1) The income statement presents a summary of the: A) changes that occurred in t
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Question
1) The income statement presents a summary of the:
A) changes that occurred in the stockholders' equity of an entity
B) cash inflows and outflows of an entity
C) revenues and expenses of an entity for a specific time period
D) assets and liabilities of an entity
2) The income statement:
A) reports the results of operations since the inception of the business
B) covers a defined period of time
C) is not dated
D) may cover a period of time or only one day in time, like a snapshot photograph
3) Claims held by the stockholders of a corporation are alternately known as:
A) paid-in capital plus retained earnings
B) retained earnings
C) paid-in capital
D) earned income
4) Payables are classified as:
A) decreases in earnings
B) assets
C) increases in earnings
D) liabilities
5) Revenues are:
A) increases in retained earnings resulting from delivering goods or services to customers
B) decreases in retained earnings resulting from delivering goods or services to customers
C) decreases in assets resulting from delivering goods or services to customers
D) increases in liabilities resulting from delivering goods or services to customers
6) Expenses are:
A) increases in assets resulting from operations
B) decreases in retained earnings resulting from operations
C) increases in liabilities resulting from purchasing assets
D) increases in retained earnings resulting from operations
7) Revenues were $150,000, expenses were $70,000, and cash dividends were $30,000. What was the net income and the change in retained earnings for the period?
Net Income // Change in Retained Earnings
A) $80,000 // $80,000
B) $80,000 // $50,000
C) $50,000 // $50,000
D) $250,000 // $250,000
8) Common stock appears on the:
A) income statement
B) statement of cash flows
C) retained earnings statement
D) balance sheet
9) Depreciation is normally associated with which asset on the balance sheet?
A) accounts receivable
B) inventory
C) equipment
D) land
10) Which of the following transactions would increase assets?
I. Borrowed cash on a note payable, $50,000
II. Provided services on account, $6,000
III. Received cash from a customer as payment on account, $2,000
IV. Received a utility bill, $500
A) I and II
B) I and III
C) I, II, and III
D) All of these answers are correct.
Explanation / Answer
Answer
1) C) revenues and expenses of an entity for a specific time period
The income statement is sometimes referred to as the profit and loss statement (P&L), statement of operations, or statement of income.It shows revenues, expenses, gains, and losses; it does not show cash receipts (money you receive) nor cash disbursements (money you pay out) As the name indicates this statement shows the profitability of a company during the time interval specified in its heading. So it is the statement that shows the revenues and expenses of an entity for a specific time period.
2) B) covers a defined period of time
The income statement shows the profitability of a company during the time interval specified in its heading. The period of time that the statement covers is chosen by the business and will vary.
3) A) paid-in capital plus retained earnings
As Whatever is left after paying the bond holders and the preffered stock holders everything belongs to the Common Stock holders . As the shareholders funds include retained earning apart from the equity. So belongs to them.
4) D) liabilities
As these are the liability to a creditor, carried on open account, usually for purchases of goods and services. in simple words it is an accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable entry is found on a balance sheet under the heading current liabilities.
5) A) increases in retained earnings resulting from delivering goods or services to customers
As the retained earnings are directly affected by the items which affect the net income and the dividends paid .
6) B) decreases in retained earnings resulting from operations
As the retained earnings are directly affected by the items which affect the net income and the dividends paid .
7) B) $80,000 // $50,000
As the net income is Revenue - Expenses so net income is $ 150000- $ 70000 i.e. $80,000 and the retained earnings are Net income - Cash Dividend .i.e. $80,000- $30,000 = $50,000
8) D) balance sheet
As Common stock is part of the balance sheet under the section of shareholders' equity. A balance sheet is a report on the amount of a business's assets, liabilities and shareholders' equity at the end of a reporting period. Common stock as a form of equity is listed under shareholders' equity within the balance sheet and often subcategorized into capital stock and additional paid-in capital. While capital stock denotes the par value of the common shares issued, additional paid-in capital represents the excess amount paid in by shareholders over the par value. A balance sheet reports the total amount of common stock at the end of a reporting period, but it doesn't show any changes to common stock during the period.
9) C) equipment
A fixed asset is an item with a useful life greater than one reporting period, fixed asset is not purchased with the intent of immediate resale, but rather for productive use within the entity. Moreover assets which are purchased for long-term use and are not likely to be converted quickly into cash, such as land, buildings, and equipment. so in this case accounts receivable and inventory are converted to cash not held for long term use. Land is not depreciated because land is assumed to have an unlimited useful life.
10) C) I, II, and III
As by borrowing the cash it will increase and the providing the services on account the recievables will increase and by receiving the cash it will increase by the same amount.
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