Question 1

From the data given below, calculate the Retained Earnings balance of December 31, 2013. $$\begin{array} { l r } 
\text { Retained earnings, December 31, } 2014 & \$ 115,000 \
\text { Increase in total liabilities during 2014 } & 33,000 \
\text { Gain on the sale of buildings during 2014 } & 14,000 \
\text { Dividends declared and paid in 2014 } & 9,000 \
\text { Proceeds from sale of common stock in 2014 } & 32,000 \
\text { Net income for the year ended December 31, 2014 } & 41,000
\end{array}$$ Prepare the retained earning portion of a statement of changes in stockholders' equity for the year ended December 31, 2014. $\begin{array}{llcc}
  \text {Retained earnings, December 31,2013  } &\$?\
 \text { Add: Net income for the year } &41,000\
 \text { Less: Dividends for the year } &\underline{(9,000)}\
 \text {Retained earnings, December 31,2014  } &\underline{\underline{\$115,000}}\
\end{array}$

Accepted Answer

The answer of From the data given below, calculate the...

Question 2

Listed below are a number of financial statement captions. Indicate in the spaces to the right of each caption (1) the category of each item, and (2) the financial statement on which the item can usually be found.

Accepted Answer

The answer of Listed below are a number of financial...

Question 3

At the beginning of the year, paid-in capital was $82 and retained earnings was $47. During the year, the stockholders invested $24 and dividends of $6 were declared and paid. Retained earnings at the end of the year were $52. Total stockholders' equity at the end of the year was:

Accepted Answer

Total stockholders' equity at the end of the year is calculated by adding the ending retained earnings to the total paid-in capital. The ending retained earnings is $52, and the paid-in capital at the end of the year is the initial $82 plus the additional investment of $24, totaling $106. Therefore, total stockholders' equity is $106 (paid-in capital) + $52 (retained earnings) = $158.

Question 4

Consolidated financial statements report financial position, results of operations, and cash flows for:

Accepted Answer

Consolidated financial statements report financial information for a parent corporation and its subsidiaries. It combines the financial information of all the entities under common control, presenting a single set of financial statements that reflect the group's financial position, results of operations, and cash flows as a whole.

Question 5

The balance sheet of an entity:

Accepted Answer

The balance sheet shows amounts that are not adjusted for changes in the purchasing power of the dollar. This means that the values reported on the balance sheet are not adjusted for inflation or changes in the fair value of the assets.

Question 6

At the beginning of the year, paid-in capital was $82 and retained earnings was $47. During the year, the stockholders invested $24 and dividends of $6 were declared and paid. Retained earnings at the end of the year were $52. Net income for the year was:

Accepted Answer

The answer of At the beginning of the year, paid-in...

Question 7

At the end of the year, retained earnings totaled $1,700. During the year, net income was $250, and dividends of $120 were declared and paid. Retained earnings at the beginning of the year totaled:

Accepted Answer

Retained earnings at the beginning of the year can be calculated by subtracting net income and adding dividends to the end-of-year retained earnings: $1,700 - $250 + $120 = $1,570.

Question 8

The principle of consistency means that:

Accepted Answer

The principle of consistency requires that once a company has chosen an accounting method, it must continue to use that method in the future unless there is a valid reason to switch to a different method. If a change is made, the financial statements must disclose the effect of the change and provide a reason for making it. This is intended to ensure that financial statements reflect truly comparable information over time and that users of the statements can rely on them when making decisions. Choices A, B, and D are incorrect because they do not correctly describe the principle of consistency.

Question 9

On January 31, an entity's balance sheet showed total assets of $750 and liabilities of $250. Stockholders' equity at January 31 was:

Accepted Answer

Stockholders' equity is calculated as total assets minus total liabilities. Therefore, $750 (total assets) - $250 (liabilities) = $500 (stockholders' equity).

Question 10

On January 31, an entity's balance sheet showed net assets of $1,025 and liabilities of $225. Stockholders' equity on January 31 was:

Accepted Answer

The answer of On January 31, an entity's balance sheet...

Question 11

At the beginning of the fiscal year, the balance sheet showed assets of $1,364 and stockholders' equity of $836. During the year, assets increased $74 and liabilities decreased $38. Liabilities at the end of the year totaled:

Accepted Answer

At the beginning of the year, liabilities = assets - stockholders' equity = $1,364 - $836 = $528. During the year, liabilities decreased by $38, so the end-of-year liabilities = $528 - $38 = $490.

Question 12

The Statement of Cash Flows:

Accepted Answer

The statement of cash flows shows how cash changed during the period. It reports the sources and uses of cash and cash equivalents in operating, investing, and financing activities. It is a mandatory financial statement required by generally accepted accounting principles (GAAP) in the United States.

