She completed the following transactions during September:
A. Opened a business bank account with a deposit of $36,000 in exchange for common stock.
B. Purchased office supplies on account, $1,800.
C. Received cash from fees earned for managing rental property, $6,750.
D. Paid rent on office and equipment for the month, $5,000.
E. Paid creditors on account, $1,375.
F. Billed customers for fees earned for managing rental property, $9,500.
G. Paid automobile expenses for month, $840, and miscellaneous expenses, $960.
H. Paid office salaries, $3,600.
I. Determined that the cost of supplies on hand was $350; therefore, the cost of supplies used was $1,450.
J. Paid dividends, $3,000.
Instructions
1. Indicate the effect of each transaction and the balances after each transaction, using the following tabular headings:
2. Briefly explain why issuing common stock and revenues increased stockholders' equity, while dividends and expenses decreased stockholders' equity.
3. Determine the net income for September.
4. How much did September's transactions increase or decrease retained earnings?
Free
Essay
Q 7Q 7
Transactions
Amy Austin established an insurance agency on March 1 of the current year and completed the following transactions during March:
A. Opened a business bank account with a deposit of $50,000 in exchange for common stock.
B. Purchased supplies on account, $4,000.
C. Paid creditors on account, $2,300.
D. Received cash from fees earned on insurance commissions, $13,800.
E. Paid rent on office and equipment for the month, $5,000.
F. Paid automobile expenses for month, $1,150, and miscellaneous expenses, $300.
G. Paid office salaries, $2,500.
H. Determined that the cost of supplies on hand was $2,700; therefore, the cost of supplies used was $1,300.
I. Billed insurance companies for sales commissions earned, $12,500.
J. Paid dividends, $3,900.
Instructions
1. Indicate the effect of each transaction and the balances after each transaction, using the following tabular headings:
2. Briefly explain why issuing common stock and revenues increased stockholders' equity, while dividends and expenses decreased stockholders' equity.
3. Determine the net income for March.
4. How much did March's transactions increase or decrease retained earnings?
Free
Essay
Q 8Q 8
Ethics in Action
Marco Brolo is one of three partners who own and operate Silkroad Partners, a global import- export business. Marco is the partner in charge of recording partnership transactions in the accounts. On his way to work one day, Marco's car broke down. At the repair shop, Marco learned that his car's engine had significant damage, and it will cost over $2,000 to repair the damage. He does not have enough money in his bank account to cover the cost of the repair, and his credit cards are at their limit. This car is the only form of transportation that Marco has to get to and from work every day. He does not use his car for any business travel.
After considering his options, Marco decides to take $2,000 from the partnership for the repair, and record it as an expense of the partnership. He believes that this is appropriate since he needs his car to get to work every day.
1. Is Marco behaving ethically? Why?
2. Who is affected by Marco's decision?
3. What other alternatives might Marco consider?
Free
Essay
Q 9Q 9
Home Depot: Ratio of liabilities to stockholders' equity
The Home Depot, Inc. , is the world's largest home improvement retailer and one of the largest retailers in the United States based on sales volume. Home Depot operates over 2,200 stores that sell a wide assortment of building, home improvement, and lawn and garden items.
Home Depot recently reported the following end-of-year balance sheet data (in millions):
A. Determine the total liabilities at the end of Years 1, 2, and 3.
B. Compute the ratio of liabilities to stockholders' equity for all three years. (Round to two decimal places.)
C. What conclusions regarding the margin of protection to creditors can you draw from the trend in this ratio for the three years?
Free
Essay
Q 10Q 10
Accounting equation
Be-The-One is a motivational consulting business. At the end of its accounting period, December 31, 2017, Be-The-One has assets of $395,000 and liabilities of $97,000. Using the accounting equation, determine the following amounts:
A. Stockholders' equity as of December 31, 2017.
B. Stockholders' equity as of December 31, 2018, assuming that assets decreased by $65,000 and liabilities increased by $36,000 during 2018.
