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ADMS 2500 Study Guide - Final Guide: Retained Earnings, Net Income, Cash Flow

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ivorycat684
6 Dec 2019
School
York University
Department
Administrative Studies
Course
ADMS 2500
Professor
Nelson Waweru

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ADMS 2500 Full Course Notes
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Related Questions

QUESTION 1

Accounting is an information and measurement system thatidentifies, records, and communicates relevant, reliable, andcomparable information about an organization's businessactivities.
True
False

QUESTION 2

We use the accounting equation to identify what a company ownsand owes. The accounting equation is:
Assets = Liabilities + Equity
Assets = Liabilities – Equity
Assets = Liabilities + Revenues
Equity = Liabilities + Revenues
QUESTION 3

______ are beliefs that distinguish right from wrong. Thesebeliefs are accepted standards of gauging good and dishonestbehavior.
Accounting Standards
Ethics
Generally Accepted Accounting Principles
FASB
QUESTION 4

The _____ is a collection of all accounts within a company’saccounting system.
General Journal
Chart of Accounts
General Ledger
Balance Sheet
QUESTION 5

We use the accounting equation to identify what a company ownsand owes. _____ are resources a company owns or controls, _____ areclaims creditors have against a company’s assets, and _____ is theowner’s claim on a company’s assets.

QUESTION 6

In double entry accounting a credit to an asset account willrepresent an increase in the asset account balance; and a debitwill represent a decrease in the asset account balance.
True
False
QUESTION 7

The purchase of supplies on credit will ____ assets and ____liabilities.
Increase, decrease
Decrease, increase
Decrease, decrease
Increase, increase
QUESTION 8

During the accounting cycle, we analyze transactions toprepare statements.
True
False
QUESTION 9

The supplies account for a company has a $1,000 debit balanceat the beginning of the year. Supplies of $2,000 were purchasedduring the year and debited to the Supplies account. A December 31physical count shows $500 of supplies remaining at the end of theyear. Assume no other adjusting entries are made during the year.Using the 3-step process for creating adjusting entries, calculatethe adjustment amount for supplies (no journal entry isrequired).
$1,000 adjustment
$2,000 adjustment
$2,500 adjustment
$3,000 adjustment
QUESTION 10

During the accounting cycle, to complete step 7 youwould:
Prepare post-closing trial balance--Test clerical accuracy ofthe closing procedures.
Prepare adjusted trial balance--Summarize adjusted ledgeraccounts and amounts.
Prepare statements--Use adjusted trial balance to preparefinancial statements.
Close--Journalize and post entries to close temporaryaccounts.
QUESTION 11

The three financial statements that should be prepared duringthe accounting cycle are the:
Balance sheet, adjusted trial balance, income statement
Balance sheet, unadjusted trial balance, Statement of Owner’sEquity
Income statement, adjusted trial balance, Statement of Owner’sEquity
Balance sheet, Income statement, Statement of Owner’sEquity

QUESTION 12

An optional working paper, which is not a required report oran accounting record, but is used to prepare a company's unadjustedtrial balance, adjusting entries, adjusted trial balance, andfinancial statements is a(n):
Adjusted trial balance
Worksheet
Post-closing trial balance
Unadjusted trial balance
General ledger
QUESTION 13

The two goals for completing the closing process are:
To identify accounts for closing and record the closingentries
To journalize and post transactions
To post transactions and prepare post-closing trialbalance
To reset revenues, expenses, and withdrawal account balancesto zero at the end of each period, and help summarize an accountingperiod’s revenues and expenses.
QUESTION 14

Fill in the Blank: The _____ describes a company’s financialposition – by the types and amounts of assets, liabilities, andequity -- at a point in time.

QUESTION 15

Return on Assets is useful in evaluating management, analyzingand forecasting profits, and planning activities.
True
False

QUESTION 16

The Income Statement:
Identifies cash inflows (receipts) and cash outflows(payments) over a period-of-time.
Summarize adjusted ledger accounts and amounts
Describes a company’s revenues and expenses along with theresulting net income or net loss -- over a period-of-time due toearnings activities
Resets revenues, expenses, and withdrawal account balances tozero at the end of each period.
QUESTION 17

An internal control system consists of the policies andprocedures used to:
Protect assets and Ensure reliable accounting
Urge adherence to company policies and Promote efficientoperations
All of the above
None of the above.
QUESTION 18

The cost-benefit principle is the second limitation of_______.
Bank reconciliations
Petty cash controls
Voucher system of controls
Internal controls
QUESTION 19

The Unadjusted Trial Balance columns of a company's work sheetshows the Store Supplies account with a balance of $750. TheAdjustments columns shows a credit of $425 for supplies used duringthe period. The amount shown as Store Supplies in the Balance Sheetcolumns of the work sheet is:
$325 debit
$325 credit
$425 debit
$425 credit
QUESTION 20

A company shows a $600 balance in Prepaid Rent in theUnadjusted Trial Balance columns of the work sheet. The Adjustmentscolumns show expired rent of $200. This adjusting entry resultsin:
$200 decrease to net income
$200 increase to net income
$200 different between the debit and credit columns of theUnadjusted Trial Balance
An error in the Balance Sheet

QUESTION 21

This semester we have discussed four major financialstatements. List the 4 financial statements and describe them. Makesure to include how they flow together.

QUESTION 22

Explain the purpose of adjusting entries at the end of aperiod.

