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Exam 1: Accounting Information and Decision Making

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Question 91

Multiple Choice

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Which financial accounting number impacts stock prices more than any other single piece of information?

A) Retained earnings.
B) Net income.
C) Common stock.
D) Total assets.

E) A) and C)
F) A) and D)

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Question 92

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Match each financial statement with the accounts reported in it.

Premises

Responses

Revenues and expenses.

Statement of stockholders' equity

Dividends.

Balance sheet

Assets and liabilities.

Income statement

Premises

Revenues and expenses.

Dividends.

Assets and liabilities.

Responses

Statement of stockholders' equity

Balance sheet

Income statement

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Correct Answer

Premises

Responses

Revenues and expenses.

Dividends.

Assets and liabilities.

Premises

Revenues and expenses.

Dividends.

Assets and liabilities.

Responses

Question 93

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

Match each business activity with its example.

Which of the following items would not appear in an income statement?

The costs of providing goods and services to customers are referred to as:

Klein Interiors has the following account balances at the end of the year. Use only the appropriate accounts to prepare a balance sheet. $\begin{array} { | l | r | } \hline { \text { Accounts } } & \text { Balances } \\\hline \text { Equipment } & \$ 78,000 \\\hline \text { Accounts Payable } & 12,000 \\\hline \text { Common Stock } & 20,000 \\\hline \text { Service Revenue } & 62,000 \\\hline \text { Cash } & 8,000 \\\hline \text { Retained Earnings } & \mathbf { ? } \\\hline \text { Salaries Expense } & 38,000 \\\hline \text { Notes Payable } & 25,000 \\\hline\end{array}$

Below is cash flow information for five independent situations. Calculate the answer to each. 1. A company reports operating cash flows of $3,200, investing cash flows of $700, and financing cash flows of -$400. What is the amount of the change in total cash? 2. A company reports operating cash flows of $1,800, investing cash flows of -$400, and financing cash flows of -$1,100. If the beginning cash amount is $500, what is the ending cash amount? 3. A company reports operating cash flows of $700, investing cash flows of $300, and a change in total cash of $100. What is the amount of cash flows from financing activities? 4. A company reports operating cash flows of $600, financing cash flows of $400, and a change in total cash of $100. What is the amount of cash flows from investing activities? 5. A company reports investing cash flows of -$1,400, financing cash flows of $900, and a change in total cash of $200. What is the amount of cash flows from operating activities?

Investing cash flows generally include cash receipts and cash payments for transactions involving revenues and expenses.

Aikman Company has paid dividends of $2,410, $0, $1,570 and $1,060 over the first four years of the company's existence. If Retained Earnings after year four has an ending balance of $9,700, what is the average annual amount of net income (loss) over the past four years for Aikman?

Given the information below about David Corporation, what was the amount of dividends the company paid in the current period? $\begin{array} { | l | l | } \hline \text { Beginning retained earnings } & \$ 35,000 \\\hline \text { Ending retained earnings } & \$ 90,000 \\\hline \text { Increase in cash } & \$ 25,000 \\\hline \text { Net income } & \$ 85,000 \\\hline \text { Change in stockholders' equity } & \$ 20,000 \\\hline\end{array}$

One advantage of the corporate form of business is double taxation.