Free
Essay
Free
Essay
Q 12Q 12
Professional ethics
A fertilizer manufacturing company wants to relocate to Yellowstone County. A report from a fired researcher at the company indicates the company's product is releasing toxic by-products. The company suppressed that report. A later report commissioned by the company shows there is no problem with the fertilizer.
Should the company's chief executive officer reveal the content of the unfavorable report in discussions with Yellowstone County representatives? Discuss.
Free
Essay
Q 13Q 13
Financial statements
The amounts of the assets and liabilities of Journey Travel Agency at December 31, 2018, the end of the year, and its revenue and expenses for the year follow. The retained earnings were $1,341,000 on January 1, 2018, the beginning of the year. During the year, dividends of $75,000 were paid.
Instructions
1. Prepare an income statement for the year ended December 31, 2018.
2. Prepare a retained earnings statement for the year ended December 31, 2018.
3. Prepare a balance sheet as of December 31, 2018.
4. What item appears on both the retained earnings statement and the balance sheet?
Free
Essay
Q 14Q 14
Financial statements
The amounts of the assets and liabilities of Wilderness Travel Service at April 30, 2018, the end of the year, and its revenue and expenses for the year follow. The retained earnings were $145,000 at May 1, 2017, the beginning of the year, and dividends of $40,000 were paid during the year.
Instructions
1. Prepare an income statement for the year ended April 30, 2018.
2. Prepare a retained earnings statement for the year ended April 30, 2018.
3. Prepare a balance sheet as of April 30, 2018.
4. What item appears on both the income statement and retained earnings statement?
Free
Essay
Q 15Q 15
Team Activity
In teams, select a public company that interests you. Obtain the company's most recent annual report on Form 10-K. The Form 10-K is a company's annually required filing with the Securities and Exchange Commission (SEC). It includes the company's financial statements and accompanying notes. The Form 10-K can be obtained either (A) from the investor relations section of the company's Web site or (B) by using the company search feature of the SEC's EDGAR database service found at www.sec.gov/edgar/searchedgar/companysearch.html.
Based on the information in the company's most recent annual report, answer the following questions:
1. What is the official name of the company?
2. Where are the company's principal offices located?
3. Who is the company's chief executive officer?
4. Is the company primarily a service, merchandising, or manufacturing business?
5. How does the company describe its business?
6. Which financial statements are included in the annual report?
Free
Essay
Q 16Q 16
Lowe's: Ratio of liabilities to stockholders' equity
Lowe's Companies, Inc. , a major competitor to The Home Depot in the home improvement retail business, operates over 1,800 stores. Lowe's recently reported the following end-of-year balance sheet data (in millions):
A. Determine the total stockholders' equity at the end of Years 1, 2, and 3.
B. Compute the ratio of liabilities to stockholders' equity for all three years. (Round to two decimal places.)
C. What conclusions regarding the margin of protection to creditors can you draw from the trend in this ratio for the three years?
D. Using the balance sheet data for Home Depot in ADM-2, how does Lowe's ratio of liabilities to stockholders' equity compare to that of Home Depot?
Free
Essay
Q 17Q 17
Transactions
Interstate Delivery Service is owned and operated by Katie Wyer. The following selected transactions were completed by Interstate Delivery during May:
1. Received cash in exchange for common stock, $18,000.
2. Paid advertising expense, $4,850.
3. Purchased supplies on account, $2,100.
4. Billed customers for delivery services on account, $14,700.
5. Received cash from customers on account, $8,200.
Indicate the effect of each transaction on the following accounting equation elements: Assets, Liabilities, Common Stock, Dividends, Revenue, and Expense. To illustrate, the answer to (1) follows:
(1) Asset (Cash) increases by $18,000; Common Stock increases by $18,000.
Free
Essay
Q 18Q 18
Why are most large companies like Microsoft, PepsiCo, Caterpillar , and AutoZone organized as corporations?
Free
Essay
Q 19Q 19
Business entity assumption
Ozark Sports sells hunting and fishing equipment and provides guided hunting and fishing trips. Ozark is owned and operated by Eric Griffith, a well-known sports enthusiast and hunter. Eric's wife, Linda, owns and operates Lake Boutique, a women's clothing store. Eric and Linda have established a trust fund to finance their children's college education. The trust fund is maintained by Missouri State Bank in the name of the children, Mark and Steffy.
