ACG-2021 Lecture Notes - Lecture 3: Current Liability, Sole Proprietorship, Accounting

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28 Apr 2017

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A financial statement that reports the assets and claims to those assets at a specific point in time. Common stock the total amount paid in by stockholders for the shares they purchase. A business organized as a separate legal entity having ownership divided into transferable shares of stock. Payments of cash from a corporation to its stockholders. Expenses the cost of assets consumed or services used in the process of generating revenues income statement. A financial statement that presents the revenues and expenses and resulting net income or net loss of a company for a specific period of time liabilities the debts and obligations of a business. Liabilities represent the amounts owed to creditors net income the amount by which revenues exceed expenses net loss the amount by which expenses exceed revenues partnership. A business owned by two or more persons associated as partners retained earnings the amount of net income retained in the corporation retained earnings statement.

Related Questions

1. Creditors' claims on the assets of a company are called: (Points : 2)

2. The primary objective of financial accounting is: (Points : 2)

To serve the decision-making needs of internal users

To provide financial statements to help external users analyze and interpret an organization's activities

To monitor and control company activitiesTo provide information on both the costs and benefits of managing products and services

To know what, when and how muchto produce

3. Assets created by selling goods and services on credit are: (Points : 2)

4. The debt ratio is used: (Points : 2)

To measure the amount of equity relative to the expenses

To reflect the risk associated with a company's debts

Only by banks when a business applies for a loan

To determine how much debt a firm should pay off

5. Net Income: (Points : 2)

Decreases equity

Represents the amount of assets owners put into a business

Equals assets minus liabilities

Is the excess of revenues over expenses

Represents the owners' claims against assets

6. Internal users of accounting information include: (Points : 2)

Shareholders

Customers

Creditors

Government regulators

Line Supervisor

7. Risk is: (Points : 2)

Net income divided by average total assets

The reward for investment

The uncertainty about the expected return that will be earned from an investment

Unrelated to expected return

8. An example of an operating activity is: (Points : 2)

Paying wages

Purchasing office equipment

Borrowing money from a bank

Selling stock

Paying off a loan

9. Which accounting assumption assumes that all accounting information is reported monthly or yearly? (Points : 2)

Business entity assumption

Monetary unit assumption

Value assumption

Cost assumption

Time period assumption

10. Distributions of assets by a business to its stockholders are called: (Points : 2)

QUESTION 1

The ownership of a corporation is represented by:

		shares of stock.
		the owner's capital account.
		the revenue account.
		cash in bank account.

QUESTION 2

How many classifications does a Capital Stock Account have?

		One
		Two
		Three
		Four

QUESTION 3

The equity contributed by stockholders and equity earned throughbusiness profits represent the stockholders' equity for a:

		partnership firm.
		sole proprietorship.
		corporation.
		none of these.

QUESTION 4

Retained earnings are a part of a/an:

		asset account.
		permanent account.
		stockholders' equity account.
		temporary account.

QUESTION 5

How many sections does an Income Statement have?

		Two
		Three
		Four
		Five

QUESTION 6

Net sales are related to the:

		net income section.
		gross profit on sales section.
		revenue section.
		cost of merchandise sold section.

QUESTION 7

Sales discount and sales return and allowance are:

		revenue accounts.
		contra revenue accounts.
		permanent accounts.
		contra expenses accounts.

QUESTION 8

The total cost related to merchandise purchases during anaccounting period is the:

		net purchase.
		cost of merchandise sold.
		cost of merchandise available for sale.
		beginning merchandise inventory.

QUESTION 9

The gross profit on sale is $65,000, and operating expenses is$35,000. What will be the operating profit?

		$65,000
		$35,000
		$100,000
		$30,000

QUESTION 10

A balance sheet has the following sections:

		Assets, liabilities, and stockholders' equity.
		Income, expenses, and stockholders' equity.
		Assets, liabilities, and income.
		Operating income, operating expenses, and stockholders'equity.

QUESTION 11

A cash flow statement is used to assess the:

		net increase or decrease of cash.
		net increases of cash only.
		net decrease of cash only.
		net profit or loss of business.

EXERCISE 15-2 Financial Ratios for Assessing Liquidity (L015-2] Comparative financial statements for Weller Corporation, a merchandising company, for the fiscal year ending December 31 appear below. The company did not issue any new common stock dur ing the year. A total of 800,000 shares of common stock were outstanding. The interest rate on the bond payable was 12%, the income tax rate was 40%, and the dividend per share of common stock was $0.40. The market value of the company's common stock at the end of the year was $18. All of the company's sales are on account. Weller Corporation Comparative Balance Sheet (dollars in thousands) This Year Last Year Assets Current assets: Cash................... Accounts receivable, net ......... Inventory ..................... Prepaid expenses .............. Total current assets ............... Property and equipment: Land ............ Buildings and equipment, net ........ Total property and equipment. Total assets ........ $ 1,280 12,300 9,700 1,800 25,080 $ 1,560 9,100 8,200 2,100 20,960 6,000 19,200 25,200 $50,280 6,000 19,000 25,000 $45,960 .... $ 9,500 600 300 10,400 $ 8,300 700 300 9,300 Liabilities and Stockholders' Equity Current liabilities: Accounts payable.. Accrued liabilities .......... Notes payable, short term ........ Total current liabilities ......... Long-term liabilities: Bonds payable ............ Total liabilities .............................. Stockholders' equity: Common stock ... Additional paid-in capital ...... Total paid-in capital ............... Retained earnings ........ . Total stockholders' equity .. Total liabilities and stockholders' equity .......... 5,000 15,400 5,000 14,300 800 4,200 800 4,200 5,000 29,880 34,880 $50,280 5,000 26,660 31,660 $45,960 Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Last Year $79,000 52,000 $74,000 48,000 26,000 27,000 8,500 12.000 Sales ..... . Cost of goods sold ........ Gross margin .......................... Selling and administrative expenses: Selling expenses ... Administrative expenses ................ Total selling and administrative expenses.... Net operating income.... Interest expense.......... Net income before taxes ................. Income taxes ........ Net Income .......... Dividends to common stockholders ......... Net income added to retained eamings ...... Beginning retained earnings .............. Ending retained earnings ................. 20,500 6,500 600 5,900 2,360 8,000 11,000 19,000 7,000 600 6,400 2,560 3,840 3,540 320 320 3,220 26,660 $29,880 3,240 23,420 $26,660 Required: Compute the following financial data and ratios for this year. 1. Working capital. 2. Current ratio. 3. Acid-test ratio.

ACG-2021 Lecture Notes - Lecture 3: Current Liability, Sole Proprietorship, Accounting

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