Financial Acctg Ch 1 Practice Problems

Question 1

Helps accountants by performing repetitive tasks such as entering invoice data.

Answer 1

Accounting

Question 2

Requires that we input, measure and log transactions and events.

Answer 2

Recording

Question 3

is the recording of transactions and events, either manually or electronically.

Answer 3

Bookkeeping.

Question 4

External Users examples

Answer 4

Customers, Suppliers, External Auditors, Business press, District attorney, Shareholders, Lenders, FBI/IRS, consumer group, voters

Question 5

Internal Users example

Answer 5

Managers, Controllers

Question 6

Accounting Principle examples

Answer 6

Full disclosure, Revenue Recognition

Question 7

Accounting Assumptions example

Answer 7

Time Period, Going-concern

Question 8

Business Taxed

Answer 8

Corporation

Question 9

Limited Liability

Answer 9

Corporation and LLC

Question 10

Legal Entity

Answer 10

Corporation and LLC

Question 11

In December of this year, Chavez Landscaping received a customer’s order and cash prepayment to install sod at a house that would not be ready for installation until March of next year. Chavez should record the revenue from the customer order in March of next year, not in December of this year.

Answer 11

Revenue Recognition Principle

Question 12

If $51,000 cash is paid to buy land, the land is reported on the buyer’s balance sheet at $51,000

Answer 12

Cost Principle

Question 13

Mike Derr owns both Sailing Passions and Dockside Digs. In preparing financial statements for Dockside Digs, Mike makes sure that the expense transactions of Sailing Passions are kept separate from Dockside Digs’s transactions and financial statements

Answer 13

Business Entity Assumption

Question 14

Total assets of Charter Company equal $700,000 and its equity is $420,000. what is the amount of its liabilities?

Answer 14

$280,000

Question 15

Total assets of Martin Marine equal $500,000 and its liabilities and equity are equal to each other. What is the amount for each?

Answer 15

Liabilities: $250,000 Equity: $250,000.

Question 16

Assets: 75,000 Liabilities: x Equity: 40,000

Answer 16

Liabilities are $35,000.

Question 17

Assets: x Liabilities: 20,000 Equity: $70,000

Answer 17

Assets are $95,000.

Question 18

Assets are $85,000, Liabilities: $20,000, Equity: x

Answer 18

Equity is $65,000.

Question 19

Assets: 40,000 Liabilities: 16,000 Common Stock: 20,000 Dividends: 0, Revenues: x, Expenses: 8,000

Answer 19

Revenues are $12,000

Question 20

Assets: 80,000 Liabilities: 32,000 Common Stock: 44,000 Dividends: x Revenues: 24,000 Expenses: 18,000

Answer 20

Dividends are $2,000

Question 21

Owner invested cash in the company.

Answer 21

Increases Equity.

Question 22

Incurred maintenance expenses.

Answer 22

Decreases equity

Question 23

Performed services for a client.

Answer 23

Increases equity.

Question 24

Incurred employee wage expenses.

Answer 24

Decreases equity.

Question 25

The company completed consulting work for a client and immediately collected $5,500 cash.

Answer 25

Cash $5,500 Revenue $5,500

Question 26

The company completed commission work for a client nd sent a bill for $4,000 to be received within 30 days.

Answer 26

Accounts Receivable $4,000 Revenue $4,000

Question 27

The company paid an assistant $1,400 cash as wages for the period.

Answer 27

Wages Expense $1,400 Cash $1,400

Question 28

The company collected $1,000 cash as partial payment from an invoice that was posted in Accounts Receivable.

Answer 28

Cash $1,000 Accounts Receivable $1,000

Question 29

The company paid $700 cash for this period's cleaning services

Answer 29

Cleaning Expense $700 Cash $700

Question 30

What is your Net Income if... AR: $3,000 Cash: $4,400 Revenue: $9,500 Wages Expense: $1,400 Cleaning Expense: $700.

Answer 30

Revenue: $9,500 - Expenses: $2,100 = $7,400

Question 31

What does your balance sheet look like if.. AR: $3,000 Cash: $4,400 Revenue: $9,500 Wages Expense: $1,400 Cleaning Expense: $700.

