Question 1

Which of the following is $\bold{not}$ true?  $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $HOOPER'S HOPS
 $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $Statement d Retained Eamings
 $\quad $ $\quad $ $\quad $ $\quad $ $\quad $For the Year Ended December 31, 2008
$\begin{array}{|l|r|}
\hline \text { Retained Earnings, January 1, 2008 } & \$ 167,800 \
\hline \text { Net Income for 2008 } & 219,100 \
\hline \text { Dividends for } 2008 & \underline{(36,400)} \
\hline \text { Retained Earnings, December 31,2008 } & \underline{\$ 350,500} \
\hline  
\end{array}$

Accepted Answer

Retained earnings are the amount of profits that have been kept by the company since the company started, not the amount of distributions made to shareholders. Thus, statement D is not true. Statements A, B, and C are all true.

Question 2

Which of the following is a publicly accountable profit-oriented enterprise?

Accepted Answer

A publicly traded corporation is the only option listed that fits the criteria of being a publicly accountable profit-oriented enterprise. Crown corporations are government-owned and may not prioritize profit as their main goal, while a sole proprietorship and partnership are not publicly traded and may not have the same level of accountability to shareholders.

Question 3

The Whackem-Smackem Software Company sold $11 million of computer games in its first year of operations.The company received payments of $7.5 million for these computer games.The company's income statement would report:

Accepted Answer

The income statement would report the total sales revenue generated by the company, which is $11 million, not just the amount received in payments. Therefore, choice D is the correct answer. Choices A, B, and C are incorrect because they do not accurately reflect the company's sales and financials.

Question 4

Find the missing data.  $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $CINNAMON AND SPICE, INC.
 $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $Income Statement
 $\quad $ $\quad $ $\quad $ $\quad $ $\quad $For the Year Ended December 31, 2008
$\begin{array}{l}
\begin{array}{|c|r|}
\hline\text { Revenues }&\ 
\hline \text { Sales Revenue } & \$ 3,810,200 \
\hline \text { Total Revenues } & ? \
\hline & \
\hline \text { Expenses } & ? \
\hline \text { Wages Expense } & 1,314,900 \
\hline \text { Advertising and Promotion Expenses } & 482,200 \
\hline \begin{array}{c}
\text { Other Selling and Administrative } \
\text { Expenses }
\end{array} & ? \
\hline \text { Interest Expense } & 225,600 \
\hline \text { Income Tax Expense } & 117,700 \
\hline \text { Other Expenses } & 253,700 \
\hline \text { Total Expenses } & \underline{3,445,600} \
\hline & \$?\
\hline
\end{array}
\end{array}$

Accepted Answer

Total revenues are equal to Sales Revenue since no other revenue sources are listed, making it $3,810,200. Other Selling and Administrative Expenses can be calculated by subtracting the listed expenses from the Total Expenses, resulting in $1,051,500. Net income is the difference between Total Revenues and Total Expenses, which is $364,600.

Question 5

Which of the following statements is true?

Accepted Answer

The income statement and the statement of cash flows both show the results of a company's operating activities, but they do so in different ways. The income statement shows the company's revenues and expenses, leading to net income. The statement of cash flows shows cash inflows and outflows from operating, investing, and financing activities, highlighting how operating activities impact the company's cash position.

Question 6

During its first year of operations,Widgets Incorporated reported sales revenue of $386,000 but collected only $303,000 from customers.The amount to be reported as accounts receivable at the end of the year is:

Accepted Answer

The difference between sales revenue and cash collected is $386,000 - $303,000 = $83,000. This means that $83,000 worth of sales have not been paid for yet, which is the amount of accounts receivable at the end of the year. Therefore, the correct answer is option D.

Question 7

Dividends are reported on the:

Accepted Answer

Dividends are reported on the statement of retained earnings because they represent the portion of earnings that is distributed to shareholders instead of being retained by the company. They are not reported on the income statement or balance sheet because they do not represent revenue or an asset/liability.

Question 8

A company's balance sheet contained the following information: $$\begin{array} { | l | r | l | r | } 
\hline \text { Contributed Capital } & \$ 12,000 & \text { Total Assets } & \$ 176,000 \
\hline \text { Accourts Payable } & \$ 64,000 & \text { Retained Earrings } & \$ 28,000 \
\hline
\end{array}$$ Assuming Notes Payable is the only other item on the balance sheet:

Accepted Answer

The total liabilities and equity must equal the total assets, so we can set up the equation: 
Contributed Capital + Accounts Payable + Retained Earnings + Notes Payable = Total Assets
$12,000 + $64,000 + $28,000 + Notes Payable = $176,000
Notes Payable = $72,000. Therefore, the correct answer is C.

Question 9

In which of the following business organization the owners could only lose the money they invested in the business?

Accepted Answer

In a corporation, the owners are shareholders who have limited liability, meaning they can only lose the money they contributed to the company and are not personally responsible for the company's debts. Crown corporations are owned by the government, sole proprietorships are owned by one person who is personally liable for the company's debts, and partnerships involve shared liability among the partners.

