Deck 2: The Financial Statementsa Closer Look

Question 1

At the end of 2009, Corey Company has total assets and liabilities at $40,000 and $13,000, respectively.Corey reported net income for 2010 in the amount of $10,000.How much is shareholders' equity at the end of 2010?

A) $20,000
B) $22,000
C) $31,000
D) $37,000

Answer 1

$37,000

Question 2

Valley Company has retained earnings of $12,000, total assets totaling $38,000, and total liabilities of $20,000.How much is total shareholders' equity?

A) $6,000
B) $12,000
C) $18,000
D) $32,000

Answer 2

$18,000

Question 3

Darwin Company has current assets, shareholders' equity, current liabilities, and long-term liabilities of $8,000, $24,000, $4,000, and $8,000, respectively.How much are long-term assets?

A) $12,000
B) $28,000
C) $32,000
D) $36,000

Answer 3

$28,000

Question 4

If the beginning and ending balances in retained earnings are $12,000 and $10,000, respectively, and dividends during the year are $10,000, then net income for the year is

A) $14,000.
B) $8,000.
C) $18,000.
D) $32,000.

Question 5

Legacy Company has total assets, liabilities, and shareholders' equity of $30,000, $17,000, and $13,000, respectively at the beginning of 2010.If Legacy reports revenues of $125,000, expenses of $85,000, and pays dividends of $30,000, how much is shareholders' equity at the end of 2010?

A) $23,000
B) $53,000
C) $44,000
D) Not enough information to determine.

Question 6

Artec Corporation has total assets, current liabilities, and long-term liabilities of $36,000, $2,000, and $13,000, respectively.If Artec purchases equipment for $4,000 for cash, how much would shareholders' equity be?

A) $21,000
B) $10,000
C) $24,000
D) $11,000

Question 7

Below are several accounts from Nortec Company's accounting records.

The amount of retained earnings at the end of the year is

A) $34,000.
B) $40,000.
C) $52,000.
D) $64,000.

Question 8

Given below are several accounts from Deere Company's accounting records.

Net income for the year was $35,000.How much is total shareholders' equity at the end of the year?

A) $86,000.
B) $82,000.
C) $87,000.
D) $77,000.

Question 9

If cash flows from operating activities were $1,000, cash flows for financing activities were $12,500, and the net increase in cash was $15,000, how much are cash flows from investing activities?

A) $1,500.
B) $28,500.
C) $3,500.
D) $26,500.

Question 10

The information below was taken from the 2010 annual report of Jena Corp.

-Which of the following is the missing amount for the beginning cash balance for 2009?

A) $5,925
B) $8,741
C) $12,440
D) $5,282

Question 11

The information below was taken from the 2010 annual report of Jena Corp.

-Which of the following is the missing amount for the ending cash balance for 2009?

A) $2,759
B) $7,158
C) $12,703
D) $11,557

Question 12

Garrison Corporation has the following transactions:
1)Dividends are paid to the shareholders.
2)A utility bill for July is paid in August.
3)A new warehouse facility is purchased
4)Principal payments on outstanding debt are paid.
5)Employees wages are paid.
6)Forty-five units of inventory are sold for $100 each
7)Common stock is issued for $230,000 in cash.
8)A delivery van used for 5-years is sold for $12,000, which is its book value.

-
Which of the above transaction(s) are examples of financing activities?

A) 1,4,7
B) 1,7,8
C) 3,8
D) 1,3,4,7,8

Question 13

Garrison Corporation has the following transactions:
1)Dividends are paid to the shareholders.
2)A utility bill for July is paid in August.
3)A new warehouse facility is purchased
4)Principal payments on outstanding debt are paid.
5)Employees wages are paid.
6)Forty-five units of inventory are sold for $100 each
7)Common stock is issued for $230,000 in cash.
8)A delivery van used for 5-years is sold for $12,000, which is its book value.

-
Which of the above transaction(s) are examples of investing activities?

A) 3,4,7,8
B) 1,4,7
C) 4,7
D) 3,8

Question 14

Garrison Corporation has the following transactions:
1)Dividends are paid to the shareholders.
2)A utility bill for July is paid in August.
3)A new warehouse facility is purchased
4)Principal payments on outstanding debt are paid.
5)Employees wages are paid.
6)Forty-five units of inventory are sold for $100 each
7)Common stock is issued for $230,000 in cash.
8)A delivery van used for 5-years is sold for $12,000, which is its book value.