Answer 31

Assets (AR + Cash) = 7,400 Liabilities = $0 Equities (Net Income) = 7,400

Question 32

What does your statement of cash flows look like if you earned $6,500 in cash from revenue, paid $1,400 in cash for wage expenses and paid $700 in cash for cleaning expenses.

Answer 32

All entries are operational-based. OP Cash Receipts = $6,500 OP Cash Invoices = $2,100. Net Operating $4,400.

Question 33

The owner invested $15,000 cash in the company in exchange for its common stock

Answer 33

Cash $15,000 Common Stock $15,000

Question 34

The company purchased supplies for $500 cash.

Answer 34

Office Supplies $500 Cash $500

Question 35

The company invested $10,000 of equipment in the company in exchange or more common stock.

Answer 35

Equipment: $10,000 Common Stock: $10,000

Question 36

The company purchased $200 of additional supplies on credit.

Answer 36

Supplies: $200 Accounts Payable: $200

Question 37

The company purchased land for $9,000 cash

Answer 37

Land: $9,000 Cash: $9,000

Question 38

What does the balance sheet look like if... Office Supplies: $700, Equipment $10,000, Cash $5,500, Land: $9,000, Common Stock: $25,000, Accounts Payable: $200

Answer 38

Assets (Office Supplies, Equipment, Cash, Land): $25,200 Liabilities (Accounts Payable): $200 Equity (Common stock): $25,000 $25,200 = $25,200

Question 39

What does the statement of cash flows look like if $15,000 in cash was exchanged for common stock, Office Supplies were purchased for $500 and Land was purchased for $9,000?

Answer 39

Operating Invoices for Office Supplies: -$500 Net Operating: -$500 Investing Purchase of Land: -$9,000 Financing Common Stock: $15,000 Total Net Cash: $5,500

Question 40

Balance Sheet Accounts

Answer 40

Assets, Liabilities, Equipment, Total liabilities and equity

Question 41

Income Statement Accounts

Answer 41

Revenues, Expenses

Question 42

Statement of Cash Flows Accounts

Answer 42

Cash from operating activities, Net decrease or increase in cash

Question 43

Assets example

Answer 43

Land, Equipment, Accounts Receivable, Supplies

Question 44

Liabilities Examples

Answer 44

Wages Payable, Accounts Payable

Question 45

Find the Net Income. Service Revenue: $16,000, Wages Expense: $8,000 Rent Expense: $1,500 Utilities Expense: $700

Answer 45

Total Revenue: $16,000 Total Expenses: $10,200 Net Income: $5,800

Question 46

What is the statement of retained earnings if Net Income: $5,800, Common Stock: $6,900, Beg Retained Earnings: 4,000, Dividends: $1,00

Answer 46

Beg RE: $4,000 Net Income: $5,800 Total: $9,800 Dividends: -$1,000 End RE: $8,800. Common Stock is not a part of the Retained Earnings formula

Question 47

Create a statement of cash flows using the following information: Beginning Cash: $1,000 Cash dividends to shareholders $2,000 Cash received from customers: $23,500 Cash investments from shareholders: $11,000 Cash paid for equipment: $3,000

Answer 47

Beginning Cash: $1,000 Operating Receipts: $23,500 Operating Invoices: -$6,000 Net Operating: $17,500 Investing Equipment: -$3,000 Investing Truck: -$22,000 Net Investing: -$25,000 Financing Common Stock: $11,000 Financing Dividends: -$2,000 Net Financing: $9,000 Total Cash: $1,500 Beg Cash: $1,000 End Cash: $2,500

Question 48

Operating Activities Examples

Answer 48

Cash paid for advertising, cash paid for wages, cash paid on account payable to supplier, cash received from clients, cash paid for rent

Question 49

Investing Activities examples

Answer 49

Cash purchase of equipment, Cash paid for land

Question 50

Financing Activities examples

Answer 50

Cash investment by owner.

Question 51

Return on Assets 2 Years ago: 8.9% 1 Year Ago: 11.2% Current Year: 13.5% Has the company's return on assets improved or worsened?

Answer 51

Improved.

Question 52

Return on Assets Sales: 95 billion Net Income: 8 billion Avg. Total Assets: 42 billion What is the ROA?

Answer 52

ROA formula = Net Incom(e)/(A)vg. Total Assets 8 billio(n)/(42) billion = 19.05%