A. For each of the following transactions, identify which of the entities listed should record the transaction in its records:
1. Linda authorized the trust fund to purchase mutual fund shares.
2. Linda purchased two dozen spring dresses from a St. Louis designer for a special spring sale.
3. Eric paid a breeder's fee for an English springer spaniel to be used as a hunting guide dog.
4. Linda deposited a $2,000 personal check in the trust fund at Missouri State Bank.
5. Eric paid a local doctor for his annual physical, which was required by the workers' compensation insurance policy carried by Ozark Sports.
6. Eric received a cash advance from customers for a guided hunting trip.
7. Linda paid her dues to the YWCA.
8. Linda donated several dresses from inventory for a local charity auction for the benefit of a women's abuse shelter.
9. Eric paid for dinner and a movie to celebrate their twelfth wedding anniversary.
10. Eric paid for an advertisement in a hunters' magazine.
B. What is a business transaction?
Free
Essay
Q 20Q 20
Financial statements
Seth Feye established Reliance Financial Services on July 1, 2018. Reliance Financial Services offers financial planning advice to its clients. The effect of each transaction and the balances after each transaction for July follow:
Instructions
1. Prepare an income statement for the month ended July 31, 2018.
2. Prepare a retained earnings statement for the month ended July 31, 2018.
3. Prepare a balance sheet as of July 31, 2018.
4. ( Optional ) Prepare a statement of cash flows for the month ending July 31, 2018.
Free
Essay
Q 21Q 21
Financial statements
Jose Loder established Bronco Consulting on August 1, 2018. The effect of each transaction and the balances after each transaction for August follow:
Instructions
1. Prepare an income statement for the month ended August 31, 2018.
2. Prepare a retained earnings statement for the month ended August 31, 2018.
3. Prepare a balance sheet as of August 31, 2018.
4. ( Optional ) Prepare a statement of cash flows for the month ending August 31, 2018.
Free
Essay
Q 22Q 22
Communication
There are two common causes of business and accounting fraud:
? a failure of individual character, and
? a culture of greed or ethical indifference within an organization.
Write a brief memo describing how these two factors could lead to accounting fraud.
Free
Essay
Q 23Q 23
Papa Johns and Yum! Brands: Ratio of liabilities to stockholders' equity
The following total liabilities and stockholders' equity information (in millions) is provided for Papa John's International, Inc. and Yum! Brands, Inc. at the end of a recent year:
Yum! Brands is a much larger company than is Papa John's, however both companies compete internationally in the fast food business. Papa John's is primarily in the carry-out and delivery pizza business, while Yum! Brands is in the quick-service restaurant business with its Pizza Hut, Taco Bell, and KFC brands.
A. Compute the ratio of liabilities to stockholders' equity for each company. (Round to one decimal place.)
B. What conclusions regarding the margin of protection to creditors can you draw for these two companies?
C. Which company is more risky to creditors?
Free
Essay
Q 24Q 24
Income statement
The revenues and expenses of Paradise Travel Service for the year ended May 31, 2018, follow:
Prepare an income statement for the year ended May 31, 2018.
Free
Essay
Q 25Q 25
Josh Reilly is the owner of Dispatch Delivery Service. Recently, Josh paid interest of $4,500 on a personal loan of $75,000 that he used to begin the business. Should Dispatch Delivery Service record the interest payment? Explain.
Free
Essay
Q 26Q 26
Accounting equation
The total assets and total liabilities (in millions) of Keurig Green Mountain Coffee, Inc. and Starbucks Corporation follow:
Determine the stockholders' equity of each company.
