33:010:272 Lecture Notes - Lecture 2: Retained Earnings, Net Income, Income Statement

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31 Jan 2019

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Stockholders" equity column is effect on stockholders" equity. Cash decreases but equipment increases, so now net change. Placed ad in paper - incur expense but had not paid it yet. Recognize revenue when service is performed not when revenue is. Service performed: assets increase and stockholders" equity collected increases. Increase in cash and decrease in accounts receivable. Dividend is when company pays their shareholders part of the profit. How much income has been retained since inception. For a new business that was just started this month, it equals 0. End amount = net income - dividends. Add all of these to get total assets. Liabilities + stockholders" equity to get total. Profitability of company"s operations over a period of time. Does not include investment and dividend transactions. Reports changes in retained earnings for period of time. Shows assets, liabilities, and stockholders" equity at a point in time. Total assets must equal liabilities plus stockholders" equity.

Related Questions

Exercise 3-2 Blossom Company entered into these transactions during May 2017, its first month of operations. 1. Stockholders invested $33,500 in the business in exchange for common stock of the company 2. Purchased computers for office use for $27,200 from Ladd on account. 3. Paid $3,700 cash for May rent on storage space. 4. Performed computer services worth $18,000 on account. 5. Performed computer services for Wharton Construction Company for $3,200 cash. 6. Paid Western States Power Co. $8,900 cash for energy usage in May. 7. Paid Ladd for the computers purchased in (2). 8. Incurred advertising expense for May of $1,700 on account. 9. Received $13,700 cash from customers for contracts billed in (4). Using the following tabular analysis, show the effect of each transaction on the accounting equation. Put explanations for changes to Stockholdersâ Equity in the far right column. (If a transaction causes a decrease in Assets, Liabilities or Stockholders' Equity, place a negative sign (or parentheses) in front of the amount entered for the particular Asset, Liability or Equity item that was reduced. See Illustration 3-3 for example.) Assets = Liabilities + Stockholdersâ Equity Cash + Accounts Receivable + Equipment = Accounts Payable + Common Stock + Retained Earnings Revenues - Expenses (1) $ $ $ $ $ $ $ (2) (3) (4) (5) (6) (7) (8) (9) $ $ $ = $ $ $ $

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NEED ASAP PLEASE

Question 1

Which one of the following is not an externaluser of accounting information?

		Customers
		Investors
		Regulatory agencies
		All of these are external users

3 points

Question 2

The first step in solving an ethical dilemma is to

		identify and analyze the principal elements in thesituation.
		identify the alternatives.
		recognize an ethical situation and the ethical issuesinvolved.
		weigh the impact of each alternative on variousstakeholders.

3 points

Question 3

Generally accepted accounting principles are

		income tax regulations of the Internal Revenue Service.
		standards that indicate how to report economic events.
		theories that are based on physical laws of the universe.
		principles that have been proven correct by academicresearchers.

3 points

Question 4

Which of the following events is not a businesstransaction?

		Issuance of stock in exchange for cash.
		Hired employees.
		Incurred utility expenses for the month.
		Earned revenue for services provided.

3 points

Question 5

When assets are distributed to the owners of a corporation,these distributions are termed

		depletions.
		consumptions.
		dividends.
		a credit line.

3 points

Question 6

If total liabilities increased by $8,000, then

		assets must have decreased by $8,000.
		stockholders' equity must have increased by $8,000.
		assets must have increased by $8,000, or stockholders' equitymust have decreased by $8,000.
		assets and stockholders' equity each increased by $4,000.

3 points

Question 7

If total liabilities increased by $30,000 and stockholders'equity increased by $20,000 during a period of time, then totalassets must change by what amount and direction during that sameperiod?

		$50,000 decrease
		$10,000 decrease
		$10,000 increase
		$50,000 increase

3 points

Question 8

Misra Company compiled the following financial information as ofDecember 31:

Revenues	$ 340,000
Retained Earnings, Beginning	$ 60,000
Equipment	$ 80,000
Expenses	$ 250,000
Cash	$ 90,000
Dividends	$ 20,000
Supplies	$ 10,000
Accounts payable	$ 40,000
Accounts receivable	$ 70,000
Common Stock	$ 80,000

Misra's assets on December 31 are

		$180,000.
		$250,000.
		$360,000.
		$ 490,000.

3 points

Question 9

Mofro's Computer Repair Shop started the year with total assetsof $300,000 and total liabilities of $200,000. During the year, thebusiness recorded $500,000 in computer repair revenues, $300,000 inexpenses, and Mofro paid dividends of $50,000. Stockholders' equityat the end of the year was

		$200,000.
		$100,000.
		$250,000.
		$300,000.

3 points

Question 10

A balance sheet shows

		assets, liabilities, and stockholders' equity.
		expenses, dividends, and stockholders' equity.
		revenues, expenses, and dividends.
		revenues, liabilities, and stockholders' equity.

3 points

Question 11

At September 1, Foli Co. reported retained earnings of $136,000.During the month, Foli generated revenues of $20,000, incurredexpenses of $12,000, purchased equipment for $5,000 and paiddividends of $2,000. What is the amount of retained earnings atSeptember 30?

		$136,000
		$142,000
		$8,000
		$137,000

3 points

Question 12

Grayton Industries purchased supplies for $1,000. The Companypaid $500 in cash and agreed to pay the balance in 30 days. Thejournal entry to record this transaction would include a debit toan asset account for $1,000, a credit to a liability account for$500. Which of the following would be the correct way to completethe recording of the transaction?

