ACCT 1220 Study Guide - Midterm Guide: Trial Balance, General Ledger, Accrual

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31 Jan 2017

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Records economic events of an organization and communicates to interested users. External (cid:1372) do not work for the company (cid:523)shareholders, investors, bank, customers(cid:524) Shareholders equity (selling shares to shareholders: investing. Related accounts such as accounts receivable and accounts payable. Financial statements: income statement, statement of changes in equity, statement of financial position (balance sheet) Reports revenues and expenses for a specific period of time. Ending (r/e) = beginning (r/e) + profit - dividend. Shows changes in each component of shareholders" equity for the period. Shows the assets, liabilities and shareholders" equity at a specific point in time. Capital (cid:523)common shares(cid:524) (cid:1372) money that shareholders bring to the company. Retained earnings (cid:523)r/e(cid:524) (cid:1372) profit cumulated over time. Reports the effect on cash of the company"s. Shows net increase or decrease in cash for the period. Income statement: statement of changes in equity, statement of financial position (balance sheet, statement of cash flows.

Related Questions

1. Creditors' claims on the assets of a company are called: (Points : 2)

2. The primary objective of financial accounting is: (Points : 2)

To serve the decision-making needs of internal users

To provide financial statements to help external users analyze and interpret an organization's activities

To monitor and control company activitiesTo provide information on both the costs and benefits of managing products and services

To know what, when and how muchto produce

3. Assets created by selling goods and services on credit are: (Points : 2)

4. The debt ratio is used: (Points : 2)

To measure the amount of equity relative to the expenses

To reflect the risk associated with a company's debts

Only by banks when a business applies for a loan

To determine how much debt a firm should pay off

5. Net Income: (Points : 2)

Decreases equity

Represents the amount of assets owners put into a business

Equals assets minus liabilities

Is the excess of revenues over expenses

Represents the owners' claims against assets

6. Internal users of accounting information include: (Points : 2)

Shareholders

Customers

Creditors

Government regulators

Line Supervisor

7. Risk is: (Points : 2)

Net income divided by average total assets

The reward for investment

The uncertainty about the expected return that will be earned from an investment

Unrelated to expected return

8. An example of an operating activity is: (Points : 2)

Paying wages

Purchasing office equipment

Borrowing money from a bank

Selling stock

Paying off a loan

9. Which accounting assumption assumes that all accounting information is reported monthly or yearly? (Points : 2)

Business entity assumption

Monetary unit assumption

Value assumption

Cost assumption

Time period assumption

10. Distributions of assets by a business to its stockholders are called: (Points : 2)

The comparative balance sheets for 2016 and 2015 and the statement of income for 2016 are given below for Wright Company. Additional information from Wright's accounting records is provided also.

WRIGHT COMPANY Comparative Balance Sheets December 31, 2016 and 2015 ($ in 000s)
	2016		2015
Assets
Cash	$	109	$	70
Accounts receivable		110		115
Short-term investment		52		24
Inventory		115		110
Land		82		100
Buildings and equipment		615		480
Less: Accumulated depreciation		(163)		(115)

	$	920	$	784

Liabilities
Accounts payable	$	35	$	43
Salaries payable		6		8
Interest payable		7		5
Income tax payable		7		11
Notes payable		0		27
Bonds payable		234		180
Shareholders' Equity
Common stock		355		280
Paid-in capitalâexcess of par		161		140
Retained earnings		115		90

	$	920	$	784

WRIGHT COMPANY Income Statement For Year Ended December 31, 2016 ($ in 000s)
Revenues:
Sales revenue			$	460
Expenses:
Cost of goods sold	$	210
Salaries expense		67
Depreciation expense		48
Interest expense		17
Loss on sale of land		4
Income tax expense		64		410

Net income			$	50

Additional information from the accounting records:
a.	Land that originally cost $18,000 was sold for $14,000.
b.	The common stock of Microsoft Corporation was purchased for $28,000 as a short-term investment not classified as a cash equivalent.
c.	New equipment was purchased for $135,000 cash.
d.	A $27,000 note was paid at maturity on January 1.
e.	On January 1, 2016, bonds were sold at their $54,000 face value.
f.	Common stock ($75,000 par) was sold for $96,000.
g.	Net income was $50,000 and cash dividends of $25,000 were paid to shareholders.

Required:

Prepare the statement of cash flows of Wright Company for the year ended December 31, 2016. Present cash flows from operating activities by the direct method. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands (i.e., 5,000 should be entered as 5).)

WRIGHT COMPANY
Statement of Cash Flows
For year ended December 31, 2016
($ in 000s)
Cash flows from operating activities:
Cash inflows:

Cash outflows:






Net cash flows from operating activities.
Cash flows from investing activities:






Net cash flows from investing activities
Cash flows from financing activities:






Net cash flows from financing activities


Cash balance, January 1
Cash balance, December 31

lavenderminnow570

The following events occurred last year at DorderCorporation:

Purchase of plant and equipment	$20,000
Sale of long-term investment	$8,000
Dividends received on long-term investments	$5,000
Paid off bonds payable	$11,000
Depreciation expense	$6,500

Based on the above information, the cash provided (used) byinvesting activities for the year on the statement of cash flowswould net to:

$(11,000)

$(12,000)

$(24,500)

$(6,500)

Last year Burch Corporation's cash account decreased by $16,000.Net cash provided by investing activities was $7,100. Net cash usedin financing activities was $14,000. On the statement of cashflows, the net cash flow provided by (used in) operating activitieswas:

$6,900

$(16,000)

$(9,100)

$(22,900)

McCorey Corporation recorded the following events last year:

Repurchase by the company of its own commonstock	$39,000
Sale of long-term investment	$58,000
Interest paid to lenders	$14,500
Dividends paid to the company's shareholders	$68,000
Collection by McCorey of a loan made to anothercompany	$44,000
Payment of taxes to governmental bodies	$24,500

On the statement of cash flows, some of these events areclassified as operating activities, some are classified asinvesting activities, and some are classified as financingactivities.

Based solely on the information above, the net cash provided by(used in) investing activities on the statement of cash flows wouldbe:

$102,000

$(9,500)

$34,000

$(19,500)

Financial statements of Rukavina Corporation follow:

Rukavina Corporation Comparative Balance Sheet
	Ending Balance	Beginning Balance
Assets:
Cash and cash equivalents	$24	$21
Accounts receivable	77	72
Inventory	33	31
Property, plant and equipment	528	480
Less: accumulated depreciation	326	299
Total assets	$336	$305
Liabilities and stockholders'equity:
Accounts payable	$42	$52
Bonds payable	95	110
Common stock	71	72
Retained earnings	128	71
Total liabilities and stockholders' equity	$336	$305

Income Statement
Sales	$705
Cost of goods sold	448
Gross margin	257
Selling and administrative expenses	151
Net operating income	106
Income taxes	38
Net income	$68

Cash dividends were $11. The company did not dispose of anyproperty, plant, and equipment. It did not issue any bonds payableor repurchase any of its own common stock. The following questionspertain to the company's statement of cash flows.

The net cash provided by (used in) investing activities for theyear was:

$(11)

$(15)

$(48)

periwinkleserval695

ACCT 1220 Study Guide - Midterm Guide: Trial Balance, General Ledger, Accrual

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