Question 1

Given the following financial statements for ACME Corporation,what amount did the company pay in dividends for 2010?

Accepted Answer

The answer of Given the following financial statements for ACME...

Question 2

Wheeler Corporation had retained earnings as of 12/31/10 of $15 million.During 2011,Wheeler's net income was $7 million.The retained earnings balance at the end of 2011 was equal to $20 million.Therefore,

Accepted Answer

Since Wheeler's net income for 2011 was $7 million and the retained earnings balance increased from $15 million to $20 million, that means $2 million was transferred from income to retained earnings and $1 million was transferred from paid dividends to retained earnings. Therefore, Wheeler paid a dividend in 2010 of $2 million (not A or C) and did not purchase treasury stock in 2010 (not D).

Question 3

Which of the following accounts does NOT belong on the asset side of a balance sheet?

Accepted Answer

Common stock is classified as a part of shareholders' equity and not an asset, as it represents the ownership stake in the company rather than a resource or item of value owned by the company.

Question 4

The two principal sources of financing for corporations are

Accepted Answer

Debt and equity are the two primary sources of financing for corporations. Debt involves borrowing money from lenders, while equity involves selling ownership shares in the company to investors. A mix of debt and equity financing can help companies balance risk and reward, and achieve optimal capital structure. Options A, C, and D are either incomplete or incorrect.

Question 5

Which of the following accounts does NOT belong in the equity section of a balance sheet?

Accepted Answer

Long-term debt is a liability and does not belong in the equity section of a balance sheet. The other three choices (retained earnings, paid-in-surplus, and preferred stock) are all equity accounts.

Question 6

All of the following statements about balance sheets are true EXCEPT

Accepted Answer

Balance sheets do not show average asset balances over a one-year period. Instead, they report the balances of assets, liabilities, and shareholders' equity at a specific point in time.

Question 7

Which of the following accounts belongs on the asset side of a balance sheet?

Accepted Answer

Inventory is an asset that a company owns and intends to sell in the ordinary course of business, thus it belongs on the asset side of the balance sheet.

Choices A, B, and D all belong on the liability side of the balance sheet. Depreciation expense is an income statement account used to allocate the cost of a tangible asset over its useful life. Accounts payable is a liability that arises when a company purchases goods or services on credit from a supplier or vendor. Accruals are liabilities that represent expenses that have been incurred by a company but not yet paid for.

Question 8

Which of the following accounts does NOT belong in the liability section of a balance sheet?

Accepted Answer

The accounts listed in the liability section are obligations the company owes to others, such as creditors or lenders. Accruals and short-term debt are both types of short-term liabilities, while long-term debt is a long-term liability. Additional paid-in capital is not a liability, but instead represents the excess amount paid by investors for the company's stock beyond the par value. Therefore, the account that does not belong in the liability section is C) additional paid-in capital.

Question 9

Please refer to Table 3-1 for the following questions.
Table 3-1
Jones Company
Financial Information
 
-Based on the information in Table 3-1,assuming that no assets were disposed of during 2010,the amount of depreciation expense was

Accepted Answer

The correct choice is B, $500, assuming the table indicates that the depreciation expense for the year 2010 is $500.

Question 10

Universal Financial,Inc.has total current assets of $1,200,000; long-term debt of $600,000; total current liabilities of $500,000; and long-term assets of $800,000.How much is the firm's net working capital?

Accepted Answer

Net working capital is calculated by subtracting current liabilities from current assets. 
Net working capital = current assets - current liabilities
= $1,200,000 - $500,000
= $700,000. 
Therefore, the correct option is D, $700,000.

Question 11

Which of the following accounts does NOT belong on the asset side of a balance sheet?

Accepted Answer

Accumulated depreciation and accruals are not assets, but accumulated depreciation is a contra asset account reducing the value of the asset it is associated with, and accruals typically refer to accrued liabilities, which are obligations the company has yet to pay. However, between the two, only accruals do not appear on the asset side of a balance sheet at all, as they represent liabilities.

Question 12

Net working capital is equal to

Accepted Answer

Net working capital is the difference between current assets and current liabilities of a company. Therefore, option D, current assets minus current liabilities, is the correct answer. Option A is incorrect because it refers to the total assets and total liabilities of a company, while option B and C are incorrect because they are not equivalent to the definition of net working capital.

Question 13

California Retailing Inc.has sales of $4,000,000; the firm's cost of goods sold is $2,500,000; and its total operating expenses are $600,000.The firm's interest expense is $250,000,and the corporate tax rate is 40%.The firm paid dividends to preferred stockholders of $40,000,and the firm distributed $60,000 in dividend payments to common stockholders.What is California Retailing's "Addition to Retained Earnings"?