Question 10

$\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $GIL'S FISHING EQUIPMENT, INC.
 $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $Statement of Cash Flows
 $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $For the Year Ended December 31, 2008
\(\begin{array}{l}
\begin{array}{|c|c|}
\hline\text { Cash flows from operating activities }\
\hline \text { Cash collected from customers } & \text { A } \
\hline \text { Cash paid to suppliers and employees } & \text { B } \
\hline \text { Cash paid for other operating activities } & \text { C } \
\hline \text { Net cash flow from operating activities } & \
\hline \text { Cash flows from investing activities } & \
\hline \text { Cash paid to purchase equipment and other assets } & \text { D } \
\hline \begin{array}{c}
\text { Cash received from selling equipment and other } \
\text { assets }
\end{array} & \underline{E} \
\hline \text { Net cash flow from investing activities } & \
\hline \text { Cash flows from financing activities } & \
\hline \text { Cash paid on notes payable } & \text { F } \
\hline \text { Cash paid for dividends } & \underline{G} \
\hline \text { Net cash flow from financing activities } & \
\hline \text { Net change in cash duringthe year } & \
\hline \text { Cash at beginning of year } & \
\hline \text { Cash at end of year } &\
\hline
\end{array}
\end{array}\) 
-Refer to the above table.In the statement of cash flows which letters represent cash outflows?

Accepted Answer

Cash outflows are the cash payments made by the company. Based on the given table, the following letters represent cash outflows:

B - Cash paid to suppliers and employees
C - Cash paid for other operating activities
D - Cash paid to purchase equipment and other assets
F - Cash paid on notes payable
G - Cash paid for dividends

Therefore, the correct choice is A.

Question 11

In the statement of cash flows,the company's payment of a $1,900 electric bill would be classified as:

Accepted Answer

Payment of an electric bill is a regular operational expense for the company and thus, it is categorized as an operating cash outflow in the statement of cash flows.

Question 12

Which of the following would not affect a company's net income?

Accepted Answer

Paying a dividend to shareholders does not affect a company's net income. Dividends are distributions of earnings to shareholders and are recorded directly against retained earnings, not as an expense on the income statement.

Question 13

The purpose of a statement of retained earnings is to:

Accepted Answer

A statement of retained earnings reports how the profits of a company have been distributed to shareholders or retained in the business. It shows changes in retained earnings from the beginning of the period to the end, and explains the reasons for those changes. It is not used to estimate current asset values, show cash flows, or detail specific revenues and expenses.

Question 14

$\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $GIL'S FISHING EQUIPMENT, INC.
 $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $Statement of Cash Flows
 $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $For the Year Ended December 31, 2008
\(\begin{array}{l}
\begin{array}{|c|c|}
\hline\text { Cash flows from operating activities }\
\hline \text { Cash collected from customers } & \text { A } \
\hline \text { Cash paid to suppliers and employees } & \text { B } \
\hline \text { Cash paid for other operating activities } & \text { C } \
\hline \text { Net cash flow from operating activities } & \
\hline \text { Cash flows from investing activities } & \
\hline \text { Cash paid to purchase equipment and other assets } & \text { D } \
\hline \begin{array}{c}
\text { Cash received from selling equipment and other } \
\text { assets }
\end{array} & \underline{E} \
\hline \text { Net cash flow from investing activities } & \
\hline \text { Cash flows from financing activities } & \
\hline \text { Cash paid on notes payable } & \text { F } \
\hline \text { Cash paid for dividends } & \underline{G} \
\hline \text { Net cash flow from financing activities } & \
\hline \text { Net change in cash duringthe year } & \
\hline \text { Cash at beginning of year } & \
\hline \text { Cash at end of year } &\
\hline
\end{array}
\end{array}\) 
-Refer to the above table.In the statement of cash flows which letters represent cash inflows?

Accepted Answer

Cash inflows in a statement of cash flows include cash collected from customers (A) and cash received from selling equipment and other assets (E).

Question 15

If XYZ Company had $12 million in revenue and net income of $3 million then its:

Accepted Answer

Net income is revenue minus expenses, so if net income is $3 million and revenue is $12 million, then expenses must have been $9 million ($12 million - $3 million = $9 million). The information given does not provide any information about the company's assets.

Question 16

Assets are listed on the balance sheet in order of:

Accepted Answer

Assets are typically listed on the balance sheet in order of liquidity, meaning how easily and quickly they can be converted into cash. This makes it easier for investors and creditors to determine the company's ability to pay its debts and fund its operations.

Question 17

If a company uses $50,000 of its cash to buy an asset then:

Accepted Answer

When a company uses its cash to buy an asset, one asset (cash) decreases while another asset (the purchased asset) increases by the same amount, leaving the total assets unchanged. Liabilities and shareholders' equity are not affected by this transaction.

Question 18

In Canada,Generally Accepted Accounting Principles (GAAP)are established:

Accepted Answer

Generally Accepted Accounting Principles (GAAP) in Canada are established by the Chartered Professional Accountants of Canada (CPA Canada) through their Handbook of Accounting.

Question 19

During 2007,a company's assets rise $56,000 and its liabilities rise $38,000.If no dividend is paid and no further capital is contributed,shareholders' equity would:

Accepted Answer

Shareholders' equity is calculated as assets - liabilities. If assets rise $56,000 and liabilities rise $38,000, then shareholders' equity would rise by $18,000 ($56,000 - $38,000).

Question 20

Which of the following would be reported on the income statement for 2005?

Accepted Answer

Supplies that were purchased and used in 2005 but paid for in 2004 are reported on the income statement for 2005 because expenses are recognized when incurred (used), not when paid. This aligns with the matching principle of accounting, which states that expenses should be matched with the revenues they help to generate in the period in which those revenues are recognized. Choices A and B are incorrect because supplies paid for in 2005 but used in 2004 do not affect the 2005 income statement, and dividends paid are not an expense but a distribution of earnings and are not reported on the income statement.

Quiz 1: Business Decisions and Financial Accounting