Financial Accounting Ch.1 - Statements and Business Statements

Which of the following is an expense on the income statement?

Cost of goods sold

Which of the following accounts would not be reported on the balance sheet?

Dividends

Which of the following statements about financial statements and components is correct?

A corporation's net income does not necessarily equal its net cash flow from operations.

Which of the following properly describes the impact on the financial statements when a company borrows $23,000 from a local bank?

Liabilities increase $23,000.

What financial statement would you look at to determine the dividends declared by a business?

Statement of stockholders' equity

Which of the following correctly describes a particular financial statement?

An income statement covers a period of time.

Duck Corporation's retained earnings increased $41,400 during the current year. What was Duck's current year net income or loss given that Duck declared $51,400 of dividends during this year?

Net income was $92,800.

Anchor Corporation has provided the following information for its most recent year of operation:

Revenues earned were $60,900, of which $6,300 were uncollected at the end of the year.

Operating expenses incurred were $24,300, of which $5,100 were unpaid at the end of the year.

Dividends declared were $7,500, of which $2,700 were unpaid at the end of the year.

Income tax expense is $10,980.

What is the amount of net income reported on Anchor's income statement?

$25,620

Assets, liabilities, and stockholders' equity are all found within which of the following financial statements?

Balance sheet

True or false? The normal balance for an asset account is a debit and the normal balance for a liability account is a credit.

True

Which of the following correctly describes retained earnings?

It is the cumulative earnings of a company less dividends declared.

True or false? The current assets section of a balance sheet includes both inventory and prepaid expenses.

True

Financing activities

burrowing or paying back money to lenders and receiving additional funds from stockholders or paying them dividends

Balance sheet

reports economic resources it owns and the sources of financing for those resources

Income statement

reports the performance of a business. How much goods they sell for more than their cost to produce and sell

Statement of stockholders’ equity

reports additional contributions from or payments to investors and the amount of income the company reinvested for future growth

statement of cash flows

reports a business’ ability to generate cash and how it was used

The top of a balance sheet includes

Name of entity, title of statement, specific date of the statement, unit of measure

Assets

Resources controlled by the company. Cash, accounts receivable, inventories, property-plant-equipment,

Assets = Liabilities + Stockholders’ Equity

basic accounting equation

Liabilities

Sources of financing for company’s resources. Liabilities, accounts payable, notes payable to bank

Stockholders’ equity

indicates the amount of financing provided by owners of the business and reinvested earnings. Common stock and retained earnings

Common stock

Investment of cash and other assets in the business by the stockholders

Retained earnings

the amount of earnings (profits) reinvested in the business

How to find total stockholders’ equity?

the sum of common stock plus the retained earnings

True or false? The balance sheet reports at a certain date?

True

True or false? The income statement reports for a specific time period

True

Do revenues have to be received to be counted?

No, revenues are expected to be received for goods, whether or not the customer has paid for the goods

Net income from the income statement results in an ___ in ending retained earnings on the statement of stockholders’ equity

increase

Ending retained earnings from the statement of stockholders’ equity is one of the two components of stockholders equity on the ____ _____

balance sheet

FASB creates GAAP

Financial Accounting Standards Board sets the underlying rules of accounting in the U.S. Those rules are called the Generally Accepted Accounting Principles

How many financial statements do organizations need to prepare?

4

Marco provided $30,000 to Pizza Pete in exchange for ownership shares. Consequently, Pizza Pete recognizes _____ ____ as part of shareholders’ equity.

common stock

On which financial statements do net income appear?

income statement and statement of stockholders’ equity