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Exam 2: Basic Accounting Systems: Cash Basis

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Question 41

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The first month of operation showed the net cash from operating activities to be $1,850, the net cash from investing activities to be ($3,000) , and the ending cash balance to be $1,600.The net cash from financing activities must be:

A) $450.
B) $2,750.
C) $3,250.
D) $6,450.

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

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Question 42

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Lewis Company has $25,000 in retained earnings, $40,000 in assets, and $11,000 in liabilities.How much is in common stock?

A) $29,000
B) $25,000
C) $14,000
D) $4,000

E) A) and B)
F) All of the above

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Question 43

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How can a company earn a large net income and have a small balance in retained earnings?

Brite Inc.had the following assets and liabilities at the end of the year: $\begin{array} { l l } \text { Assets } & \$ 54,800 \\\text { Liabilities } & \$ 32,000\end{array}$ What is the year-end stockholders' equity of Brite Inc.?

By keeping a running total of the effects of transactions, the accounting equation provides a framework for summarizing the effects of a series of transactions.

Which of the following transactions changes the mix of assets only?

The basic elements of a financial accounting system include a framework for preparing financial statements.

JNC Company sells its products for cash, at a profit of 20%.Which of the following financial statement elements are affected as a result of this transaction?

The following are included in Ace Auto Parts, Inc.'s December 31, 2016 balance sheet: $\begin{array}{l}\begin{array} { | l | r | } \hline \text { Accounts Receivable } & \$ 50,000 \\\hline \text { Building } & 100,000 \\\hline \text { Cash } & 60,000 \\\hline \text { Land } & 130,000 \\\hline \text { Accounts Payable } & 40,000 \\\hline \text { Notes Payable } & 70,000 \\\hline \text { Stockholders' Equity } & ? \\\hline\end{array}\\\text { Below are the balances for December 31, 2016: }\\\begin{array} { | l | r | } \hline \text { Accounts Receivable } & \$ 90,000 \\\hline \text { Building } & 100,000 \\\hline \text { Cash } & 150,000 \\\hline \text { Land } & 130,000 \\\hline \text { Accounts Payable } & 60,000 \\\hline \text { Notes Payable } & 50,000 \\\hline \text { Stockholders' Equity } & \text { ? } \\\hline\end{array}\end{array}$ Analyze the changes in these balances and determine net income for 2017, assuming that the only change to stockholders' equity is from net income.

​Jade Inc.paid rent of $25,000 for the current month.This transaction:

Which of the following situations increase stockholders' equity?

Navy Inc.buys land for $500,000 cash in the month of March.In March, it also paid wages of $100,000.Which of the following statements is true with regards to the above transactions?​

For EFG Co., the transaction "purchase of store equipment with a note payable" would:

When an account receivable is collected in cash, the total assets of the business increase.

ABC Inc.borrows $50,000 from a bank to finance its operations.Which of the following statements regarding the effect of this transaction on the company's liquidity and profitability metric is true?​

The accounting equation is expressed as follows: Assets = Liabilities + Stockholders' Equity.

A business receives $10,000 cash for a sale of merchandise and records this receipt of cash as an increase in accounts receivable by mistake.The accounting equation is still in balance.

Johnson, Inc.issued $15,000 in common stock in exchange for cash.What is the effect of this transaction?

A to Z Corporation issued a $30,000 note payable to borrow cash from the bank.On the Statement of Cash Flows, the transaction would be classified as:

The payment of $20,000 for expenses was incorrectly recorded by Elite Co.as an increase in cash of $20,000 and a decrease in retained earnings of $20,000.What is the effect of this error on the accounting equation?