1. A company began the year with Assets of $100,000, Liabilities of $20,000 and
ID: 2470563 • Letter: 1
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1. A company began the year with Assets of $100,000, Liabilities of $20,000 and Stockholders' equity of $80,000. During the year Assets increased $55,000 and stockholders' equity increased $20,000. What was the change in Liabilities for the year? A. Increase of $75,000 B. Increase of $35,000 C. Decrease of 75,000 OD. Decrease of $35,000 2. Which of the following would not affect a company's net income? A. A change in the company's income taxes. B. Changing the selling price of a company's product. ©Paying a dividend to stockholders. D. Advertising a new product. 3. Which of the following would be reported on the income statement for 20157 A. Supplies that were purchased and used in 2014 but paid for in 2015. B. Dividends that were paid in 2015. C. Supplies that were purchased in 2014, but used in 2015. D. Accounts receivable as of December 31, 2015 4. In 1999, the GAP Company bought land that cost $15,0o0. In 2015, a similar piece of land was bought for $28,000 and the company's existing land was estimated to be worth $18,000. On the balance sheet at the end of 2015, the land that was purchased in 1999 would be reported at: A $15,000. B. $28,000. C. $18,000. . the average of the three prices. 5. The characteristic shared by all liabilities is that they A. provide a future economic benefit. B. result in an inflow of resources to the company. C always end in the word "payable. D. obligate the company to do something in the future. During June, the Green Thumb Lawn Care mows :00 lawns a week and is paid in July by those customers. The company uses the accrual basis of accounting. How will these events affect the company's financial statements? A. The income statement shows the effects of the transactions in June. B. The income statement shows the effects of the transactions in July. C. The balance sheet shows no effect from the transactions in June. D. The transactions have no effect on the balance sheet. 6.Explanation / Answer
1) Assets = liabilities + equity 100000 = 20000 + 80000 155000 = 55000 + 100000 Hence option B is correct, that is liabilities increased by $35,000 2) option c Paying a dividend to stockholder would not affect a company's net income 3) option C is correct Supplies that were purchased in 2014 , but used in 2015 would be reported on the income statement for 2015 4) It would be reported at cost ie 15000 hence option A is correct 5) option D Liabilities obligate the company to do something in the future 6) Option A is correct , as revenue for mowing 100 lawns will be accrued in June , hence income statement will get affected in June 7) Option B is correct 8) closing balance retained earnings 399860 Add : dividend paid 4700 Less : opening balance retained earnings 385600 net income 18960 option B is correct 9) option B is correct 10) Option B ie Assets will be overstated
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