-
Which of the above transaction(s) are examples of operating activities?

A) 2,3,5
B) 5,6,8
C) 2,3,5,6,8
D) 2,5,6

Question 15

For items select the appropriate section of the balance sheet in which the item would be reported.

-Amounts owed for purchasing inventory from creditors (due next month).

A) Long-term Investments
B) Property, Plant, & Equipment
C) Current Liabilities
D) Long-term Liabilities
E) Shareholders' Equity

Question 16

For items select the appropriate section of the balance sheet in which the item would be reported.

-Cumulative profits retained by the company since operations began.

A) Long-term Investments
B) Property, Plant, & Equipment
C) Current Liabilities
D) Long-term Liabilities
E) Shareholders' Equity

Question 17

For items select the appropriate section of the balance sheet in which the item would be reported.

-Cost of a building expected to be used by the company for ten more years.

A) Long-term Investments
B) Property, Plant, & Equipment
C) Current Liabilities
D) Long-term Liabilities
E) Shareholders' Equity

Question 18

For each item numbered below, identify which accounting element(s) listed in A through H each statement describes.You may use each letter more than once or not at all.

-Total past earnings not distributed to the owners

A) Assets
B) Liabilities
C) Contributed capital
D) Retained earnings
E) Revenues
F) Expenses
G) Net income
H) Dividends

Question 19

For each item numbered below, identify which accounting element(s) listed in A through H each statement describes.You may use each letter more than once or not at all.

-Inflow of assets from the regular operating activities

A) Assets
B) Liabilities
C) Contributed capital
D) Retained earnings
E) Revenues
F) Expenses
G) Net income
H) Dividends

Question 20

For each item numbered below, identify which accounting element(s) listed in A through H each statement describes.You may use each letter more than once or not at all.

-Obligations which must be met at some future date

A) Assets
B) Liabilities
C) Contributed capital
D) Retained earnings
E) Revenues
F) Expenses
G) Net income
H) Dividends

Question 21

For each item numbered below, identify which accounting element(s) listed in A through H each statement describes.You may use each letter more than once or not at all.

-That which will be used to generate future economic benefits

A) Assets
B) Liabilities
C) Contributed capital
D) Retained earnings
E) Revenues
F) Expenses
G) Net income
H) Dividends

Question 22

For each item numbered below, identify which accounting element(s) listed in A through H each statement describes.You may use each letter more than once or not at all.

-The net growth during a period of time measured as revenues less expenses

A) Assets
B) Liabilities
C) Contributed capital
D) Retained earnings
E) Revenues
F) Expenses
G) Net income
H) Dividends

Question 23

For each item numbered below, identify which accounting element(s) listed in A through H each statement describes.You may use each letter more than once or not at all.

-Amount invested by equity investors

A) Assets
B) Liabilities
C) Contributed capital
D) Retained earnings
E) Revenues
F) Expenses
G) Net income
H) Dividends

Question 24

For each financial statement item listed below, identify the best description by selecting from items a through f below.You may use each letter more than once or not at all.Write the letter 'X' for each item for which no description is listed.

-Current liability

A) Amount of net income or loss less distributions to the owners of the company
B) Must be settled within one year
C) Converted to cash within one year
D) Amount of owners' investment
E) Portion of equity to which dividends reduce
F) Land used as a site for production

Question 25

For each financial statement item listed below, identify the best description by selecting from items a through f below.You may use each letter more than once or not at all.Write the letter 'X' for each item for which no description is listed.

-The property part of property, plant, and equipment

A) Amount of net income or loss less distributions to the owners of the company
B) Must be settled within one year
C) Converted to cash within one year
D) Amount of owners' investment
E) Portion of equity to which dividends reduce
F) Land used as a site for production

Question 26

For each financial statement item listed below, identify the best description by selecting from items a through f below.You may use each letter more than once or not at all.Write the letter 'X' for each item for which no description is listed.

-Retained earnings

A) Amount of net income or loss less distributions to the owners of the company
B) Must be settled within one year
C) Converted to cash within one year
D) Amount of owners' investment
E) Portion of equity to which dividends reduce
F) Land used as a site for production

Question 27

For each financial statement item listed below, identify the best description by selecting from items a through f below.You may use each letter more than once or not at all.Write the letter 'X' for each item for which no description is listed.

