Question 1

Universal Corp.has beginning Retained Earnings of $80,000,cash flows from operating activities during the current year of $35,000,dividends paid during the year of $5,000,net income for the current year of $50,000,and Common Stock at the end of the year of $15,000.What is the amount of its Retained Earnings at the end of the year?

Accepted Answer

A) $125,000 
B) $140,000 
C) $160,000 
D) $175,000

Question 2

The Statement of Cash Flows for the current year contained the following:  The change in cash for the current year was an increase of $14,000.
What was the amount of cash flows from (used in)operating activities?

Accepted Answer

A) $5,000 
B) $35,000 
C) $25,000 
D) $4,000

Question 3

Which of the following statements about organizational forms of a business is not correct?

Accepted Answer

A) In a sole proprietorship form of business or in a partnership form,the owner(s)are personally responsible for the debts of the business. 
B) The partnership agreement states how profits are to be shared between partners and what happens when a new partner is to be admitted or an existing partner is retiring. 
C) A corporation is a separate entity from both a legal and accounting perspective. 
D) The owners of a corporation are legally responsible for the corporation's debts and taxes.

Question 4

A list of Year 3 revenues and expenses for Green Thumb,Inc.is provided below.
 $\begin{array}{lr}
\text { Advertising and Promotion Expenses } & 262,500 \
\text { Income Tax Expense } & 56,500 \
\text { Interest Expense } & 43,900 \
\text { Other Expenses } & 122,400 \
\text { Other Selling \& Administrative Expenses } & 350,800 \
\text { Sales Revenue } & 1,865,300 \
\text { Salaries and Wages Expense } & 724,800
\end{array}$ Required:
a.Calculate the net income for the Green Thumb,Inc.for Year 3.
b.Prepare a statement of retained earnings for Green Thumb,Inc.for Year 3.Assume the company had retained earnings of $162,000 as of January 1,Year 3,and paid out $46,000 in dividends during Year 3.

Accepted Answer

The answer of A list of Year 3 revenues and...

Question 5

Match the business activity to the appropriate category.
-Company repayment of a bank loan

Accepted Answer

A) Financing activity 
B) Operating activity 
C) Investing activity

Question 6

Stockholders are owners of a corporation.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is typically considered a disadvantage of sole proprietorships?

Accepted Answer

A) Income taxes are paid by both the business and its owner. 
B) The business is considered a separate legal entity from its owner. 
C) Establishing the business usually requires legal assistance. 
D) Owner is personally liable for all debts of the business.

Question 8

Dividends are reported on the:

Accepted Answer

A) income statement. 
B) balance sheet. 
C) statement of retained earnings. 
D) income statement and balance sheet.

Question 9

Alpha sold $2,000 of services to Beta on credit.Beta promised to pay for it next month.Beta will report a $2,000:

Accepted Answer

A) Payable. 
B) Accounts Receivable. 
C) decrease in Cash,since it plans to pay next month. 
D) net income.

Question 10

What is the missing amount for Total Liabilities?

Accepted Answer

A) $3,347,700 
B) $1,439,200 
C) $1,470,700 
D) $1,877,000

Question 11

The following accounts are taken from the December 31,Year 4 financial statements of a company.  What is the amount of total assets at the end of Year 4?

Accepted Answer

A) $16,800 
B) $16,500 
C) $21,600 
D) $23,500

Question 12

Dividends paid to stockholders:

Accepted Answer

A) are a reduction to Retained Earnings. 
B) appear in the cash flows from operating activities section of the statement of cash flows. 
C) appear on the income statement. 
D) are subtracted from Common Stock.

Question 13

The WeBuild Construction Company sold $16.5 million of buildings in its first year of operations.The company received payments of $11.25 million for these buildings.The company's income statement would report:

Accepted Answer

A) Accounts Receivable of $5.25 million. 
B) Expenses of $5.25 million. 
C) Sales Revenue of $11.25 million. 
D) Sales Revenue of $16.5 million.

Question 14

Borrowing from a bank is a(n):

Accepted Answer

A) operating activity. 
B) investing activity. 
C) financing activity. 
D) expense.

Question 15

Which of the following requires that its members adhere to a Code of Professional Conduct?

Accepted Answer

A) SEC 
B) FASB 
C) PCAOB 
D) AICPA

Question 16

Which of the following statements about financial accounting is correct?

Accepted Answer

A) Financial accounting reports are used primarily by employees to make business decisions related to production. 
B) Financial accounting reports are used primarily by management to understand whether a product line should be discontinued. 
C) Financial accounting reports are primarily prepared to provide information for external decision makers. 
D) Financial accounting reports primarily contain detailed internal records of the company.

Question 17

Profit is equal to:

Accepted Answer

A) revenues minus expenses. 
B) assets minus liabilities. 
C) the amount of cash that a company has. 
D) the amount of cash that owners have contributed to the business.

Question 18

Managerial accounting reports prepared for internal use are used by the company's:

Accepted Answer

A) suppliers. 
B) bank. 
C) employees. 
D) stockholders.

Question 19

What would a user of financial statements learn from reading the auditors' report?

Accepted Answer

A) Whether the financial statements present a fair picture of the company's financial results and are prepared in accordance with GAAP. 
B) Whether or not it is a good time to purchase the stock. 
C) How much the company plans to distribute as dividends. 
D) Whether or not the company has plans for future expansion.

Question 20

The Publish or Perish Printing Company paid a dividend to stockholders.This will be reported on the:

Accepted Answer

A) audit report. 
B) income statement. 
C) balance sheet. 
D) statement of retained earnings.

Exam 1: Business Decisions and Financial Accounting

The Statement of Cash Flows for the current year contained the following: The change in cash for the current year was an increase of $14,000. What was the amount of cash flows from (used in) operating activities?