Free
Essay
Q 27Q 27
Transactions; financial statements
On August 1, 2018, Brooke Kline established Western Realty. Brooke completed the following transactions during the month of August:
A. Opened a business bank account with a deposit of $35,000 in exchange for common stock.
B. Purchased supplies on account, $2,750.
C. Paid creditor on account, $1,800.
D. Earned sales commissions, receiving cash, $52,800.
E. Paid rent on office and equipment for the month, $4,500.
F. Paid dividends, $3,000.
G. Paid automobile expenses for month, $1,100, and miscellaneous expenses, $1,200.
H. Paid office salaries, $5,250.
I. Determined that the cost of supplies on hand was $1,750; therefore, the cost of supplies used was $1,000.
Instructions
1. Indicate the effect of each transaction and the balances after each transaction, using the following tabular headings:
2. Prepare an income statement for August, a retained earnings statement for August, and a balance sheet as of August 31.
Free
Essay
Q 28Q 28
Transactions; financial statements
On April 1, 2018, Maria Adams established Custom Realty. Maria completed the following transactions during the month of April:
A. Opened a business bank account with a deposit of $24,000 in exchange for common stock.
B. Paid rent on office and equipment for the month, $3,600.
C. Paid automobile expenses for month, $1,350, and miscellaneous expenses, $600.
D. Purchased supplies on account, $1,200.
E. Earned sales commissions, receiving cash, $19,800.
F. Paid creditor on account, $750.
G. Paid office salaries, $2,500.
H. Paid dividends, $3,500.
I. Determined that the cost of supplies on hand was $300; therefore, the cost of supplies used was $900.
Instructions
1. Indicate the effect of each transaction and the balances after each transaction, using the following tabular headings:
2. Prepare an income statement for April, a retained earnings statement for April, and a balance sheet as of April 30.
Free
Essay
Q 29Q 29
Retained earnings statement
Using the income statement for Paradise Travel Service shown in Basic Exercise 1-4, prepare a retained earnings statement for the year ended May 31, 2018. Everett McCauley invested an additional $40,000 in the business in exchange for common stock, and $10,000 of dividends were paid during the year. Retained earnings as of June 1, 2017, were $300,000.
Free
Essay
Q 30Q 30
On July 12, Reliable Repair Service extended an offer of $150,000 for land that had been priced for sale at $185,000. On September 3, Reliable Repair Service accepted the seller's counteroffer of $167,500. Describe how Reliable Repair Service should record the land.
Free
Essay
Q 31Q 31
Accounting equation
The total assets and total liabilities (in millions) of Dollar Tree Inc. and Target Corporation follow:
Determine the stockholders' equity of each company.
Free
Essay
Q 32Q 32
Transactions; financial statements
D'Lite Dry Cleaners is owned and operated by Joel Palk. A building and equipment are currently being rented, pending expansion to new facilities. The actual work of dry cleaning is done by another company at wholesale rates. The assets, liabilities, and common stock of the business on July 1, 2018, are as follows: Cash, $45,000; Accounts Receivable, $93,000; Supplies, $7,000; Land, $75,000; Accounts Payable, $40,000; Common Stock, $60,000. Business transactions during July are summarized as follows:
A. Joel Palk invested additional cash in exchange for common stock with a deposit of $35,000 in the business bank account.
B. Paid $50,000 for the purchase of land adjacent to land currently owned by D'Lite Dry Cleaners as a future building site.
C. Received cash from customers for dry cleaning revenue, $32,125.
D. Paid rent for the month, $6,000.
E. Purchased supplies on account, $2,500.
F. Paid creditors on account, $22,800.
G. Charged customers for dry cleaning revenue on account, $84,750.
H. Received monthly invoice for dry cleaning expense for July (to be paid on August 10), $29,500.
I. Paid the following: wages expense, $7,500; truck expense, $2,500; utilities expense, $ 1,300; miscellaneous expense, $2,700.
J. Received cash from customers on account, $88,000.
K. Determined that the cost of supplies on hand was $5,900; therefore, the cost of supplies used during the month was $3,600.
L. Paid dividends, $12,000.
Instructions
1. Determine the amount of retained earnings as of July 1, 2018.
2. State the assets, liabilities, and stockholders' equity as of July 1 in equation form similar to that shown in this chapter. In tabular form below the equation, indicate increases and decreases resulting from each transaction and the new balances after each transaction.