		Credit an asset account for $500.
		Credit the Retained Earnings account for $500.
		Credit another liability account for $500.
		Debit the Retained Earnings account for $500.

3 points

Question 13

Radio Moscow Industries purchased supplies for $1,000. They paid$400 in cash and agreed to pay the balance in 30 days. The journalentry to record this transaction would include a debit to an assetaccount for $1,000, a credit to a liability account for $600. Whichof the following would be the correct way to complete the recordingof the transaction?

		Credit an asset account for $400.
		Credit another liability account for $400.
		Credit the retained earnings account for $400.
		Debit the retained earnings account for $400.

3 points

Question 14

A credit to a liability account

		must be accompanied by a debit to an asset account.
		indicates an increase in the amount owed to creditors.
		is an error.
		indicates a decrease in the amount owed to creditors.

3 points

Question 15

In recording business transactions, evidence that an accountingtransaction has taken place is obtained from

		business documents.
		the Internal Revenue Service.
		the public relations department.
		the SEC.

3 points

Question 16

On June 1, Leno Inc. buys a copier machine for her business andfinances this purchase with cash and a note. When journalizing thistransaction, the company's accountant will

		make a simple entry.
		use two journal entries.
		make a compound entry.
		list the credit entries first, which is proper form for thistype of transaction.

3 points

Question 17

A three column form of account is so named because it hascolumns for

		debit, credit, and balance.
		debit, credit, and date.
		debit, credit, and account name.
		debit, credit, and reference.

3 points

Question 18

The first step in designing a computerized accounting system isthe creation of the

		general ledger.
		general journal.
		trial balance.
		chart of accounts.

3 points

Question 19

Chik Chik Company showed the following balances at the end ofits first year:

Cash	$ 6,000
Prepaid insurance	$ 9,400
Accounts receivable	$ 7,000
Accounts payable	$ 5,600
Notes payable	$ 8,400
Common stock	$ 2,800
Dividends	$ 1,400
Revenues	$ 44,000
Expenses	$ 35,000

What did Chik Chik Company show as total credits on its trialbalance?

		$51,400
		$60,800
		$62,200
		$70,200

3 points

Question 20

Which of the following time periods would notbe referred to as an interim period?

		Monthly
		Quarterly
		Semi-annually
		Annually

The realizationprinciple indicates that revenue usually should be recorded inthe accounting records:

Question 1 options:

A)	when cash is collected from customers

B)	when goods are sold or services are rendered to customers

C)	at the end of the accounting period

D)	only when the revenue can be matched by an equal dollar amountof expenses

E)	both (b) and (d) are correct

Which of the following account(s) would be part ofworking capital?

Question 2 options:

A)	accounts payable

land

supplies

D)	retained earnings

E)	cost of goods sold

F)	two of the above accounts are part of working capital

G)	three of the above accounts are part of working capital

H)	four of the above accounts are part of working capital

I)	all of the above accounts are part of working capital

On May 17, Buckeye Corporation performed $800 ofservices for ABC Company, a customer. ABC paid for one-half ofthe
bill on May 17 and agreed to pay the remainder within 30 days. OnJune 9, ABC paid the remaining amount owed. Which
of the following journal entries would ABC Company make onJune 9?

Question 3 options:

A)	debit accounts receivable $400 and credit cash $400

B)	debit cash $400 and credit service revenue $400

C)	debit accounts payable $400 and credit service revenue$400

D)	debit cash $400 and credit accounts payable $400

E)	debit cash $400 and credit accounts receivable $400

F)	debit accounts payable $400 and credit cash $400

The following information is available for XYZ Company: January 1, 2003 December 31, 2003Assets $500,000 $700,000Liabilities $300,000 $400,000 Equity $200,000 $300,000
XYZ Company reported a net income of $50,000 during 2003.
XYZ Company's return on equity (ROE) for 2003 was equal to:

Fletcher, Inc. reported an ending notes payablebalance of $57,000. An examination of the notes payablet-account
revealed debits of $25,000 and credits of $39,000 during the year.The beginning notes payable balance for Fletcher,
Inc. was equal to:

Question 5 options:

A)	$71,000 credit

B)	$71,000 debit

C)	$43,000 debit

D)	$43,000 credit

E)	none of the above are correct

Indicate the effect each of the following transactions has onthe accounting equation (i.e., assets, liabilities, and equity).Enter the number corresponding to your answer in the box provided.Answer choices may be used once, more than once, or not atall.

Question 6 options:

	ABC Company performed $2,000 of delivery servicesfor a customer who agreed to pay next month
	ABC Company paid $2,000 cash to the bank; $1,800of this amount was the repayment of a bank loan and the other $200paid was interest
	ABC Company made the adjusting entry to accrueincome taxes owed but not yet paid
	ABC Company purchased equipment for $3,000cash

1.	assets increase; liabilities increase; equitydecrease
2.	assets decrease; liabilities decrease; equity noeffect
3.	assets increase; liabilities no effect; equityincrease
4.	assets no effect; liabilities no effect; equity noeffect
5.	assets no effect; liabilities increase; equitydecrease
6.	assets increase; liabilities increase; equityincrease
7.	assets increase; liabilities increase; equity noeffect
8.	assets no effect; liabilities decrease; equityincrease
9.	assets decrease; liabilities no effect; equitydecrease
10.	assets decrease; liabilities decrease; equitydecrease

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33:010:272 Lecture Notes - Lecture 2: Retained Earnings, Net Income, Income Statement

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