152. Why should the income statement be prepared first?
a. The statement of cash flows should be prepared first because it determines the sources of cash. That information is then used in preparing the income statement.
b. Net income from the income statement flows into the retained earnings statement. The ending retained earnings balance then flows into the balance sheet.
c. The income statement does not have to be prepared first. Financial statements can be prepared in any order.
d. None of these answer choices are correct.
Ans: B, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
153. Elston Company compiled the following financial information as of December 31, 2022:
Service revenue $840,000
Common stock 180,000
Equipment 240,000
Operating expenses 750,000
Cash 210,000
Dividends 60,000
Supplies 30,000
Accounts payable 120,000
Accounts receivable 300,000
Retained earnings, 1/1/22 450,000
Elston’s assets on December 31, 2022 are
a. $1,620,000.
b. $1,230,000.
c. $750,000.
d. $780,000.
Ans: D, LO: 3, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: Problem Solving, IMA: Reporting
Solution: $240,000 + $210,000 + $30,000 + $300,000 = $780,000
(Equip + cash + sup. + A/R)
154. Elston Company compiled the following financial information as of December 31, 2022:
Service revenue $840,000
Common stock 180,000
Equipment 240,000
Operating expenses 750,000
Cash 210,000
Dividends 60,000
Supplies 30,000
Accounts payable 120,000
Accounts receivable 300,000
Retained earnings, 1/1/22 450,000
Elston’s retained earnings on December 31, 2022 are
a. $450,000.
b. $540,000.
c. $480,000.
d. $ 30,000.
Ans: C, LO: 3, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: Problem Solving, IMA: Reporting
Solution: $450,000 + ($840,000 - $750,000) - $60,000 = $480,000