Balance Sheet and Financial Position
What is the basic accounting equation that the balance sheet summarizes?
Assets = Liabilities + Stockholders’ Equity
What are the firm's current assets if the balances are: Cash $7,530, Accounts Receivable $2,100, Prepaid Expenses $700?
$10,330
What components make up stockholders' equity on a balance sheet?
Common stock, additional paid-in capital, and retained earnings
What type of activity is cash paid to buy a building classified under?
Investing.
What term describes the debt created by a business when it makes a purchase on credit?
Accounts Payable.
What does a common-size balance sheet express each account as a percentage of?
Total Assets.
Which of the following assets would be classified as current assets on the balance sheet: cash equivalents, inventory, or property, plant, and equipment?
Cash equivalents and inventory.
If a company’s net income is $328,000, does this mean the company must have $328,000 in cash at the end of the year?
False.
If assets are $100 and liabilities are $80, what must equity be?
$20.
How are expenses recorded on the income statement in relation to equity?
Expenses are recorded as negative values, reducing owners' equity.
Which section of the balance sheet would capital lease obligations, short-term debt, and unearned revenues fall under?
Current Liabilities.
How much will be classified as a current liability if a company has a long-term debt obligation of $10 million, with $1 million due in the next fiscal year?
$1 million
How are retained earnings calculated at the end of a period?
Beginning Retained Earnings + Net Income - Dividends.
Which of the following is not considered a liability: Accounts Receivable, Wages Payable, or Unearned Revenues?
Accounts Receivable.
If a company's net income is $16,000, derived from cash services of $22,000, services on account of $12,000, and rent expenses of $18,000, how is net income calculated?
Net Income = $22,000 + $12,000 - $18,000.
If total liabilities decreased by $46,000 and stockholders' equity increased by $60,000 during a period, what is the net change in total assets?
$14,000 increase
If a company's liabilities increased by $75,000 and stockholders' equity decreased by $30,000, what is the change in the company's assets?
Increased by $45,000
What does the retained earnings account measure?
All undistributed earnings.
How do you classify a cash flow when a company pays dividends to its shareholders?
Financing.
What is the net income reported on the income statement if total revenues are $800, total expenses are $500, and dividends are zero?
Net Income = $300.
What is the retained earnings balance reported on the balance sheet if the beginning retained earnings are $3,200, service revenue is $33,900, expenses total $10,000, and dividends paid are $800?
$24,300
Given the following account balances: Accounts Payable $7,100, Unearned Revenue $3,800, and Notes Payable due in 2025 $2,200, what are the total liabilities?
$13,100
If the beginning equity is $73,000, revenues are $93,000, expenses are $66,000, and dividends are $9,100, what is the ending equity?
$90,900.
On July 8, Jones Inc. issued an $80,000, 6%, 120-day note payable. If the fiscal year ends on July 31, what is the interest expense recognized in the current fiscal year?
$307.
Deacon Inc. has beginning retained earnings of $12,940, net income of $3,580, and dividends of $790. What is the ending retained earnings?
$15,730.