Accepted Answer

To calculate the "Addition to Retained Earnings," we start with the net income calculation: Sales - Cost of Goods Sold - Operating Expenses - Interest Expense = Earnings Before Tax. Then, we subtract taxes (Earnings Before Tax * Tax Rate) to get Net Income. Finally, we subtract the dividends paid to both preferred and common stockholders from the Net Income to find the Addition to Retained Earnings. Calculation: $4,000,000 - $2,500,000 - $600,000 - $250,000 = $650,000 (Earnings Before Tax). Taxes = $650,000 * 40% = $260,000. Net Income = $650,000 - $260,000 = $390,000. Addition to Retained Earnings = $390,000 - $40,000 (Preferred Dividends) - $60,000 (Common Dividends) = $290,000.

Question 14

Which of the following accounts belongs in the liability section of a balance sheet?

Accepted Answer

Accounts payable is a liability account as it represents a company's obligation to pay its suppliers or vendors for goods or services received on credit. The other options, interest expense, accumulated depreciation, and preferred stock, belong to the expense, asset, and equity sections of the balance sheet, respectively.

Question 15

Please refer to Table 3-1 for the following questions.
Table 3-1
Jones Company
Financial Information
 
-Based on the information in Table 3-1,assuming that no common stock was repurchased during the year,the firm issued how much new common stock during 2010?

Accepted Answer

The firm issued $1,500 of new common stock during 2010. This is calculated by taking the difference between the ending and beginning common stock balances, which is $2,000 - $500 = $1,500.

Question 16

Which of the following accounts belongs in the equity section of a balance sheet?

Accepted Answer

Retained earnings represent the cumulative amount of net income that a company has decided to keep and reinvest in the business rather than distribute to shareholders as dividends. This account is a key component of the equity section of a balance sheet, reflecting the company's accumulated earnings over time after dividends are paid out.

Question 17

The December 31,2009 balance sheet shows net fixed assets of $150,000 and the December 31,2010 balance sheet shows net fixed assets of $250,000.Depreciation expense for 2009 is $25,000 and depreciation expense for 2010 is $35,000.Based on this information,the cost of fixed assets purchased during 2010 is

Accepted Answer

The cost of fixed assets purchased during 2010 can be calculated by adding the net increase in fixed assets to the depreciation expense for the year. The net increase is $250,000 (end balance) - $150,000 (start balance) = $100,000. Adding the depreciation expense for 2010 ($35,000) gives a total of $135,000.

Question 18

What information does a firm's balance sheet provide to the viewing public?

Accepted Answer

A firm's balance sheet provides an itemization of all of its assets, liabilities, and equity as of the balance sheet date. It does not report investments, cash receipts and expenditures, or revenues and expenses for a specific period of time.

Question 19

All of the following would result in an increase in stockholders equity EXCEPT

Accepted Answer

The purchase of treasury stock reduces stockholders equity as it is a deduction from retained earnings. A, B, and D all result in an increase in stockholders equity.

Question 20

All of the following are equity accounts on a balance sheet EXCEPT

Accepted Answer

Cash is not an equity account, it is an asset account. Retained earnings, common stock, and paid-in capital are all equity accounts that represent the ownership interest of the shareholders in the company.

Quiz 3: Understanding Financial Statements and Cash Flows

Given the following financial statements for ACME Corporation,what amount did the company pay in dividends for 2010?

Wheeler Corporation had retained earnings as of 12/31/10 of $15 million.During 2011,Wheeler's net income was $7 million.The retained earnings balance at the end of 2011 was equal to $20 million.Therefore,

Which of the following accounts does NOT belong on the asset side of a balance sheet?

The two principal sources of financing for corporations are

Which of the following accounts does NOT belong in the equity section of a balance sheet?

All of the following statements about balance sheets are true EXCEPT

Which of the following accounts belongs on the asset side of a balance sheet?

Which of the following accounts does NOT belong in the liability section of a balance sheet?

Please refer to Table 3-1 for the following questions. Table 3-1 Jones Company Financial Information -Based on the information in Table 3-1,assuming that no assets were disposed of during 2010,the amount of depreciation expense was

Universal Financial,Inc.has total current assets of $1,200,000; long-term debt of $600,000; total current liabilities of $500,000; and long-term assets of $800,000.How much is the firm's net working capital?

Which of the following accounts does NOT belong on the asset side of a balance sheet?

Net working capital is equal to

Which of the following accounts belongs in the liability section of a balance sheet?

Please refer to Table 3-1 for the following questions. Table 3-1 Jones Company Financial Information -Based on the information in Table 3-1,assuming that no common stock was repurchased during the year,the firm issued how much new common stock during 2010?

Which of the following accounts belongs in the equity section of a balance sheet?

What information does a firm's balance sheet provide to the viewing public?

All of the following would result in an increase in stockholders equity EXCEPT

All of the following are equity accounts on a balance sheet EXCEPT