References
Multiple Choice Difficulty: 1 Easy Learning Objective: 01-07 Prepare an income statement, a
statement of changes in stockholders equity, and a balance sheet.
At the beginning of Year 2, Jones Company had a balance in common stock of $300,000 and a balance of retained earnings of $15,000. During Year 2, the
following transactions occurred:
· Issued common stock for $90,000
· Earned net income of $50,000
· Paid dividends of $8,000
· Issued a note payable for $20,000
Based on the information provided, what is the total stockholders' equity on December 31, Year 2?
$147,000
$357,000
$427,000
$447,000
The total stockholder’s equity equals Ending Common Stock + Ending Retained Earnings. First, ending common stock is calculated as: Beginning common
stock + Common stock issued or $300,000 + $90,000 = $390,000. Next, ending retained earnings is calculated as follows. Beginning retained earnings of
$15,000 + Net income of $50,000 − Dividends of $8,000 = Ending retained earnings of $57,000. Finally, ending common stock of $390,000 + Ending retained
earnings of $57,000 = Total stockholders’ equity of $447,000. Paying back a portion of a note payable does not affect stockholders’ equity and therefore it is
not included in the calculation.
References
Multiple Choice Difficulty: 1 Easy Learning Objective: 01-07 Prepare an income statement, a
statement of changes in stockholders equity, and a balance sheet.
62.
Award: 1.00 point
63.
Award: 1.00 point
64.
Award: 1.00 point
Which of the following accounts are permanent?
Retained earnings
All income statement accounts
Dividends
All balance sheet accounts including dividends.
Accounts that do not close at the end of the accounting period are permanent accounts. Income statement accounts and dividends are temporary accounts, as
they close to retained earnings at the end of the accounting period.
References
Multiple Choice Difficulty: 1 Easy Learning Objective: 01-09 Distinguish between permanent and
temporary accounts.
In which section of a statement of cash flows would the payment of cash dividends be reported?
Investing activities
Operating activities
Financing activities
Dividends are not reported on the statement of cash flows.
Paying cash dividends, and any cash exchanged between a company and its stockholders, is a financing activity.
References
Multiple Choice Difficulty: 1 Easy Learning Objective: 01-08 Prepare a statement of cash flows.
Which financial statement matches asset increases from operating a business with asset decreases from operating the business?
Balance sheet
Statement of changes in stockholders' equity
Income statement
Statement of cash flows
The income statement matches asset increases from operations (revenues) with asset decreases from operations (expenses).
References
Multiple Choice Difficulty: 2 Medium Learning Objective: 01-07 Prepare an income statement, a
statement of changes in stockholders equity, and a balance sheet.
65.
Award: 1.00 point
66.
Award: 1.00 point
67.
Award: 1.00 point
The amount of retained earnings is shown on the
income statement.
balance sheet.
statement of cash flows.
statement of changes in stockholders' equity.
balance sheet and statement of changes in stockholders' equity.
The balance sheet reports a company’s assets, liabilities, and stockholders’ equity (common stock and retained earnings). The statement of changes in
stockholders’ equity explains the effects of transactions on stockholders’ equity (common stock and retained earnings) during the period.
References
Multiple Choice Difficulty: 2 Medium Learning Objective: 01-07 Prepare an income statement, a
statement of changes in stockholders equity, and a balance sheet.
Chow Company earned $4,900 of cash revenue, paid $2,700 for cash expenses, and paid a $1,050 cash dividend to its stockholders. Which of the following
statements is true?
The net cash inflow from operating activities was $1,150.
The net cash outflow for investing activities was $1,050.
The net cash inflow from operating activities was $2,200.
The net cash outflow for investing activities was $1,150.
Cash revenue and cash expenses are operating activities. Paying dividends is a financing activity. $4,900 revenue − $2,700 expense = $2,200 cash inflow