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Exam 1: Accounting Information and Decision Making

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Question 51

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Using the information below from the accounting records of Thomas Corporation,owners' claims to the company's resources amount to: $\begin{array} { l r } \text { Assets } & \$ 1,200,000 \\\text { Liabilities } & \$ \$ 00,000 \\\text { Net incorne } & \$ 100,000 \\\text { Retained earmings } & \$ 250,000\end{array}$

A) $1,200,000.
B) $800,000.
C) $250,000.
D) $400,000.

E) None of the above
F) B) and C)

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Question 52

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The balance sheet is a financial statement that reports the company's revenues and expenses over an interval of time.

A) True
B) False

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Question 53

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At the end of the current period,Rogers Company reports the following amounts: Assets = $25,000; Liabilities = $15,000; Dividends = $3,000; Revenues = $20,000; Expenses = $13,000.Calculate net income and stockholders' equity at the end of the period.

The accounting equation shows that a company's resources equal creditors' and owners' claims to those resources.

DW has an ending Retained Earnings balance of $51,100.If during the year DW paid dividends of $4,300 and had net income of $22,500,then what was the beginning Retained Earnings balance?

Retained earnings at the end of the year is calculated using:

Accounting information is used by creditors to decide whether to invest in a company's stock.

The body of rules and procedures that guide the measurement and communication of financial accounting information is known as:

What is the primary purpose of financial accounting?

Thomason Financial has the following cash transactions for the year.Assume cash at the beginning of the period is $6,000.Prepare a statement of cash flows. $\begin{array} { l c } { \text { Accounts } } & \text { Amounts } \\\hline \text { Cash received for sale of services to customers } & \$ 42,000 \\\text { Cash received from issuance of common stock } & 33,000 \\\text { Cash paid to purchase office equipment } & ( 49,000 ) \\\text { Cash paid to building maintenance } & ( 7,000 ) \\\text { Cash paid for advertisement } & ( 8,000 ) \\\text { Cash paid to workers } & ( 18,000 ) \\\text { Cash paid for dividends to stockholders } & ( 3,000 ) \\\text { Cash received from sale of land } & 7,000 \\\text { Cash received from borrowing } & 14,000\end{array}$

Dividends are considered an expense in running the business and reported in the income statement.

Accountants are responsible for measuring various operating,investing and financing activities.Which of the following correctly matches the activity with its type?

Any transaction that affects the income statement ultimately affects the balance sheet through the balance of retained earnings.

Today,financial accounting and reporting standards in the United States are established primarily by the:

Financial accounting does not deal with which of the following?

During its first five years of operations,Della Manufacturing reports net income and pays dividends as follows.Calculate the balance of retained earnings at the end of each year.Note that retained earnings will always equal $0 at the beginning of year 1. $\begin{array} { c c c l } \text { Year } & \begin{array} { c } \text { Net } \\\text { Income }\end{array} & \text { Dividends } & \begin{array} { l } \text { Retained } \\\text { Earnings }\end{array} \\\hline 1 & \$ 1,700 & \$ 1,000 & \\2 & 2,700 & 1,000 & \\3 & 3,200 & 2,000 & \\4 & 5,400 & 2,000 & \\5 & 7,600 & 3,000 & \\-\end{array}$

If total assets of a company equal $12,000 and total stockholders' equity equals $4,000,then total liabilities equal $8,000.

Dividends represent a return of the company's profits to its owners,the stockholders.

Which statement below best describes the accounting equation?

Auditors are trained individuals hired by a company as an independent party to express a professional opinion of the accuracy of that company's financial statements.