-Contributed capital

A) Amount of net income or loss less distributions to the owners of the company
B) Must be settled within one year
C) Converted to cash within one year
D) Amount of owners' investment
E) Portion of equity to which dividends reduce
F) Land used as a site for production

Question 28

For each financial statement item listed below, identify the best description by selecting from items a through f below.You may use each letter more than once or not at all.Write the letter 'X' for each item for which no description is listed.

-Current asset

A) Amount of net income or loss less distributions to the owners of the company
B) Must be settled within one year
C) Converted to cash within one year
D) Amount of owners' investment
E) Portion of equity to which dividends reduce
F) Land used as a site for production

Question 29

For each statement listed below, state whether it is correct or not.

-Property differs from plant and equipment in that property has no physical substance, while plant and equipment does.

Question 30

For each statement listed below, state whether it is correct or not.

-Current assets of a major retailer, such as Sears, typically exceed 50 percent of total assets because of merchandise inventory.

Question 31

For each statement listed below, state whether it is correct or not.

-Goodwill is common on many major U.S.companies' balance sheets because of the numerous mergers and acquisitions that occur.

Question 32

For each statement listed below, state whether it is correct or not.

-Yard Mart Company owes $4,700.If Yard Mart uses assets listed in the current asset section of the balance sheet to pay off this debt next year, Yard Mart must report the $4,700 in the current liability section of its balance sheet.

Question 33

For each statement listed below, state whether it is correct or not.

-Martinez, Inc.issued common stock for cash.This is an investing activity.

Question 34

For each financial statement item listed in below, identify in which balance sheet category (listed in a through h) it should be reported.You may use each letter more than once or not at all.

-Contributed capital

A) Current assets
B) Long-term investments
C) Property, plant, and equipment
D) Intangible assets
E) Current liabilities
F) Long-term liabilities
G) Shareholders' equity
H) Not disclosed on the balance sheet

Question 35

For each financial statement item listed in below, identify in which balance sheet category (listed in a through h) it should be reported.You may use each letter more than once or not at all.

-Prepaid insurance

A) Current assets
B) Long-term investments
C) Property, plant, and equipment
D) Intangible assets
E) Current liabilities
F) Long-term liabilities
G) Shareholders' equity
H) Not disclosed on the balance sheet

Question 36

For each financial statement item listed in below, identify in which balance sheet category (listed in a through h) it should be reported.You may use each letter more than once or not at all.

-Accounts payable

A) Current assets
B) Long-term investments
C) Property, plant, and equipment
D) Intangible assets
E) Current liabilities
F) Long-term liabilities
G) Shareholders' equity
H) Not disclosed on the balance sheet

Question 37

For each financial statement item listed in below, identify in which balance sheet category (listed in a through h) it should be reported.You may use each letter more than once or not at all.

-Sales revenue

A) Current assets
B) Long-term investments
C) Property, plant, and equipment
D) Intangible assets
E) Current liabilities
F) Long-term liabilities
G) Shareholders' equity
H) Not disclosed on the balance sheet

Question 38

For each financial statement item listed in below, identify in which balance sheet category (listed in a through h) it should be reported.You may use each letter more than once or not at all.

-Delivery truck

A) Current assets
B) Long-term investments
C) Property, plant, and equipment
D) Intangible assets
E) Current liabilities
F) Long-term liabilities
G) Shareholders' equity
H) Not disclosed on the balance sheet

Question 39

For each statement listed below, state whether it is correct or not

-Financing activities involve the sale of goods and services of a business.

Question 40

For each statement listed below, state whether it is correct or not

-The income statement is often referred to as a statement of financial condition.

Question 41

For each statement listed below, state whether it is correct or not

-The asset sections found on a classified balance sheet include current assets, current liabilities, and owners' equity.

Question 42

For each statement listed below, state whether it is correct or not

-Dividends payable, Inventories, Contributed capital, and Accumulated Depreciation all appear on a company's balance sheet.

Question 43

For each financial statement item listed below, identify in which balance sheet category (listed in a through h) it should be reported.You may use each letter more than once or not at all.

-Accumulated depreciation

A) Current assets
B) Long-term investments
C) Property, plant, and equipment
D) Intangible assets
E) Current liabilities
F) Long-term liabilities
G) Shareholders' equity
H) Not disclosed on the balance sheet

Question 44

For each financial statement item listed below, identify in which balance sheet category (listed in a through h) it should be reported.You may use each letter more than once or not at all.