Prepare an Income Statement, Balance Sheet, and Statement of Changes in Shareholder's Equity. Analyze the results. The following information was obtained from the records of Shae, Inc.:

Merchandise Inventory $132,000
Notes Payable, long term $150,000
Sales $450,000
Buildings and Equipment $252,000
Selling, general, and administrative expenses $36,000
Accounts Receivable $60,000
Common Stock (21,000 shares) $105,000
Income tax expense $42,000
Cash $96,000
Retained Earnings, 1/1/13 $64,500
Accrued Liabilities $9,000
Cost of Goods Sold $270,000
Accumulated Depreciation $108,000
Interest Expense $24,000
Accounts Payable $45,000
Dividends declared and paid during 2013 $19,500

Except as otherwise indicates, assume that all Balance Sheet items reflect account balances at December 31, 2013, and that all Income Statement items reflect activities that occurred during the year ended December 31, 2013. There were no changes in paid-in capital during the year.

 

Required:

a. Prepare an Income Statement and Statement of Changes in Shareholder's Equity for the year ended December 31, 2013, and a Balance Sheet at December 31, 2013, for Shae, Inc.

Based on the financial statements that you have prepared for part a, answer the questions in parts b-e. Provide brief explanations for each of your answers and state any assumptions you believe are necessary to ensure that your answers are correct.

b. What is the company's average income tax rate?

c. What interest rate is charged on long-term debt?

d. What is the ar value per share of common stock?

e. What proportion of the company's earnings is used for dividends? 

Create a Multi-Step Income Statement, Statement of Retained Earnings, Classified Balance Sheet and Statement of Cash Flows. These financial statements are being prepared for the fiscal month ending May 31st. Build the financial statements within the given blanks. The month of May's worksheet is to be utilized while creating the financial statements. Additional information folows:

-For the Statement of Retained Earnings, assume a beginning balance in the Retained Earnings account of $366,000. Also assume that $345,500 of dividends were declared.

-For the Classified Balance Sheet, assume that the company only has common stock and that the value of common stock at par value equals $30,200. Further assume that the value of paid-in-capital excess of par on the common stock has a value of $1,560,000.

-For the Statement of Cash Flow assume that the company purchased equipment with $200,000 cash. The company sold land and received $429,000 in cash. Also assume the following ending balances from the last financial period: Cash: $345,091; A/R: $525,000; Inventory: $836,000; Office Supplies: $5,000; A/P: $675,800. Additionally, the company paid cash dividends during the period of $345,500. Create the Statement of Cash Flow using the Indirect Method.

Worksheet for May

Unadjusted Adjusted Income Bal. Sheet
Trial Balance Adjustments Trial Balance Statement Stmt. Own. Equity
Account Title Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Cash 250,000 250,000 250,000
Accounts Receivable 280,000 280,000 280,000
Allowance for Doubtful Accounts 12,500 2,415 14,915 14,915
Merchandise Inventory 745,000 5,000 740,000 740,000
Office Supplies 2,300 735 1,565 1,565
Prepaid Insurance 7,000 3,500 3,500 3,500
Land 1,628,803 1,628,803 1,628,803
Building 1,000,000 1,000,000 1,000,000
Accumulated Depreciation - Building 700,000 700,000 700,000
Equipment & Furniture - Warehouse 7,900 7,900 7,900
Accumulated Depreciation - Equip & Furn. - Warehouse 5,643 775 6,418 6,418
Equipment & Furniture - Office 7,421 7,421 7,421
Accumulated Depreciation - Equip & Furn. - Office 2,000 825 2,825 2,825
Accounts Payable 800,000 800,000 800,000
Wages Payable 0 0 0
Interest Payable 2,500 2,500 2,500
Dividends Payable 0 0 0
Unearned Rent 7,400 2,143 5,257 5,257
Notes Payable 200,000 200,000 200,000
Bonds Payable 90,000 90,000 90,000
Mortgage (Warehouse) Payable 197,000 197,000 197,000
Common Stock, $1 Par, 100,000 Authorized; 60,000 shares Issued/Outstanding 30,200 30,200 30,200
Paid In Capital - Excess of Par 1,560,000 1,560,000 1,560,000
Retained Earnings 20,500 20,500 289,574 310,074
Treasury Stock 0 0 0
Sales 1,067,500 1,067,500 1,067,500
Cost of Goods Sold 636,700 5,000 641,700 641,700
Wage Expense (hourly workers) 10,000 10,000 10,000
Salaries Expense (Exempt Staff) 32,100 32,100 32,100
Marketing Expense 64,000 64,000 64,000
Travel and Entertainment Expense 1,250 1,250 1,250
Bad Debt Expense 0 2,415 2,415 2,415
Property Tax Expense 1,455 1,455 1,455
Office Maintenance & Repair Expense 0 0 0
Legal Expenses 6,340 6,340 6,340
Insurance Expense 0 3,500 3,500 3,500
Utilities Expense 2,000 2,000 2,000
Office Supplies Expense 0 735 735 735
Telecommunications Expense 754 754 754
Depreciation Expense - Equip & Furniture - Warehouse 0 775 775 775
Depreciation Expense - Equip & Furniture - Office 0 825 825 825
Rent Income 0 2,143 2,143 2,143
Interest Expense 12,220 12,220 12,220
Total 4,695,243 4,695,243 15,393 15,393 4,699,258 4,699,258 1,069,643 1,069,643 3,919,189 3,919,189
0 0
Net Income (Loss) 1,069,643 1,069,643 3,919,189 3,919,189
Income Statement
For the Month Ended May 31, 2016
Sales
Statement of Retained Earnings
For the Month Ended May 31, 2016
Balance Sheet
May 31, 2016
Statement of Cash Flow
For the Month Ended May 31, 2016