Question 13

The going concern concept refers to a presumption that:

Accepted Answer

The going concern concept refers to the presumption that the entity will continue to operate in the foreseeable future. It assumes that the entity will not be forced to liquidate its assets or cease operations due to financial difficulties. This assumption is important in financial reporting as it affects the valuation of assets and liabilities, the presentation of financial statements and disclosures, and the assessment of the entity's ability to meet its obligations.

Question 14

Listed below are a number of financial statement captions. Indicate in the spaces to the right of each caption (1) the category of each item, and (2) the financial statement on which the item can usually be found.

Accepted Answer

The answer of Listed below are a number of financial...

Question 15

Which of the following accounting methods accomplishes much of the matching of revenues and expenses?

Accepted Answer

Accrual accounting recognizes revenues and expenses when they are earned or incurred, regardless of when cash is received or paid. This method ensures that the matching of revenues and expenses is more accurate and reflects the period in which they were incurred.

Question 16

A concept or principle that relates to transactions is:

Accepted Answer

The answer of A concept or principle that relates to...

Question 17

Accrual accounting:

Accepted Answer

Accrual accounting is designed to match revenues and expenses, meaning that revenues are recorded when they are earned and expenses are recorded when they are incurred, regardless of when the cash is actually exchanged. This allows for a more accurate representation of a company's financial performance over a period of time. The balance sheet under accrual accounting still shows the historical cost of the entity's assets, not their fair value.

Question 18

At the beginning of the fiscal year, the balance sheet showed assets of $1,364 and stockholders' equity of $836. During the year, assets increased $74 and liabilities decreased $38. Stockholders' equity at the end of the year totaled:

Accepted Answer

The accounting equation is Assets = Liabilities + Stockholders' Equity. Initially, Liabilities = $1,364 - $836 = $528. During the year, Assets increased by $74, making them $1,438, and Liabilities decreased by $38, making them $490. Therefore, Stockholders' Equity = $1,438 - $490 = $948.

Question 19

The principle of full disclosure pertains to:

Accepted Answer

The principle of full disclosure requires that all necessary information be disclosed in financial statements to ensure that a reasonably astute user is not misled.

Question 20

Matching revenues and expenses refers to:

Accepted Answer

Matching revenues and expenses means that the expenses incurred to generate revenue are recognized in the same period as the revenue is earned. This ensures that the financial statements accurately reflect the results of operations for a fiscal period, leading to better decision making by the users of the financial statements. Simply having revenues equal expenses (Option A) does not necessarily mean that they are properly matched. Recording revenues when cash is received (Option B) and recording revenues when a product is sold or a service is rendered (Option D) are both basic principles of accrual accounting, but neither fully explains the concept of matching revenues and expenses.

Quiz 2: Financial Statements and Accounting Conceptsprinciples

Listed below are a number of financial statement captions. Indicate in the spaces to the right of each caption (1) the category of each item, and (2) the financial statement on which the item can usually be found.

At the beginning of the year, paid-in capital was $82 and retained earnings was $47. During the year, the stockholders invested $24 and dividends of $6 were declared and paid. Retained earnings at the end of the year were $52. Total stockholders' equity at the end of the year was:

Consolidated financial statements report financial position, results of operations, and cash flows for:

The balance sheet of an entity:

At the beginning of the year, paid-in capital was $82 and retained earnings was $47. During the year, the stockholders invested $24 and dividends of $6 were declared and paid. Retained earnings at the end of the year were $52. Net income for the year was:

At the end of the year, retained earnings totaled $1,700. During the year, net income was $250, and dividends of $120 were declared and paid. Retained earnings at the beginning of the year totaled:

The principle of consistency means that:

On January 31, an entity's balance sheet showed total assets of $750 and liabilities of $250. Stockholders' equity at January 31 was:

On January 31, an entity's balance sheet showed net assets of $1,025 and liabilities of $225. Stockholders' equity on January 31 was:

At the beginning of the fiscal year, the balance sheet showed assets of $1,364 and stockholders' equity of $836. During the year, assets increased $74 and liabilities decreased $38. Liabilities at the end of the year totaled:

The Statement of Cash Flows:

The going concern concept refers to a presumption that:

Listed below are a number of financial statement captions. Indicate in the spaces to the right of each caption (1) the category of each item, and (2) the financial statement on which the item can usually be found.

Which of the following accounting methods accomplishes much of the matching of revenues and expenses?

A concept or principle that relates to transactions is:

Accrual accounting:

At the beginning of the fiscal year, the balance sheet showed assets of $1,364 and stockholders' equity of $836. During the year, assets increased $74 and liabilities decreased $38. Stockholders' equity at the end of the year totaled:

The principle of full disclosure pertains to:

Matching revenues and expenses refers to: