Ch.1 Introduction to Financial Statements Test Bank Docx 8e - Practice Test Bank | Accounting for Decisions 8e by Paul D. Kimmel. DOCX document preview.
CHAPTER 1
INTRODUCTION TO FINANCIAL STATEMENTS
CHAPTER LEARNING OBJECTIVES
1. Identify the forms of business organization and the uses of accounting information. A sole proprietorship is a business owned by one person. A partnership is a business owned by two or more people associated as partners. A corporation is a separate legal entity for which evidence of ownership is provided by shares of stock. Internal users are managers who need accounting information to plan, organize, and run business operations. The primary external users are investors and creditors. Investors (stockholders) use accounting information to decide whether to buy, hold, or sell shares of a company’s stock. Creditors (suppliers and bankers) use accounting information to assess the risk of granting credit or loaning money to a business. Other groups who have an indirect interest in a business are taxing authorities, customers, labor unions, and regulatory agencies.
2. Explain the three principal types of business activity. Financing activities involve collecting the necessary funds to support the business. Investing activities involve acquiring the resources necessary to run the business. Operating activities involve putting the resources of the business into action to generate a profit.
3. Describe the four financial statements and how they are prepared. An income statement presents the revenues and expenses of a company for a specific period of time. A retained earnings statement summarizes the changes in retained earnings that have occurred for a specific period of time. A balance sheet reports the assets, liabilities, and stockholders’ equity of a business at a specific date. A statement of cash flows summarizes information concerning the cash inflows (receipts) and outflows (payments) for a specific period of time. Assets are resources owned by a business. Liabilities are the debts and obligations of the business. Liabilities represent claims of creditors on the assets of the business. Stockholders’ equity represents the claims of owners on the assets of the business. Stockholders’ equity is subdivided into two parts: common stock and retained earnings. The basic accounting equation is Assets = Liabilities + Stockholders’ Equity. Within the annual report, the management discussion and analysis provides management’s interpretation of the company’s results and financial position as well as a discussion of plans for the future. Notes to the financial statements provide additional explanation or detail to make the financial statements more informative. The auditor’s report expresses an opinion as to whether the financial statements present fairly the company’s results of operations and financial position.
*4. Explain the career opportunities in accounting. Accounting offers many different jobs in fields such as public and private accounting, governmental, and forensic accounting. Accounting is a popular major because there are many different types of jobs, with unlimited potential for career advancement
Difficulties:
Easy: 143
Medium: 101
Hard: 12
Question List by Section
Business Organization and Accounting Information Uses:
Forms of Business Organization; 47, 48, 202, 246
Sole Proprietorship: 5, 44, 49, 58, 59
Partnership: 1, 4, 46, 56
Corporation: 2, 3, 45, 50, 51, 52, 53, 55, 57, 233, 245
Hybrid Forms of Organization: 60, 61
Users and Uses of Financial Information: 6, 7, 11, 74, 87
Internal Users: 62, 63, 64, 75, 77, 82, 234
External Users: 8, 9, 10, 12, 65, 76, 78, 79, 80, 81, 83, 84, 85, 86, 88, 89
Data Analytics: 66, 67, 68, 69, 70, 235, 236
Ethics in Financial Reporting: 71, 72, 73, 237, 255
The Three Types of Business Activity: 97
Financing Activities: 13, 15, 18, 90, 91, 93, 94, 95, 96, 97, 102, 109, 117, 118, 119, 238
Investing Activities: 14, 16, 98, 99, 115, 116
Operating Activities: 17, 19, 20, 100, 101, 103, 104, 105, 106, 107, 108, 110, 111, 112, 113, 114
The Four Financial Statements:
Income Statement: 21, 22, 23, 24,127, 128, 132, 133, 134, 138, 142, 143
Retained Earnings Statement: 120, 122, 123, 124, 125, 126, 129, 130, 131, 135, 137, 139, 140, 141, 144, 145, 146, 147, 148, 149, 150, 154, 164, 169, 178, 181, 252
Balance Sheet: 25, 27, 28, 29, 30, 31, 32, 33, 34, 35, 136, 151, 152, 153, 163, 165, 166, 168, 170, 173, 177, 179, 180, 182, 185, 186, 187, 188, 199, 200, 201, 207, 208, 213, 214, 215, 216, 217, 218, 219, 220, 221, 222, 225, 229, 239, 240, 241, 253
Statement of Cash Flows: 26, 121, 171, 174, 183, 242, 249
Interrelationships of Statements: 155, 156, 157, 158, 159, 160, 161, 162, 167, 175, 176, 184, 250, 251, 256
Elements of an Annual Report: 36, 41, 192, 196, 197
Management Discussion and Analysis: 40, 191
Notes to the Financial Statements: 37, 42, 190, 193, 194, 198, 254
Auditor’s Report: 38, 39, 195
TRUE-FALSE STATEMENTS
1. A business organized as a separate legal entity and owned by stockholders is a partnership.
2. Corporate stockholders have no personal liability for the debts of the corporation.
3. The liability of corporate stockholders is limited to the amount of their investment.
4. The majority of U.S. business is transacted by partnerships.
5. Sole proprietorships in the United States generate more revenue than the other two forms of business enterprise.
6. Owners of business firms are the only people who need accounting information.
7. Some users of accounting information are internal to the company while others are external.
8. Management of a business enterprise is the major external user of accounting information.
9. External users of accounting information include managers who plan, organize, and run a business.
10. The accounting information needs and questions of external users vary considerably.
11. Accounting communicates financial information about a business to both internal and external users.
12. Two primary external users of accounting information are investors and creditors.
13. Financing activities for corporations include borrowing money and selling shares of their own stock.
14. Investing activities involve collecting the necessary funds to support the business.
15. The purchase of equipment is an example of a financing activity.
16. Assets are resources owned by a business that provide future services or benefits to the business.
17. Payments by the business to its owners are operating activities.
18. The economic resources owned by a business are called stockholders’ equity.
19. Operating activities involve putting the resources of the business into action to generate a profit.
20. A business is usually involved in only two types of activities—financing and investing.
21. Net income for the period is determined by subtracting expenses and dividends from revenues.
22. A different set of financial statements is usually prepared for each user.
23. The heading for an income statement prepared for the year ending December 31, 2025 will include the line “As of December 31, 2025.”
24. Net income is another term for revenue.
25. Cash is another term for stockholders’ equity.
26. The primary purpose of the statement of cash flows is to provide information about the cash receipts and cash payments of a company for a specific period of time.
27. The balance sheet reports assets and claims to those assets at a specific point in time.
28. The basic accounting equation states that Assets = Liabilities.
29. One way of stating the accounting equation is Assets + Liabilities = Stockholders’ Equity.
30. The accounting equation can be expressed as Assets - Stockholders’ Equity = Liabilities.
31. The accounting equation can be expressed as Assets - Liabilities = Stockholders’ Equity.
32. If the assets of a business total $150,000 and liabilities total $105,000, then its stockholders’ equity totals $45,000.
33. If the assets owned by a business total $100,000 and liabilities total $65,000, then stockholders’ equity totals $25,000.
34. Claims of creditors and owners on the assets of a business are called liabilities.
35. Creditors’ rights to assets supersede owners’ rights to the assets.
36. All publicly traded U.S. companies must provide their stockholders with an annual report each year.
37. Information in the notes to the financial statements has to be quantifiable (numeric).
38. An auditor is an accounting professional who conducts an independent examination of a company’s financial statements.
39. The auditor’s report states the auditor’s opinion as to the fairness of the presentation of the financial position and results of operations and their conformance with generally accepted accounting principles.
40. The management discussion and analysis (MD&A) section of an annual report covers various financial aspects of a company.
41. Explanatory notes and supporting schedules are an optional part of an annual report.
42. Examples of notes are descriptions of the significant accounting policies and methods used in preparing the statements, explanations of contingencies, and various statistics.
43. The demand for accountants was increased by passage of the Sarbanes-Oxley Act (SOX) which significantly increased the accounting and internal control requirements for corporations.
MULTIPLE CHOICE QUESTIONS
44. The sole proprietorship form of business organization
a. must have at least two owners in most states.
b. generally receives favorable tax treatment relative to a corporation.
c. combines the records of the business with the personal records of the owner.
d. is classified as a separate legal entity.
45. A business organized as a corporation
a. is not a separate legal entity in most states.
b. requires that stockholders be personally liable for the debts of the business.
c. is owned by its stockholders.
d. has tax advantages over a proprietorship or partnership.
46. The partnership form of business organization
a. is a separate legal entity.
b. is a common form of organization for service-type businesses.
c. enjoys an unlimited life.
d. has limited liability.
47. Which of the following is not one of the three forms of business organization?
a. Corporations
b. Partnerships
c. Proprietorships
d. Investors
48. The main forms of business organizations include all of the following except
a. Limited Liability Corporations
b. Partnerships
c. Sole Proprietorships
d. Corporations
49. Most business enterprises in the United States are
a. proprietorships and partnerships.
b. partnerships.
c. corporations.
d. government units.
50. A business organized as a separate legal entity is a
a. corporation.
b. proprietor.
c. government unit.
d. partnership.
51. Which of the following is not an advantage of the corporate form of business organization?
a. No personal liability
b. Easy to transfer ownership
c. Favorable tax treatment
d. Easy to raise funds
52. An advantage of the corporate form of business is that
a. it has limited life.
b. its owner’s personal resources are at stake.
c. its ownership is easily transferable via the sale of shares of stock.
d. it is simple to establish.
53. Which of the following has the advantage of enabling a business to raise funds most easily?
a. Entity
b. Sole proprietorship
c. Corporation
d. Partnership
54. Which of the following is an advantage of corporations relative to partnerships and sole proprietorships?
a. Reduced legal liability for investors
b. Harder to transfer ownership
c. Lower taxes
d. Most common form of organization
55. Which of the following set of characteristics describes a corporation?
a. Shared control, tax advantages, increased skills and resources
b. Simple to set up and maintains control with founder
c. Easier to transfer ownership and raise funds, no personal liability
d. Harder to raise funds and gives owner control
56. A small neighborhood barber shop that is operated by its two owners would likely be organized as a
a. joint venture.
b. partnership.
c. corporation.
d. proprietorship.
57. A local retail shop has been operating as a sole proprietorship. The business is growing and now the owner wants to incorporate. Which of the following is not a reason for this owner to incorporate?
a. Ability to raise capital for expansion
b. Desire to limit the owner’s personal liability
c. The prestige of operating as a corporation
d. The ease in transferring shares of the corporation’s stock
58. All of the following are advantages for organizing a business as a sole proprietorship except
a. a sole proprietorship is a simple form of business to set up.
b. a sole proprietorship gives the owner control of the business.
c. a sole proprietorship receives more favorable tax treatment.
d. a sole proprietorship allows for an easy transfer of ownership through stock sales.
59. Jack and Jill form a partnership. Jack runs the business in New York, while Jill vacations in Hawaii. During the time Jill is away from the business, Jack increases the debts of the business by $20,000. Which of the following statements is true regarding this debt?
a. Only Jack is personally liable for the debt, since he has been the managing partner during that time.
b. Only Jill is personally liable for the debt of the business, since Jack has been working and she has not.
c. Both Jack and Jill are personally liable for the business debt.
d. Neither Jack nor Jill is personally liable for the business debt, since the partnership is a separate legal entity.
60. Hybrid forms of business organization include
a. limited liability companies.
b. sole proprietorships.
c. partnerships
d. all of these are hybrid forms of business organization.
61. Hybrid forms of business organization
a. are not allowed in many states.
b. account for the majority of U.S. business transactions.
c. combine the tax advantages of corporations with the limited liability advantage of partnerships.
d. combine the tax advantages of partnerships with the limited liability advantage of corporations.
62. Which one of the following questions is most likely asked by an internal human resources director for the company?
a. Which product line is most profitable?
b. What price for our product will maximize the company income?
c. What average pay raise is affordable for employees this year?
d. Should any product lines be eliminated?
63. Which of the following are reports that accounting provides to internal users?
a. Forecasts of cash needs for next year only
b. Financial comparisons of operating activity alternatives only
c. Both forecasts of cash needs and financial comparisons
d. Neither forecasts of cash needs nor financial comparisons
64. Which of the following is the best description of an internal user of accounting information?
a. Investors who use accounting information to decide whether to buy or sell stock
b. Creditors, such as banks, that use accounting information to evaluate the risk of lending money
c. Labor unions who use accounting information to examine the ability of the company to pay increased wages and benefits
d. Managers who use accounting information to plan, organize, and run a business
65. An external user of accounting information like the Internal Revenue Service is most commonly known as a
a. taxing authority.
b. labor union.
c. customer.
d. regulatory agency.
66. Types of data analytics include all of the following except
a. prescriptive.
b. predictive.
c. authoritative.
d. diagnostic.
a. “What is likely to happen?”.
b. “Why did it happen?”.
c. “What should we do about it?”.
d. “What happened?”.
a. “What is likely to happen?”.
b. “Why did it happen?”.
c. “What should we do about it?”.
d. “What happened?”.
a. “What is likely to happen?”.
b. “Why did it happen?”.
c. “What should we do about it?”.
d. “What happened?”.
a. “What is likely to happen?”.
b. “Why did it happen?”.
c. “What should we do about it?”.
d. “What happened?”.
71. Which of the following statements is not true regarding the Sarbanes-Oxley Act (SOX)?
a. The Act calls for increased oversight responsibilities for boards of directors.
b. The Act has resulted in increased penalties for financial fraud by top management.
c. The Act calls for decreased independence of outside auditors reviewing corporate financial statements.
d. The goal of the Act is to decrease the likelihood of unethical corporate behavior.
72. Which of the following is not a step for solving an ethical dilemma?
a. Identify the alternatives and weigh the impact of each alternative on various stakeholders.
b. Certify the ethical accuracy of the financial information.
c. Identify and analyze the principal elements in the situation.
d. Recognize the ethical situation and issues involved.
73. What is the first step in solving an ethical dilemma?
a. Weigh the impact of alternative solutions on various stakeholders.
b. Identify the alternative solutions.
c. Identify the stakeholders.
d. Recognize an ethical situation and the issues involved.
74. Which of the following is the most appropriate definition of accounting?
a. The information system that identifies, records, and communicates the economic events of an organization to interested users.
b. A means of collecting information.
c. The interconnected network of subsystems necessary to operate a business.
d. Electronic collection, organization, and communication of vast amounts of information.
75. Which of the following would not be considered an internal user of accounting data for the Amazon?
a. President of the company
b. Production manager
c. Merchandise inventory clerk
d. President of the employees' labor union
76. Which of the following groups uses accounting information primarily to insure that the entity is operating within prescribed rules?
a. Investors
b. Regulatory agencies
c. Labor Unions
d. Management
77. The users of accounting information charged with achieving the goals of the business are its
a. auditors.
b. investors.
c. managers.
d. creditors.
78. Which external group uses accounting information to determine whether the company can pay its obligations?
a. Investors in common stock
b. Marketing managers
c. Creditors
d. Chief Financial Officer
79. Which external group uses accounting information to determine whether the company’s operating performance might result in a stock price increase?
a. Investors in common stock
b. Marketing managers
c. Creditors
d. Chief Financial Officer
80. Which of the following groups uses accounting information to determine whether a marketing proposal will be cost effective?
a. Investors in common stock
b. Marketing managers
c. Creditors
d. Chief Financial Officer
81. Which of the following would not be considered an external user of accounting data for the Tesla Corporation?
a. Internal Revenue Service agent
b. Management
c. Creditors
d. Customers
82. Which of the following would not be considered an internal user of Patagonia’s accounting data?
a. The president of the company
b. The controller of the company
c. Creditor of the company
d. Salesperson of the company
83. Which of the following is an example of a primary user of Walmart’s accounting information with a direct financial interest in the business?
a. Taxing authority
b. Creditor
c. Regulatory agency
d. Labor union
84. Which of the following is a user of accounting information with an indirect financial interest in a business?
a. A financial adviser
b. Management
c. Investor
d. Creditor
85. Which of the following is not considered an external user of accounting information?
a. Finance directors
b. Regulatory agencies
c. Creditors
d. Stockholders
86. Which type of corporate information about Target Corporation is readily available to investors?
a. Financial comparison of operating alternatives
b. Marketing strategies for a product that will be introduced in eighteen months
c. Forecasts of cash needs for the upcoming year
d. Amount of net income retained in the business
87. Which of the following statements concerning users of accounting information is incorrect?
a. Management is considered an internal user.
b. Present creditors are considered external users.
c. Regulatory authorities are considered internal users.
d. Taxing authorities are considered external users.
88. External users of GameStop’s financial information want answers to all of the following questions except:
a. Is the company earning satisfactory income?
b. Will the company be able to pay its debts as they come due?
c. Will the company be able to afford employee pay raises this year?
d. How does the company compare in profitability with competitors?
89. Which type of corporate financial information is not available to investors?
a. Dividend history
b. Forecast of cash needs for the upcoming year
c. Cash provided by investing activities
d. Beginning cash balance
90. The liability created by Old Navy when it purchases cleaning supplies on credit from a supplier is termed a(n)
a. account payable.
b. account receivable.
c. revenue.
d. expense.
91. The right to receive money in the future is called a(n)
a. account payable.
b. account receivable.
c. liability.
d. revenue.
92. Which of the following is not a principal type of business activity?
a. Operating
b. Investing
c. Financing
d. Delivering
93. Borrowing money is an example of a(n)
a. delivering activity.
b. financing activity.
c. investing activity.
d. operating activity.
94. Issuing shares of stock in exchange for cash is an example of a(n)
a. delivering activity.
b. investing activity.
c. financing activity.
d. operating activity.
95. Debt securities sold to investors that must be repaid at a particular date some years in the future are called
a. accounts payable.
b. notes receivable.
c. taxes payable.
d. bonds payable.
96. Which of the following activities involves obtaining the necessary funds to support the business?
a. Operating
b. Investing
c. Financing
d. Delivering
97. Which one of the following represents the typical order of occurrence of the three business activities for a new company?
a. Financing, investing, operating
b. Investing, financing operating
c. Operating, investing, financing
d. Financing, operating, investing
98. Buying assets needed to operate a business is an example of a(n)
a. delivering activity.
b. financing activity.
c. investing activity.
d. operating activity.
99. Which activities involve acquiring the resources to run the business?
a. Delivering
b. Financing
c. Investing
d. Operating
100. Which activities involve putting the resources of the business into action to generate a profit?
a. Delivering
b. Financing
c. Investing
d. Operating
101. Where can an investor find information about operating activities in a company’s financial statements?
- On the statement of cash flows only
- On the income statement only
- On the statement of cash flows and the income statement
- On all four financial statements
102. The statement of cash flows would disclose the payment of a dividend
a. nowhere on the statement.
b. in the operating activities section.
c. in the investing activities section.
d. in the financing activities section.
103. Buying and selling products are examples of
a. operating activities.
b. investing activities.
c. financing activities.
d. delivering activities.
104. Which of the following would not be considered an asset of Target Corporation?
a. Cash
b. Buildings
c. Land
d. Common Stock
105. Expenses are incurred
a. only on rare occasions.
b. to produce assets.
c. to produce liabilities.
d. to generate revenues.
106. The cost of assets consumed or services used is also known as a(n)
a. revenue.
b. expense.
c. liability.
d. asset.
107. Resources owned by a business are referred to as
a. stockholders’ equity.
b. liabilities.
c. assets.
d. revenues.
108. The best definition of assets is the
a. cash owned by the company.
b. collections of resources belonging to the company and the claims on these resources.
c. owners’ investment in the business.
d. resources belonging to a company that have future benefit to the company.
109. Debts and obligations of a business are referred to as
a. assets.
b. equities.
c. liabilities.
d. expenses.
110. Suppose that Forever 21 Company recorded the following cash transactions for the year:
Paid $135,000 for salaries.
Paid $60,000 to purchase office equipment.
Paid $15,000 for utilities.
Paid $6,000 in dividends.
Collected $275,000 from customers.
What was Forever 21’s net cash provided by operating activities?
a. $125,000
b. $65,000
c. $140,000
d. $119,000
111. Suppose that Ralph Lauren Company recorded the following cash transactions for the
year:
Paid $180,000 for salaries.
Paid $80,000 to purchase office equipment.
Paid $20,000 for utilities.
Paid $8,000 in dividends.
Collected $350,000 from customers.
What was Ralph Lauren’s net cash provided by operating activities?
a. $150,000
b. $70,000
c. $170,000
d. $142,000
112. When expenses exceed revenues, which of the following is true?
a. a net loss results
b. a net income results
c. assets equal liabilities
d. assets are increased
113. Which of the following is an asset?
a. Mortgage payable
b. Investments
c. Common stock
d. Retained earnings
114. Which of the following is not a liability?
a. Unearned Service Revenue
b. Accounts Payable
c. Accounts Receivable
d. Interest Payable
115. Which of the following is an investing activity for Target?
a. Issuing shares of stock for cash
b. Purchasing inventory
c. Paying warehouse workers’ salaries
d. Purchasing computer equipment
116. Which of the following is an investing activity for Patagonia?
a. Purchasing materials to make clothing
b. Paying for social media advertising
c. Purchasing manufacturing equipment
d. Paying executive salaries
117. Liabilities
a. are future economic benefits.
b. are debts and obligations.
c. possess service potential.
d. are things of value owned by a business.
118. Liabilities of a company are owed to its
a. debtors.
b. owners.
c. creditors.
d. stockholders.
119. Stockholders’ equity can be described as claims of
a. creditors on total assets.
b. owners on total assets.
c. customers on total assets.
d. debtors on total assets.
120. Payments to stockholders are called
a. expenses.
b. liabilities.
c. dividends.
d. assets.
121. Which of the following financial statements is divided into major categories of operating, investing, and financing activities?
a. The income statement
b. The balance sheet
c. The retained earnings statement
d. The statement of cash flows
122. The retained earnings statement shows all of the following except:
a. the amounts of changes in retained earnings during the period.
b. the causes of changes in retained earnings during the period.
c. the time period following the one shown for the income statement.
d. beginning retained earnings on the first line of the statement.
123. Ending retained earnings for a period is equal to beginning
a. Retained earnings + Net income + Dividends.
b. Retained earnings – Net income – Dividends.
c. Retained earnings + Net income – Dividends.
d. Retained earnings – Net income + Dividends.
124. Suppose that American Eagle Company's records show the following for the month of
January:
Total retained earnings at January 1 $432,000
Total retained earnings at January 31 450,000
Total revenues 2,160,000
Total dividends declared 140,000
How much are total expenses for January?
a. $2,002,000
b. $2,318,000
c. $1,984,000
125. Suppose that at the beginning of January 2025, Walgreens had a balance in its Retained Earnings account totaling $42,000. At the end of the year, the balance totaled $47,000. If $11,000 of dividends were declared and paid during the year, what was 2025 net income?
a. $5,000
b. $16,000
c. $53,000
d. $6,000
126. Which of the following items will be reported on the Retained Earnings Statement?
a. Cash received from customers
b. Amounts received from issuing stock
c. Amounts owed to creditors
d. Profits earned by a company
127. Which one of the following is not the correct date format for the respective financial
statement?
a. A balance sheet as of May 31, 2025
b. A Retained Earnings Statement as of May 31, 2025
c. An income statement for the month ended May 31, 2025
d. A statement of cash flows for the month ended May 31, 2025
128. Which of the following statements is true?
a. Amounts received from issuing stock are revenues.
b. Amounts paid out as dividends are not expenses.
c. Amounts paid out as dividends are reported on the income statement.
d. Amounts received from issued stock are reported on the income statement.
129. Dividends are reported on the
a. income statement.
b. retained earnings statement.
c. balance sheet.
d. income statement and balance sheet.
130. Dividends declared and paid
a. increase assets.
b. increase expenses.
c. decrease revenues.
d. decrease retained earnings.
131. The financial statement that summarizes the changes in retained earnings for a specific period of time is the
a. balance sheet.
b. income statement.
c. statement of cash flows.
d. retained earnings statement.
132. To show how successfully its business performed during a period of time, Home Depot reports its revenues and expenses in the
a. balance sheet.
b. income statement.
c. statement of cash flows.
d. retained earnings statement.
133. Net income results when
a. Assets > Liabilities.
b. Revenues = Expenses.
c. Revenues > Expenses.
d. Revenues < Expenses.
134. Net income will result during a time period when
a. assets exceed liabilities.
b. assets exceed revenues.
c. expenses exceed revenues.
d. revenues exceed expenses.
135. Retained earnings at the end of the period is equal to
a. retained earnings at the beginning of the period plus net income minus liabilities.
b. retained earnings at the beginning of the period plus net income minus dividends.
c. net income.
d. assets plus liabilities.
136. Which of the following financial statements is concerned with the company at a point in time?
a. Balance sheet
b. Income statement
c. Retained earnings statement
d. Statement of cash flows
137. The company’s policy toward dividends and growth could best be determined by examining the
a. balance sheet.
b. income statement.
c. retained earnings statement.
d. statement of cash flows.
138. An income statement
a. summarizes the changes in retained earnings for a specific period of time.
b. reports the changes in assets, liabilities, and stockholders’ equity over a period of time.
c. reports the assets, liabilities, and stockholders’ equity at a specific date.
d. presents the revenues and expenses for a specific period of time.
139. If Amazon’s retained earnings account increases from the beginning of the year to the end of the year, then
a. net income is less than dividends.
b. a net loss is less than dividends.
c. additional investments are less than net losses.
d. net income is greater than dividends.
140. Target’s retained earnings statement would not show
a. the retained earnings beginning balance.
b. revenues and expenses.
c. dividends.
d. the ending retained earnings balance.
141. If the retained earnings account decreases from the beginning of the year to the end of the year, then
a. net income is less than dividends.
b. there was a net income and no dividends.
c. additional investments are less than net losses.
d. net income is greater than dividends.
142. Which financial statement is prepared first?
a. Balance sheet
b. Income statement
c. Retained earnings statement
d. Statement of cash flows
143. An income statement shows
a. revenues, liabilities, and stockholders’ equity.
b. expenses, dividends, and stockholders’ equity.
c. revenues, expenses, and net income.
d. assets, liabilities, and stockholders’ equity.
144. In a study session, a classmate makes this statement “Dividends are listed as expenses on the income statement.” What is your best response to this statement?
a. I’ve been struggling with that concept and I feel that dividends should be shown on the balance sheet as assets.
b. You are right. Revenues and expenses are shown on the income statement. Dividends are a cost of generating revenues and that makes them an expense. Why else would a corporation pay dividends?
c. Dividends represent a portion of corporate profits paid to the shareholders. They belong on the retained earnings statement.
d. Dividends are deducted from retained earnings on the balance sheet.
145. Suppose that Uber Company began the year with retained earnings of $380,000. During the year, the company recorded revenues of $500,000, expenses of $380,000, and paid dividends of $40,000. What was Uber’s retained earnings balance at the end of the year?
a. $540,000
b. $460,000
c. $840,000
d. $500,000
146. Kardashian Company began the year 2025 with retained earnings of $670,000. During the year, the company sold additional shares of stock for $1,000,000, recorded revenues of $600,000, expenses of $380,000, and paid dividends of $140,000. What was Kardashian’s retained earnings balance at the end of 2025?
a. $1,030,000
b. $750,000
c. $1,130,000
d. $600,000
147. A1 Company began the year with retained earnings of $100,000. During 2025, the company issued $80,000 of common stock for cash. The company recorded revenues of $740,000, expenses of $640,000, and paid dividends of $40,000. What was A1’s net income for the year 2025?
a. $60,000
b. $140,000
c. $100,000
d. $180,000
148. Ace Company began the year by issuing $120,000 of common stock for cash. The company recorded revenues of $1,100,000, expenses of $960,000, and paid dividends of $60,000. What was Ace’s net income for the year?
a. $80,000
b. $200,000
c. $140,000
d. $260,000
149. Acme Corporation began the year with retained earnings of $310,000. During the year, the company issued $420,000 of common stock, recorded expenses of $1,200,000, and paid dividends of $80,000. If Acme’s ending retained earnings was $330,000, what was the company’s revenue for the year?
a. $1,220,000
b. $1,300,000
c. $1,640,000
d. $1,720,000
150. A1 Supply Corporation began 2025 with total stockholders’ equity of $1,270,000, including retained earnings of $930,000. During the year, the company issued $1,260,000 of common stock, recorded expenses of $3,600,000, and paid dividends of $240,000. If A1 Supply’s ending retained earnings was $990,000, what was the company’s revenue for 2025?
a. $3,660,000
b. $3,900,000
c. $4,920,000
d. $5,160,000
152. The accounting equation may be expressed as
a. Assets = Stockholders’ Equity – Liabilities.
b. Assets = Liabilities + Stockholders’ Equity.
c. Assets + Liabilities = Stockholders’ Equity.
d. Assets + Stockholders’ Equity = Liabilities.
153. Which of the following is not a satisfactory statement of the accounting equation?
a. Assets = Stockholders’ Equity – Liabilities
b. Assets = Liabilities + Stockholders’ Equity
c. Assets - Liabilities = Stockholders’ Equity
d. Assets - Stockholders’ Equity = Liabilities
154. Ace Repair Shop started the year with total assets of $300,000 and total liabilities of $240,000. During the year, the business recorded $630,000 in revenues, $330,000 in expenses, and dividends of $60,000. Assuming that no common stock was sold during the year, stockholders’ equity at the end of the year was
a. $360,000.
b. $300,000.
c. $240,000.
d. $270,000.
155. Ace Repair Shop started the year with total assets of $300,000 and total liabilities of $240,000. During the year, the business recorded $630,000 in revenues, $330,000 in expenses, and dividends of $60,000. The net income reported by Ace Repair Shop for the year was
a. $240,000.
b. $300,000.
c. $180,000.
d. $570,000.
156. Acme Inc. started the month of June 2025 with total assets of $210,000 and total liabilities of $120,000. During June, the business recorded $330,000 in revenues, $165,000 in expenses, and dividends of $60,000. Assuming that no common stock was sold during the year, stockholders’ equity at the end of June was
a. $180,000.
b. $165,000.
c. $195,000.
d. $105,000.
157. Acme Inc. started the month of June 2025 with total assets of $210,000 and total liabilities of $120,000. During June, the business recorded $330,000 in revenues, $165,000 in expenses, and dividends of $60,000. The net income reported by Acme for the month of June was
a. $120,000.
b. $150,000.
c. $195,000.
d. $165,000.
158. If total liabilities increased by $90,000 and stockholders’ equity increased by $30,000 during a period of time, then total assets must change by what amount and direction during that same period?
a. $120,000 decrease
b. $120,000 increase
c. $150,000 increase
d. $180,000 increase
159. The total liabilities of Acme Construction Co. decreased by $90,000 during the month of August 2025. Stockholders’ equity increased by $30,000 during this period. By what amount and in what direction must total assets have changed during August?
a. $120,000 increase
b. $60,000 decrease
c. $60,000 increase
d. $90,000 decrease
160. During September 2025, Ace Diner’s total liabilities decreased by $75,000 and its stockholders’ equity increased by $15,000. The company’s total assets must change by what amount and in what direction during that same period?
a. $60,000 decrease
b. $60,000 increase
c. $75,000 increase
d. $90,000 increase
161. A1 Company’s total liabilities decreased by $105,000 and its stockholders’ equity decreased by $35,000 during a period of time. By what amount and in what direction must the company’s total assets have changed during that same period?
a. $140,000 increase
b. $70,000 decrease
c. $140,000 decrease
d. $70,000 decrease
162. If total liabilities increased by $69,000 during a period of time and stockholders’ equity decreased by $27,000 during the same period, then the amount and direction (increase or decrease) of the period’s change in total assets is a(n)
a. $69,000 increase.
b. $96,000 increase.
c. $42,000 decrease.
d. $42,000 increase.
163. The balance sheet
a. summarizes the changes in retained earnings for a specific period of time.
b. reports the changes in assets, liabilities, and stockholders’ equity over a period of time.
c. reports the assets, liabilities, and stockholders’ equity at a specific date.
d. presents the revenues and expenses for a specific period of time.
164. The retained earnings statement
a. summarizes the changes in retained earnings for a specific period of time.
b. reports the changes in assets, liabilities, and stockholders’ equity over a period of time.
c. reports the assets, liabilities, and stockholders’ equity at a specific date.
d. presents the revenues and expenses for a specific period of time.
165. Common stock is reported on the
a. statement of cash flows.
b. retained earnings statement.
c. income statement.
d. balance sheet.
166. Stockholders’ equity is comprised of
a. common stock and dividends.
b. common stock and retained earnings.
c. dividends and retained earnings.
d. net income and retained earnings.
167. Acme Corporation began the month of May with $58,000 of obligations and $180,000 of economic resources. Stockholders’ equity increased by $22,000 during May because the company paid $123,000 of dividends and generated net income totaling $145,000. How much is total stockholders’ equity at the end of May?
a. $33,000
b. $144,000
c. $122,000
d. $111,000
Sol: $180,000 - $58,000 = $122,000; $122,000 + $22,000 = $144,000
(Assets – Liabilities = Beg. equity + Increase in equity = End. Equity)
168. Stockholders’ equity
a. is usually equal to cash on hand.
b. is equal to liabilities and retained earnings.
c. includes retained earnings and common stock.
d. is shown on the income statement.
169. Retained earnings is
a. the stockholders’ claim on total assets.
b. equal to cash.
c. equal to revenues.
d. the amount of net income kept in the corporation for future use.
170. Which financial statement would best indicate whether the company relies on debt or stockholders’ equity to finance its assets?
a. Statement of cash flows
b. Retained earnings statement
c. Income statement
d. Balance sheet
171. The primary purpose of the statement of cash flows is to report
a. a company's investing transactions.
b. a company's financing transactions.
c. information about cash receipts and cash payments of a company.
d. the net increase or decrease in cash.
172. Claims of owners are called
a. dividends.
b. stockholders’ equity.
c. liabilities.
d. income payable.
173. Which of the following is not a common way that managers use the balance sheet?
a. To analyze the balances of assets, liabilities, and stockholders’ equity throughout the accounting period
b. To determine if the cash balance is sufficient for future needs
c. To analyze the balance between debt and common stock financing
d. To analyze the balance of accounts receivable on the last day of the accounting period
174. Why are financial statement users interested in the statement of cash flows?
a. It is the easiest financial statement to evaluate.
b. It provides information about an important company resource.
c. It is the first statement that is presented to users.
d. It helps users decide whether assets such as office equipment should be replaced.
175. Why should the income statement be prepared first?
a. The statement of cash flows should be prepared first because it determines the sources of cash. That information is then used in preparing the income statement.
b. Net income from the income statement flows into the retained earnings statement. The ending retained earnings balance then flows into the balance sheet.
c. The income statement does not have to be prepared first. Financial statements can be prepared in any order.
176. Which one of the following statements is true concerning the interrelationships of financial
statements?
- Net income on the income statement equals the cash balance at the end of the period on the balance sheet.
- The ending balance of retained earnings on the Retained Earnings Statement is equal to net income on the income statement.
- The amount of net income on the income statement is added to the beginning retained earnings balance on the Retained Earnings Statement.
- The amount of cash used during the period on the statement of cash flows is equal to total expenses on the income statement.
177. Ace Company compiled the following financial information as of December 31, 2025:
Service revenue $840,000
Common stock 180,000
Equipment 240,000
Operating expenses 750,000
Cash 210,000
Dividends 60,000
Supplies 30,000
Accounts payable 120,000
Accounts receivable 90,000
Retained earnings, 1/1/2025 240,000
Ace’s total assets on December 31, 2025 are
a. $1,410,000.
b. $1,020,000.
c. $480,000.
d. $570,000.
178. Ace Company compiled the following financial information as of December 31, 2025:
Service revenue $840,000
Common stock 180,000
Equipment 240,000
Operating expenses 750,000
Cash 210,000
Dividends 60,000
Supplies 30,000
Accounts payable 120,000
Accounts receivable 90,000
Retained earnings, 1/1/2025 240,000
Ace’s retained earnings balance on December 31, 2025 is
a. $240,000.
b. $330,000.
c. $270,000.
d. $ 30,000.
180. A1 Supply Company compiled the following financial information as of December 31, 2025:
Service revenue $1,120,000
Common stock 240,000
Equipment 320,000
Salaries and wages expense 400,000
Rent expense 100,000
Depreciation expense 500,000
Cash 280,000
Dividends 80,000
Supplies 40,000
Accounts payable 160,000
Accounts receivable 120,000
Retained earnings, 1/1/2025 320,000
A1’s total assets at December 31, 2025 are
a. $1,880,000.
b. $1,360,000.
c. $640,000.
d. $760,000.
181. A1 Supply Company compiled the following financial information as of December 31, 2025:
Service revenue $1,120,000
Common stock 240,000
Equipment 320,000
Salaries and wages expense 400,000
Rent expense 100,000
Depreciation expense 500,000
Cash 280,000
Dividends 80,000
Supplies 40,000
Accounts payable 160,000
Accounts receivable 120,000
Retained earnings, 1/1/2025 320,000
A1’s retained earnings balance at December 31, 2025 is
a. $320,000.
b. $440,000.
c. $360,000.
d. $40,000.
182. A1 Supply Company compiled the following financial information as of December 31, 2025:
Service revenue $1,120,000
Common stock 240,000
Equipment 320,000
Salaries and wages expense 400,000
Rent expense 100,000
Depreciation expense 500,000
Cash 280,000
Dividends 80,000
Supplies 40,000
Accounts payable 160,000
Accounts receivable 120,000
Retained earnings, 1/1/2025 320,000
A1’s total stockholders’ equity at December 31, 2025 is
a. $560,000.
b. $600,000.
c. $360,000.
d. $680,000.
183. The heading on the statement of cash flows identifies all of the following except
a. the preparer of the statement.
b. the company
c. the time period covered by the statement.
d. the type of statement.
184. All of the following are interrelationships that are important to understand when preparing financial statements except
a. the net income from the income statement is used in the retained earnings statement.
b. the ending retained earnings from the retained earnings statement is used in the stockholders’ equity section of the balance sheet.
c. the cash on the balance sheet should be equal to the cash at the end of the period on the statement of cash flows.
d. all of the payments on the balance sheet should be equal to the cash payments for operating activities on the statement of cash flows.
185. Acme Services Corporation had the following accounts and balances:
Accounts payable | $30,000 | Equipment | $35,000 |
Accounts receivable | 5,000 | Land | 35,000 |
Buildings | 70,000 | Unearned service revenue | 10,000 |
Cash | 15,000 | Total stockholders' equity | ? |
If Acme pays $5,000 of Accounts Payable in cash, total stockholders' equity would be
a. $135,000.
b. $120,000.
c. $170,000.
d. $130,000.
186. Suppose that Old Navy had the following accounts and balances:
Accounts payable | $30,000 | Equipment | $35,000 |
Accounts receivable | 5,000 | Land | 35,000 |
Buildings | 40,000 | Unearned service revenue | 10,000 |
Cash | 15,000 | Total stockholders' equity | ? |
If Old Navy paid $10,000 of Accounts Payable in cash, total liabilities and stockholders' equity would be
a. $90,000.
b. $78,000.
c. $80,000.
d. $120,000.
187. Suppose that Ben & Jerry’s had the following accounts and balances:
Accounts payable | $30,000 | Equipment | $35,000 |
Accounts receivable | 5,000 | Land | 35,000 |
Buildings | ? | Unearned service revenue | 10,000 |
Cash | 15,000 | Total stockholders' equity | ? |
If total stockholders’ equity is $95,000, what is the balance of the Buildings account?
a. $35,000
b. $135,000
c. $145,000
d. $45,000
188. Acme Construction Company had the following accounts and balances:
Accounts payable | $30,000 | Equipment | $35,000 |
Accounts receivable | 5,000 | Land | 35,000 |
Buildings | 75,000 | Unearned service revenue | 10,000 |
Cash | 15,000 | Total stockholders' equity | ? |
If the equipment was sold for $35,000, what would be the total of stockholders' equity?
a. $65,000
b. $90,000
c. $115,000
d. $125,000
189. A1 Services Corporation had the following accounts and balances:
Accounts payable | $30,000 | Equipment | $35,000 |
Accounts receivable | 5,000 | Land | 35,000 |
Buildings | ? | Unearned service revenue | 10,000 |
Cash | 15,000 | Total stockholders' equity | ? |
If the balance of the Buildings account was $85,000, what would be the total of liabilities and stockholders' equity?
a. $170,000
b. $175,000
c. $135,000
d. $125,000
190. Notes to the financial statements include all of the following except
a. descriptions of significant accounting policies used.
b. explanations of uncertainties.
c. projected accounting information.
d. statistics needed to understand the statements.
191. The management discussion and analysis (MD&A) section of the annual report covers all of the following aspects except the
a. ability of the company to pay near-term obligations.
b. certification criteria of the company's auditors.
c. company's ability to fund operations and expansion.
d. results of the company operations.
192. An annual report includes all of the following except
a. management discussion and analysis section.
b. notes to the financial statements.
c. an auditor’s report.
d. a list of all customers.
193. Which of the following clarifies information presented in the financial statements, as well as expanding upon it where additional detail is needed?
a. Auditor’s report
b. Management discussion and analysis section
c. Notes to the financial statements
d. President’s state of the company report
194. The information needed to determine whether a company is using accounting methods similar to those of its competitors is found in the
a. auditor’s report.
b. balance sheet.
c. management discussion and analysis section.
d. notes to the financial statements.
195. In Target’s annual report, where would a financial statement reader find out if the company’s financial statements give a fair depiction of its financial position and operating results?
a. Notes to the financial statements
b. Management discussion and analysis section
c. Balance sheet
d. Auditor’s report
196. Management’s views on the company’s short-term debt paying ability, expansion financing, and results of operations are found in the
a. auditor’s report.
b. management discussion and analysis section.
c. notes to the financial statements.
d. president’s state of the company report.
197. Which of the following statements is true?
a. Publicly traded U.S. companies must provide an annual report to their shareholders when operating conditions change significantly.
b. An unqualified independent auditor’s report must be included in the annual report.
c. Notes to the financial statements do not need to be included in the annual report because that information is only for internal users.
d. A company’s annual report normally includes the financial statements with notes, a management and discussion analysis section, and the independent auditor’s report.
198. Notes to the financial statements
a. are optional.
b. help clarify information presented in the financial statements.
c. are generally brief and few in number.
d. need not be read in detail if an unqualified opinion accompanies the financial statements.
199. Based on the following data, what are total assets?
Accounts payable………………………………………………………. $62,000
Accounts receivable……………………………………………………. 50,000
Cash……………………………………………………………………… 70,000
Inventory…………………………………………………………………. 138,000
Buildings…………………………………………………………………. 160,000
Bonds payable…………………………………………………………... 500,000
Supplies………………………………………………………………….. 8,000
Notes payable…………………………………………………………… 56,000
Equipment……………………………………………………………….. 340,000
a. $822,000
b. $766,000
c. $758,000
d. $708,000
200. Based on the following data, what are total liabilities?
Accounts payable……………………………………………………….. $ 62,000
Accounts receivable…………………………………………………….. 50,000
Cash………………………………………………………………………. 70,000
Inventory………………………………………………………………….. 138,000
Buildings………………………………………………………………….. 160,000
Bonds payable…………………………………………………………… 500,000
Supplies…………………………………………………………………... 8,000
Notes payable……………………………………………………………. 56,000
Equipment………………………………………………………………... 340,000
a. $618,000
b. $562,000
c. $556,000
d. $118,000
201. Based on the following data and assuming that the common stock account balance is $48,000, what is the balance in retained earnings?
Accounts payable……………………………………………………….. $ 62,000
Accounts receivable…………………………………………………….. 50,000
Cash………………………………………………………………………. 70,000
Inventory………………………………………………………………….. 138,000
Buildings………………………………………………………………….. 160,000
Bonds payable…………………………………………………………… 500,000
Supplies…………………………………………………………………... 8,000
Notes payable……………………………………………………………. 56,000
Equipment………………………………………………………………… 340,000
a. $218,000
b. $162,000
c. $148,000
d. $100,000
- Service revenue
- Cash
- Common stock
- Accounts payable
- Rent expense
- Supplies
- Land
Ex. 223
Prepare an income statement and a retained earnings statement, for the month of October 2025 and a balance sheet at October 31, 2025 for the medical practice of Meredith Grey, MD, from the items listed below.
Retained earnings (October 1) $15,000
Common stock 30,000
Accounts payable 6,000
Equipment 29,000
Service revenue 23,000
Dividends 6,000
Insurance expense 3,500
Cash 11,000
Utilities expense 700
Supplies 2,800
Salaries and wages expense 9,000
Accounts receivable 10,000
Rent expense 2,000
MEREDITH GREY, MD
Income Statement
For the Month Ended October 31, 2025
Revenues $
Expenses $
Total expenses
Net income $ t
Ex. 223 (Cont.)
MEREDITH GREY, MD
Retained Earnings Statement
For the Month Ended October 31, 2025
Retained Earnings, October 1 $
Add:
Less:
$ t
MEREDITH GREY , MD
Balance Sheet
October 31, 2025
Assets
$
Total assets
$ t
Liabilities and Stockholders’ Equity
Liabilities
$
Stockholders’ Equity
$
Total liabilities and stockholders’ equity $ t
Ex. 224
Use the following accounts and information to prepare, in good form, an income statement and a retained earnings statement, for the month of August and a balance sheet at August 31, 2025 for Acme Industries.
Accounts payable $ 1,100 Dividends $ 3,000
Accounts receivable 5,400 Insurance expense 1,200
Equipment 63,000 Supplies 1,400
Cash 18,600 Notes payable 3,300
Service revenue 25,700 Rent expense 3,400
Common stock 52,000 Salaries and wages expense 12,000
Retained earnings (beginning) 25,900
ACME INDUSTRIES
Income Statement
For the Month Ended August 31, 2025
Revenues
$
Expenses
$
Total expenses
Net income $ t
ACME INDUSTRIES
Retained Earnings Statement
For the Month Ended August 31, 2025
Retained Earnings, August 1 $
Add:
Less:
Retained Earnings, August 31 $ t
Ex. 224 (Cont.)
ACME INDUSTRIES
Balance Sheet
August 31, 2025
Assets
$
Total assets
$ t
Liabilities and Stockholders’ Equity
Liabilities
$
$
Stockholders’ Equity
$
Total liabilities and stockholders’ equity $ t
Ex. 225
At September 1, 2025, the balance sheet accounts for A1 Steakhouse Restaurant were as follows:
Accounts Payable $ 3,800 Land $33,000
Accounts Receivable 1,600 Common Stock ?
Buildings 66,000 Notes Payable 46,000
Cash 5,000 Supplies 3,600
Equipment 15,700 Retained Earnings 45,200
The following transactions occurred during the next two days:
On September 2, stockholders invested an additional $20,000 cash in the business. The accounts payable were paid in full.
Instructions
Assuming these were the only two transactions during the first three days of September, prepare a balance sheet at September 3, 2025.
Ex. 226
This information relates to Acme Service Co. for the year 2025.
Retained earnings, January 1, 2025 $59,000
Advertising expense 1,800
Dividends paid during 2025 9,000
Rent expense 10,400
Service revenue 52,000
Utilities expense 2,400
Salaries and wages expense 25,000
Instructions
After analyzing the data, prepare an income statement and a retained earnings statement for the year ending December 31, 2025.
Ex. 227
Here are incomplete financial statements for Kardashian, Inc.
KARDASHIAN, INC.
Balance Sheet
Assets Liabilities and Stockholders' Equity
Cash $ 5,000 Liabilities
Inventory 10,000 Accounts payable $ 5,000
Buildings 40,000 Stockholders' equity
Total assets $55,000 Common stock (a)
Retained earnings (b)
Total liabilities and
stockholders' equity $55,000
Income Statement
Revenues $80,000
Cost of goods sold (d)
Administrative expenses 10,000
Net income $ (c)
Retained Earnings Statement
Beginning retained earnings $10,000
Net income (c)
Dividends 5,000
Ending retained earnings $24,000
Instructions
Calculate the missing amounts.
Ex. 228
Holly’s Hipcamp is a private camping ground near the Pisgah National Forest. It has compiled the following financial information as of December 31, 2025.
Services revenues (from camping fees) $132,000 Dividends $ 8,000
Sales revenues (from general store) 25,000 Notes payable 50,000
Accounts payable 13,000 Administrative expenses 133,000
Cash 13,500 Supplies 2,500
Equipment 108,000 Common stock 40,000
Retained earnings (1/1/2025) 5,000
Instructions
(a) Determine net income for Holly’s Hipcamp for 2025.
(b) Prepare a retained earnings statement and a balance sheet for Holly’s Hipcamp as of December 31, 2025.
Ex. 229
Ryan Seacrest is the bookkeeper for Idol Company. Ryan has been trying to get the company’s balance sheet to balance. It finally balanced, but now he is not sure it is correct.
IDOL COMPANY
Balance Sheet
December 31, 2025
Assets Liabilities and Stockholders' Equity
Cash $12,500 Accounts payable $18,000
Supplies 9,500 Accounts receivable (12,000)
Equipment 50,000 Common stock 40,000
Dividends 13,000 Retained earnings 39,000
Total assets $85,000 Total liabilities and
stockholders' equity $85,000
Instructions
Prepare a correct balance sheet.
Ex. 230
Suppose that the following summaries of data for 2025 from the balance sheet, income statement, and retained earnings statement are for Walmart and Target:
Walmart Target
Beginning of year
Total assets $110,000 $130,000
Total liabilities 80,000 (d)
Total stockholders' equity (a) 70,000
End of year
Total assets (b) 190,000
Total liabilities 120,000 65,000
Total stockholders' equity 70,000 (e)
Changes during year in retained
earnings
Dividends (c) 5,000
Total revenues 225,000 (f)
Total expenses 165,000 80,000
Instructions
Determine the missing amounts. Assume all changes in stockholders' equity are due to changes in retained earnings.
Ex. 231
This information is for Ace Corporation for the year ended December 31, 2025.
Cash received from lenders $20,000
Cash received from customers 65,000
Cash paid for new equipment 30,000
Cash dividends paid 9,000
Cash paid to suppliers 28,000
Cash balance 1/1/2025 12,000
Instructions
Prepare the 2025 statement of cash flows for Ace Corporation.
Ex. 232
One item is omitted in each of the following summaries of balance sheet and income statement data for three different corporations, A, B, and C.
Determine the amounts of the missing items, identifying each corporation by letter.
Corporation
A B C
Beginning of the Year:
Assets $410,000 $150,000 $199,000
Liabilities 250,000 115,000 166,000
End of the Year:
Assets 460,000 195,000 205,000
Liabilities 280,000 95,000 169,000
During the Year:
Additional Investment by stockholders ? 79,000 78,000
Dividends 70,000 83,000 ?
Revenue 195,000 ? 187,000
Expenses 155,000 113,000 183,000