accounting equation.
Which of the following is not an element of the financial statements?
Net income
Revenue
Assets
Cash
Cash is not an element of the financial statements. It is an account that is part of the element assets.
References
Multiple Choice Difficulty: 2 Medium Learning Objective: 01-03 Identify the elements of the accounting
equation.
The balance sheet of the Algonquin Company reported assets of $50,000, liabilities of $22,000 and common stock of $15,000. Based on this information only,
what is the amount of retained earnings?
$7,000.
$57,000.
$13,000.
$87,000.
Assets = Liabilities + Stockholders’ Equity; Stockholders’ equity includes common stock and retained earnings. $50,000 = $22,000 + $15,000 + Retained
earnings; Retained earnings = $13,000
References
Multiple Choice Learning Objective: 01-04 Show
how business events affect the
accounting equation.
Difficulty: 1 Easy Learning Objective: 01-07
Prepare an income statement, a
statement of changes in
stockholders equity, and a
balance sheet.
22.
Award: 1.00 point
23.
Award: 1.00 point
24.
Award: 1.00 point
Stosch Company's balance sheet reported assets of $62,000, liabilities of $19,000 and common stock of $16,000 as of December 31, Year 1. If Retained
Earnings on the balance sheet as of December 31, Year 2, amount to $34,000 and Stosch paid a $18,000 dividend during Year 2, then the amount of net
income for Year 2 was which of the following?
$7,000
$25,000
$27,000
$18,000
If assets on December 31, Year 1 totaled $62,000, total claims (including liabilities, common stock, and retained earnings) on that date must have also been
$62,000. If liabilities were $19,000 and common stock was $16,000, retained earnings on December 31, Year 1 must have been $27,000. At the end of Year 2,
the company reported $34,000 in retained earnings, a $7,000 increase. During Year 2, Stosch paid a $18,000 cash dividend, which reduced retained earnings.
Therefore, Year 2 net income must have been $7,000 greater than the dividend paid. $18,000 + $7,000 = $25,000.
References
Multiple Choice Difficulty: 3 Hard Learning Objective: 01-07 Prepare an income statement, a
statement of changes in stockholders equity, and a balance sheet.
Stosch Company's balance sheet reported assets of $40,000, liabilities of $15,000 and common stock of $12,000 as of December 31, Year 1. If Retained
Earnings on the balance sheet as of December 31, Year 2, amount to $18,000 and Stosch paid a $14,000 dividend during Year 2, then the amount of net
income for Year 2 was which of the following?
$17,000
$19,000
$13,000
$21,000
If assets on December 31, Year 1 totaled $40,000, total claims (including liabilities, common stock, and retained earnings) on that date must have also been
$40,000. If liabilities were $15,000 and common stock was $12,000, retained earnings on December 31, Year 1 must have been $13,000. At the end of Year 2,
the company reported $18,000 in retained earnings, a $5,000 increase. During Year 2, Stosch paid a $14,000 cash dividend, which reduced retained earnings.
Therefore, Year 2 net income must have been $5,000 greater than the dividend paid. $14,000 + $5,000 = $19,000.
References
Multiple Choice Difficulty: 3 Hard Learning Objective: 01-07 Prepare an income statement, a
statement of changes in stockholders equity, and a balance sheet.
Hazeltine Company issued common stock for $200,000 cash. As a result of this event, which of the following statements is true?
Assets increased.
Stockholders’ equity increased.
Claims increased.
Assets, claims, and stockholders’ equity all increased.
Issuing common stock increases both assets (cash) and stockholders’ equity (common stock). Stockholders’ equity and liabilities collectively make up claims in
the accounting equation.
References
Multiple Choice Difficulty: 2 Medium Learning Objective: 01-04 Show how business events affect the
accounting equation.
25.
Award: 1.00 point
26.
Award: 1.00 point
27.
Award: 1.00 point
If Ballard Company reported assets of $500 and liabilities of $200, Ballard's stockholders' equity equals:
$300.
$500.
$700.
Cannot be determined.
In the accounting equation, assets equal claims (liabilities + stockholders’ equity). If assets are $500, total claims must also be $500. Therefore, stockholders’