-Trademarks

A) Current assets
B) Long-term investments
C) Property, plant, and equipment
D) Intangible assets
E) Current liabilities
F) Long-term liabilities
G) Shareholders' equity
H) Not disclosed on the balance sheet

Question 45

For each financial statement item listed below, identify in which balance sheet category (listed in a through h) it should be reported.You may use each letter more than once or not at all.

-Investment in bonds

A) Current assets
B) Long-term investments
C) Property, plant, and equipment
D) Intangible assets
E) Current liabilities
F) Long-term liabilities
G) Shareholders' equity
H) Not disclosed on the balance sheet

Question 46

For each financial statement item listed below, identify in which balance sheet category (listed in a through h) it should be reported.You may use each letter more than once or not at all.

-Retained earnings

A) Current assets
B) Long-term investments
C) Property, plant, and equipment
D) Intangible assets
E) Current liabilities
F) Long-term liabilities
G) Shareholders' equity
H) Not disclosed on the balance sheet

Question 47

For each financial statement item listed below, identify in which balance sheet category (listed in a through h) it should be reported.You may use each letter more than once or not at all.

-Short-term investments

A) Current assets
B) Long-term investments
C) Property, plant, and equipment
D) Intangible assets
E) Current liabilities
F) Long-term liabilities
G) Shareholders' equity
H) Not disclosed on the balance sheet

Question 48

For each financial statement item listed below, identify in which balance sheet category (listed in a through h) it should be reported.You may use each letter more than once or not at all.

-Prepaid insurance

A) Current assets
B) Long-term investments
C) Property, plant, and equipment
D) Intangible assets
E) Current liabilities
F) Long-term liabilities
G) Shareholders' equity
H) Not disclosed on the balance sheet

Question 49

Given below are several accounts from Nicholas Company's accounting records.

Net income for the year was $20,000.How much is total shareholders' equity at the end of the year?

Question 50

Below are several amounts from Netcom Company's accounting records.Answer the questions that follow.
Total assets, end of year $190,000
Total liabilities, end of year 30,000
Contributed capital, end of year 20,000
Retained earnings, beginning of year 65,000
Dividends for the period 15,000
Net income 32,000

A. Calculate the amount of retained earnings at the end of the year.
B. If revenue amounts to $220,000, how much is 'total expenses'?
C. How do you know the company has been profitable since it began operations?

Question 51

Following are several items from Simmons Company's financial statements.Use this information to calculate the amounts for the questions that follow.

A. Calculate the dollar amount of net income.
B. How much is inventory expense?
C. Was the company profitable during the current year? How do you know?

Question 52

At the beginning of 2010, Waterford Company sold stock and began operations.Information from Waterford's accounting records for the year ending December 31, 2010, follows:


A.Circle the names of any accounts above that would not be reported on the income statement.
B.Determine the amount of net income.

Question 53

The following are account balances of Marcia Company on 12/31/10.

Prepare a classified balance sheet for Marcia Company on December 31, 2010.

Question 54

The following is the balance sheet of Lamont Corporation immediately prior to deciding how to finance the purchase of a $300 addition to its building.
The bonds payable contract agreement requires current assets to be twice as much as current liabilities.Assume the $300 addition to the building is to be paid in cash and financed by issuing more stock.Calculate and explain the maximum cash that Lamont can pay and still honor its debt agreement.

Question 55

Below is all of the account information from Neville Company's balance sheet, with the exception of Retained Earnings.

Using this information, please calculate the following:
A.The total amount of retained earnings for Neville Company.
B.The total amount of shareholders' equity for the company at the end in the year.

Question 56

The following information is shown on Foreman Company's balance sheet.Answer the questions that follow.

A. How much did debt investors provide to Foreman Company?
B. What is the amount of money provided by equity investors to Foreman Company?
C. How much would be classified as property, plant, and equipment?

Question 57

The following is the balance sheet of Cleveland Corporation immediately prior to deciding how to finance the purchase of an additional $200,000 parcel of land.
‪
REQUIRED: Cleveland will finance the $200,000 investment in land by issuing either $200,000 of common stock or using $200,000 of additional accounts payable that will be due in 90 days.Indicate which method of financing is preferable for Cleveland.Consider the effects on short-term solvency positions.