3. Prepare an income statement for July, a retained earnings statement for July, and a balance sheet as of July 31.
4. ( Optional ) Prepare a statement of cash flows for July.
Free
Essay
Q 33Q 33
Transactions; financial statements
Bev's Dry Cleaners is owned and operated by Beverly Zahn. A building and equipment are currently being rented, pending expansion to new facilities. The actual work of dry cleaning is done by another company at wholesale rates. The assets, liabilities, and common stock of the business on November 1, 2018, are as follows: Cash, $39,000; Accounts Receivable, $80,000; Supplies, $11,000; Land, $50,000; Accounts Payable, $31,500; Common Stock, $50,000. Business transactions during November are summarized as follows:
A. Beverly Zahn invested additional cash in exchange for common stock with a deposit of $21,000 in the business bank account.
B. Purchased land adjacent to land currently owned by Bev's Dry Cleaners to use in the future as a parking lot, paying cash of $35,000.
C. Paid rent for the month, $4,000.
D. Charged customers for dry cleaning revenue on account, $72,000.
E. Paid creditors on account, $20,000.
F. Purchased supplies on account, $8,000.
G. Received cash from customers for dry cleaning revenue, $38,000.
H. Received cash from customers on account, $77,000.
I. Received monthly invoice for dry cleaning expense for November (to be paid on December 10), $29,450.
J. Paid the following: wages expense, $24,000; truck expense, $2,100; utilities expense, $1,800; miscellaneous expense, $1,300.
K. Determined that the cost of supplies on hand was $11,800; therefore, the cost of supplies used during the month was $7,200.
L. Paid dividends, $5,000.
Instructions
1. Determine the amount of retained earnings as of November 1.
2. State the assets, liabilities, and stockholders' equity as of November 1 in equation form similar to that shown in this chapter. In tabular form below the equation, indicate increases and decreases resulting from each transaction and the new balances after each transaction.
3. Prepare an income statement for November, a retained earnings statement for November, and a balance sheet as of November 30.
4. ( Optional ) Prepare a statement of cash flows for November.
Free
Essay
Q 34Q 34
Balance sheet
Using the following data for Paradise Travel Service as well as the retained earnings statement shown in Basic Exercise 1-5, prepare a balance sheet as of May 31, 2018:
Free
Essay
Q 35Q 35
Land with an assessed value of $750,000 for property tax purposes is acquired by a business for $900,000. Ten years later, the plot of land has an assessed value of $1,200,000 and the business receives an offer of $2,000,000 for it. Should the monetary amount assigned to the land in the business records now be increased?
b. Assuming that the land acquired in (a) was sold for $2,125,000, how would the various elements of the accounting equation be affected?
Free
Essay
Free
Essay
Q 37Q 37
Missing amounts from financial statements
The financial statements at the end of Wolverine Realty's first month of operations are as follows:
Instructions
By analyzing the interrelationships among the four financial statements, determine the proper amounts for A through Q.
Free
Essay
Q 38Q 38
Missing amounts from financial statements
The financial statements at the end of Atlas Realty's first month of operations follow:
Instructions
By analyzing the interrelationships among the four financial statements, determine the proper amounts for A through Q.
Free
Essay
Q 39Q 39
Statement of cash flows
A summary of cash flows for Paradise Travel Service for the year ended May 31, 2018, follows:
The cash balance as of June 1, 2017, was $50,000.
Prepare a statement of cash flows for Paradise Travel Service for the year ended May 31, 2018.
Free
Essay
Free
Essay
Q 41Q 41
Accounting equation
Inspirational Inc. is a motivational consulting business. At the end of its accounting period, October 31, 2017, Inspirational has assets of $5,250,000 and liabilities of $1,600,000. Using the accounting equation and considering each case independently, determine the following amounts:
A. Stockholders' equity as of October 31, 2017.
B. Stockholders' equity as of October 31, 2018, assuming that assets increased by $800,000 and liabilities increased by $330,000 during 2018.
C. Stockholders' equity as of October 31, 2018, assuming that assets decreased by $600,000 and liabilities increased by $140,000 during 2018.
