ARBC 106b Study Guide - Final Guide: Retained Earnings, Net Income, Common Stock

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12 Dec 2019
Department
Course
Professor
Accounting Final Exam Review
Chapter 1: A Framework for Financial Accounting
Key Formulas:
Assets = liabilities + Owner’s Equity
Net Income = Revenue Expenses Income Statement
Stock Equity = Common Stock + Retained Earnings
Retained Earnings = Net Income Dividends
Change in Stockholder’s Equity = issuance common stock + Net Income – Dividends
Total Change in Cash = Operating + Investing + Financing
Assets = liabilities + common stock + retained earnings
Practice Questions:
A companies RE increased by $50,000 and gave away $30,000 in dividends. What was their
income?
- $50,000 = x $30,000
- x = $80,000
Assets = $50,000 and liabilities = $10,000. What was equity?
- $50,000 = $10,000 + x
- Equity = $40,000
Chapter 2: The Accounting Cycle: During the Period
Practice Questions:
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Sells shares of common stock for $25,000 to obtain the funds necessary to start the business.
Which is one account affected by the transaction?
- Cash
Does that account increase or decrease?
- Increase by $25,000
What OTHER account affected by the transaction?
- Common stock LOOK AT CHART - credit common stock Increases it
Which of the following is used to provide a chronological record of all transactions affecting a
firm?
- The journal
What effect does the payment of dividends have on the accounting equation? ***
- Assets decrease and equity decreases
Questions to review in Connect: CMQ, Q2, Attempt 1, Stockholder’s equity chart
Chapter 3: The Accounting Cycle: End of the Period
Accrual-basis vs cash-basis accounting
Accrual-basis matching revenue and expenses in the right time period as we have incurred it
Cash-basis when you receive or pay out cash
Practice Questions:
For each transaction below, calculate the amount of revenue to be recognized in the current
period using accrual-basis accounting:
a. Performed $28,000 of services during the month and received full cash payment from
customers at the time of service
- Revenue to be recognized $28,000
b. Performed $9,000 of services during the month and billed customers. Customers are
expected to pay next month.
- Revenue to be recognized $9,000
c. Received $19,000 cash from customers for services to be provided next month
- Revenue to be recognized $0
A company lends $60,000 with 9% interest on May 1, 2018. This amount plus interest is due on
April 30, 2019. Record the adjusting entry on December 31, 2018.
- Debit Interest receivable 3600
- Credit Interest revenue 3600
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Post-Closing Trial Balance
- Lists all PERMANENT account balances after updating for closing entries
- Helps verify that closing entries were prepared and posted correctly and that the
accounts are now ready for the next period’s transactions
Typical Post-Closing Trial Balance
Account
Debit
Credit
Cash
XXX
Accounts Receivable
XXX
Supplies
XXX
Prepaid Rent
XXX
Equipment
XXX
Accumulated Depreciation
XXX
Accounts Payable
XXX
Salaries Payable
XXX
Utilities Payable
XXX
Deferred Revenue
XXX
Interest Payable
XXX
Notes Payable
XXX
Common Stock
XXX
Retained Earnings
XXX
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