Retained earnings, May 31, 2017 $5,100
*Net income $13,400 = 45,500 - 1,200 - 6,500 - 19,400 - 5,000
Diff: 2 Type: ES
L.O.: 1-2
CPA COMPETENCIES: Chapter 1
1.1.1 Evaluates financial reporting needs
1.1.2 Evaluates the appropriateness of the basis of financial reporting
1.1.3 Evaluates reporting processes to support reliable financial reporting
95) A cash flow statement is divided into the following sections: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. For each of the following events, state the section in which it would be listed.
a. Received cash from issuance of long-term note payable
b. Payment of interest (ASPE)
c. Repurchase of shares
d. Sale of land
e. Received cash from customers
f. Payment of dividends
g. Purchase of equipment
h. Issuance of 50 shares of common stock
Answer:
a. financing activity
b. operating activity
c. financing activity
d. investing activity
e. operating activity
f. financing activity
g. investing activity
h. financing activity
Diff: 3 Type: ES
L.O.: 1-2
CPA COMPETENCIES: Chapter 1
1.1.1 Evaluates financial reporting needs
1.1.2 Evaluates the appropriateness of the basis of financial reporting
1.1.3 Evaluates reporting processes to support reliable financial reporting
96) Classify each statement below as an operating activity, investing activity, or a financing activity.
a. Sold 12,000 shares for cash.
b. Paid salaries of employees.
c. Paid amount due for income taxes.
d. Paid interest expense (ASPE).
e. Purchased office equipment for cash.
f. Sold old office equipment and received cash.
g. Received interest income.
h. Paid interest on a bank loan.
i. Paid dividends to shareholders.
Answer:
a. financing activity
b. operating activity
c. operating activity
d. operating activity
e. investing activity
f. investing activity
g. operating activity
h. operating activity
i. financing activity
Diff: 2 Type: ES
L.O.: 1-2
CPA COMPETENCIES: Chapter 1
1.1.1 Evaluates financial reporting needs
1.1.2 Evaluates the appropriateness of the basis of financial reporting
1.1.3 Evaluates reporting processes to support reliable financial reporting
97) Prepare a Statement of Retained Earnings: On October 31, 2017, Lariat Inc. reported retained earnings of $250,000. For the year ended October 31, 2017, Lariat had a net income of $80,000 and paid dividends of $50,000.
Answer: Lariat Inc.
Statement of Retained Earnings