D. Stockholders' equity as of October 31, 2018, assuming that assets increased by $440,000 and liabilities decreased by $90,000 during 2018.
E. Net income (or net loss) during 2018, assuming that as of October 31,2018, assets were $6,140,000, liabilities were $1,950,000, and no additional common stock was issued or dividends paid.
Free
Essay
Q 42Q 42
A business had revenues of $679,000 and operating expenses of $588,000. Did the business (a) incur a net loss or (b) realize net income?
Free
Essay
Q 43Q 43
Asset, liability, and stockholders' equity items
Indicate whether each of the following is identified with (1) an asset, (2) a liability, or (3) stockholders' equity:
A. accounts payable
B. cash
C. fees earned
D. land
E. supplies
F. wages expense
Free
Essay
Q 44Q 44
A business had revenues of $640,000 and operating expenses of $715,000. Did the business (a) incur a net loss or (b) realize net income?
Free
Essay
Q 45Q 45
Effect of transactions on accounting equation
Describe how the following business transactions affect the three elements of the accounting equation:
a. Invested cash in business.
b. Paid for utilities used in the business.
c. Purchased supplies for cash.
d. Purchased supplies on account.
e. Received cash for services performed.
Free
Essay
Q 46Q 46
The financial statements are interrelated. (a) What item of financial or operating data appears on both the income statement and the statement of owner's equity? (b) What item appears on both the balance sheet and the statement of owner's equity? (c) What item appears on both the balance sheet and the statement of cash flows?
Free
Essay
Q 47Q 47
Effect of transactions on accounting equation
a. A vacant lot acquired for $115,000 is sold for $298,000 in cash. What is the effect of the sale on the total amount of the seller's (1) assets, (2) liabilities, and (3) owner's equity?
b. Assume that the seller owes $80,000 on a loan for the land. After receiving the $298,000 cash in (a), the seller pays the $80,000 owed. What is the effect of the payment on the total amount of the seller's (1) assets, (2) liabilities, and (3) owner's equity?
c. Is it true that a transaction always affects at least two elements (Assets, Liabilities, or Owner's Equity) of the accounting equation? Explain.
Free
Essay
Q 48Q 48
Effect of transactions on stockholders' equity
Indicate whether each of the following types of transactions will either (A) increase stockholders' equity or (B) decrease stockholders' equity:
1. expenses
2. issuing common stock in exchange for cash
3. dividends
4. revenues
Free
Essay
Q 49Q 49
Transactions
The following selected transactions were completed by Cota Delivery Service during July:
1. Received cash in exchange for common stock, $35,000.
2. Purchased supplies for cash, $1,100.
3. Paid rent for October, $4,500.
4. Paid advertising expense, $900.
5. Received cash for providing delivery services, $33,000.
6. Billed customers for delivery services on account, $58,000.
7. Paid creditors on account, $2,900.
8. Received cash from customers on account, $27,500.
9. Determined that the cost of supplies on hand was $300 and $8,600 of supplies had been used during the month.
10. Paid cash dividends, $2,500.
Indicate the effect of each transaction on the accounting equation by listing the numbers identifying the transactions, (1) through (10), in a column, and inserting at the right of each number the appropriate letter from the following list:
A. Increase in an asset, decrease in another asset.
B. Increase in an asset, increase in a liability.
C. Increase in an asset, increase in stockholders'equity.
D. Decrease in an asset, decrease in a liability.
E. Decrease in an asset, decrease in stockholders' equity.
Free
Essay
Q 50Q 50
Nature of transactions
Teri West operates her own catering service. Summary financial data for July are presented in equation form as follows. Each line designated by a number indicates the effect of a transaction on the equation. Each increase and decrease in stockholders' equity, except transaction (5), affects net income.
A. Describe each transaction.
B. What is the amount of the net increase in cash during the month?
C. What is the amount of the net increase in stockholders' equity during the month?
D. What is the amount of the net income for the month?
E. How much of the net income for the month was retained in the business?
Free
Essay
Q 51Q 51
Net income and owner's withdrawals
The income statement of a proprietorship for the month of February indicates a net income of $17,500. During the same period, the owner withdrew $25,500 in cash from the business for personal use. Would it be correct to say that the business had incurred a net loss of $8,000 during the month? Discuss.
