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Exam 1: An Introduction to Accounting

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Question 101

True/False

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A business's creditors have a priority claim to its assets in the event of liquidation.

A) True
B) False

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Question 102

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The four financial statements prepared by a business bear no relationship to each other.

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B) False

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Question 103

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Which of the following items is an example of revenue?

Vantage Corporation invested $800 cash in Tandem Company stock. As a result of this transaction,

Indicate whether each of the following statements about the types of transactions is true or false. _______ a) An asset source transaction increases total assets and decreases claims to assets. _______ b) The issuance of stock to owners for cash would be an example of an asset exchange transaction. _______ c) Purchasing equipment for cash is an example of an asset exchange transaction. _______ d) Paying a dividend to stockholders is an example of an asset use transaction. _______ e) Making a payment on a bank loan is an example of an asset exchange transaction.

Retained Earnings at the beginning and ending of the accounting period was $300 and $700, respectively. If revenues were $1,100 and dividends paid to stockholders were $200, expenses for the period must have been

Richardson Company paid $850 cash for rent expense. As a result of this business event,

Indicate how each of the following transactions affect assets by entering + for increase, - for decrease, or NA if total assets are not affected. _______ 1) Issued stock to investors. _______ 2) Borrowed cash from the bank. _______ 3) Provided services for cash. _______ 4) Purchased land for cash. _______ 5) Paid operating expenses. _______ 6) Paid cash dividend to the stockholders. _______ 7) Repaid the bank loan.

Grayson Corporation reports the following cash transactions for the year ending December 31, 2012, its first year of operation: 1) issued common stock for $36,000 2) borrowed $20,000 from a local bank 3) purchased land for $24,000 4) provided services to clients for $28,000 5) paid operating expenses of $21,500 6) paid $2,500 cash dividends to stockholders Required: a) What are the total assets for Grayson Corporation at December 31, 2012? b) Prepare an income statement for 2012.

Petras Company engaged in the following transactions during 2012, its first year in operations: (Assume all transactions are cash transactions) 1) Acquired $950 cash from the issue of common stock. 2) Borrowed $420 from a bank. 3) Earned $600 of revenues. 4) Paid expenses of $250. 5) Paid a $50 dividend. During 2013, Petras engaged in the following transactions: (Assume all transactions are cash transactions) 1) Issued an additional $325 of common stock. 2) Repaid $220 of its debt to the bank. 3) Earned revenues of $750. 4) Incurred expenses of $360. 5) Paid dividends of $100. The amount of retained earnings on Petras's 2013 balance sheet is

Dividends paid by a company are shown on the

Rialto Company experienced an accounting event that affected its financial statements as indicated below: $\begin{array} { | c | c | c | c | c | c | c | c | c | c | c | } \hline \begin{array} { c } \text { Assets } \\+\end{array} & = & \begin{array} { c } \text { Liab. } \\\text { NA }\end{array} & + & \begin{array} { c } \text { Equity } \\+\end{array} & \begin{array} { c } \text { Rev } \\+\end{array} & - & \begin{array} { c } \text { Exp } \\\text { NA }\end{array} & = & \begin{array} { c } \text { Net } \\\text { Inc. } \\+\end{array} & \begin{array} { c } \text { Cash } \\\text { Flow } \\+ \mathrm { OA }\end{array} \\\hline\end{array}$ Which of the following accounting events could have caused these effects on Rialto's statements?

La Paz Company engaged in the following transactions during 2012, its first year in operation: (Assume all transactions are cash transactions) 1) Acquired $3,000 cash from issuing common stock. 2) Borrowed $2,200 from a bank. 3) Earned $3,100 of revenues. 4) Incurred $2,400 in expenses. 5) Paid dividends of $400. La Paz Company engaged in the following transactions during 2013: 1) Acquired an additional $500 cash from the issue of common stock. 2) Repaid $1,300 of its debt to the bank. 3) Earned revenues, $4,500. 4) Incurred expenses of $2,750. 5) Paid dividends of $640. The amount of total assets on La Paz's 2012 balance sheet was

Give three examples of asset use transactions.

During 2013, XYZ Company issued common stock to stockholders for $10,000; purchased land for $2,000 cash; provided services to customers for $8,000; paid cash operating expenses of $6,200; and paid cash dividends of $1,000 to the company's owners. Enter each of these events into the horizontal financial statements model, below. Indicate dollar amounts of increases and decreases. For cash flows, show whether they are operating activities (OA), investing activities (IA), or financing activities (FA).

From what three sources does a business obtain its assets?

Both liabilities and equity are sources of a business's assets.

Expenses are shown on the

Borrowing cash from the bank is an example of which type of transaction?

Which financial statement matches asset increases from operating a business with asset decreases from operating the business?