Free
Essay
Q 52Q 52
Net income and stockholders' equity for four businesses
Four different corporations, Amber, Blue, Coral, and Daffodil, show the same balance sheet data at the beginning and end of a year. These data, exclusive of the amount of stockholders' equity, are summarized as follows:
On the basis of the preceding data and the following additional information for the year, determine the net income (or loss) of each company for the year. ( Hint: First determine the amount of increase or decrease in stockholders' equity during the year.)
Free
Essay
Q 53Q 53
Balance sheet items
From the following list of selected items taken from the records of Bobcat Appliance Service as of a specific date, identify those that would appear on the balance sheet:
1. Accounts Receivable
2. Cash
3. Common Stock
4. Fees Earned
5. Land
6. Supplies
7. Supplies Expense
8. Utilities Expense
9. Wages Expense
10. Wages Payable
Free
Essay
Q 54Q 54
Income statement items
Based on the data presented in Exercise 1-16, identify those items that would appear on the income statement.
Free
Essay
Q 55Q 55
Retained earnings statement
Financial information related to Healthy Products Company for the month ended November 30, 2018, is as follows:
A. Prepare a retained earnings statement for the month ended November 30, 2018.
B. Why is the retained earnings statement prepared before the November 30, 2018, balance sheet?
Free
Essay
Q 56Q 56
Income statement
Imaging Services was organized on March 1, 2018. A summary of the revenue and expense transactions for March follows:
Prepare an income statement for the month ended March 31.
Free
Essay
Q 57Q 57
Missing amounts from balance sheet and income statement data
One item is omitted in each of the following summaries of balance sheet and income statement data for the following four different proprietorships:
Determine the missing amounts, identifying them by letter. ( Hint: First, determine the amount of increase or decrease in owner's equity during the year.)
Free
Essay
Q 58Q 58
Balance sheets, net income
Financial information related to Ebony Interiors for February and March 2018 is as follows:
A. Prepare balance sheets for Ebony Interiors as of February 28 and March 31, 2018.
B. Determine the amount of net income for March, assuming that no additional common stock was issued and no dividends were paid during the month.
C. Determine the amount of net income for March, assuming that no additional common stock was issued, but dividends of $50,000 were paid during the month.
Free
Essay
Q 59Q 59
Financial statements
Each of the following items is shown in the financial statements of Exxon Mobil Corporation :
1. Accounts payable
2. Cash equivalents
3. Crude oil inventory
4. Equipment
5. Exploration expenses
6. Income taxes payable
7. Investments
8. Long-term debt
9. Marketable securities
10. Notes and loans payable
11. Notes receivable
12. Operating expenses
13. Prepaid taxes
14. Sales
15. Selling expenses
a. Identify the financial statement (balance sheet or income statement) in which each item would appear.
b. Can an item appear on more than one financial statement?
c. Is the accounting equation relevant for Exxon Mobil Corporation?
Free
Essay
Q 60Q 60
Statement of cash flows
Indicate whether each of the following activities would be reported on the statement of cash flows as (A) an operating activity, (B) an investing activity, or (C) a financing activity:
1. Cash received from fees earned.
2. Cash paid for expenses.
3. Cash paid for land.
4. Cash paid for dividends.
Free
Essay
Q 61Q 61
Statement of cash flows
A summary of cash flows for Ethos Consulting Group for the year ended May 31, 2018, follows:
The cash balance as of June 1, 2017, was $58,000.
Prepare a statement of cash flows for Ethos Consulting Group for the year ended May 31, 2018.
Free
Essay
Q 62Q 62
Financial statements
We-Sell Realty, organized as a corporation on August 1, 2018, is owned and operated by Omar Farah, the sole stockholder. How many errors can you find in the following statements for We-Sell Realty, prepared after its first month of operations?
Free
Essay