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Exam 1: Accounting As a Form of Communication

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Question 91

Multiple Choice

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Which the following organizations is primarily responsible for establishing GAAP today?

A) IRS
B) Securities and Exchange Commission (SEC)
C) SEC
D) None of these choices

E) A) and C)
F) B) and C)

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Question 92

Multiple Choice

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Which one of the following is an assumption made in the preparation of financial statements?

A) Financial statements are prepared for a specific entity that is distinct from the entity owners.
B) Financial statements are prepared assuming that inflation has a distinct effect on the monetary unit
C) Preparation of financial statements for a specific time period assumes that the balance sheet covers a period of time.
D) Market values are always assumed to be irrelevant when preparing financial statements.

E) C) and D)
F) All of the above

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Question 93

Multiple Choice

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All of the following are examples of retailers except

Lori Corporation reported the following information for the year ended December 31,2017: $\begin{array}{lr}\text { Net income } & \$ 10,000 \\\text { Dividends } & 6,000 \\\text { Retained earnings at December } 31,2017 & 25,000\end{array}$ What was the balance of Lori' retained earnings at January 1,2017?

How is the balance sheet linked to the other financial statements?

Volt Corp.reported the following information for the year ended December 31,2017: $\begin{array}{lr}\text { Revenues } & \$ 50,000 \\\text { Expenses } & 20,000 \\\text { Retained earnings at December 31,2016 } & 100,000 \\\text { Retained earnings at December 31,2017 } & 105,000\end{array}$ How much was paid out in dividends by Volt in 2017?

Which one of the following is least likely to be a user of financial information of a grocery store?

Which organization,in addition to the Financial Accounting Standards Board (FASB) ,occasionally issues authoritative rules for financial statements?

Rogers Corporation starts the year with a Retained Earnings balance of $55,000.Net income for the year is $27,000.The ending balance in Retained Earnings is $70,000.What was the amount of dividends declared and paid for the year?

Which of the following statements would be true if you own stock in a company?

The following information is provided by Ferrara Corporation: $\begin{array}{lr}\text { Beginning retained earnings } & \$ 50,000 \\\text { Ending retained earnings } & 70,000 \\\text { Dividends declared and paid } & 10,000 \\\text { Revenue } & 50,000\end{array}$ -Calculate Ferrara Corporation's expenses.

In 2017,you and 5 other investors invested $12,000 in a new theatre,Rock-On,that offers Broadway play productions.Because you live out of state,you have not been actively involved in the daily affairs of the theatre.On January 10,2018,you are excited because you received $12,000 as a dividend after the end of the first year of the theatre's existence.Included with your $12,000 check are financial statements and some supplemental information regarding the accounting.The supplemental information explains: (1)During the last three months of 2017,an aggressive advertising campaign resulted in the sale of 600 season tickets for the 2018 productions.Each season ticket cost $120,and the resulting $72,000 was included in 2016 income. (2)Along with the advertising campaign,the general manager was able to secure pledges of $7,500 for advertising by local merchants in the playbills for the first two productions for 2018.This amount is included as advertising revenue in the 2017 financial statements. REQUIRED: Are there any problems related to the supplementary disclosures? If so,explain and indicate what effects (over- or understatements)these items will have on the financial statements.

Assume that you have received copies of the financial statements for PepsiCo for the years ending December 31,2017 and 2016.Answer the following questions: A) If you were a banker, why would you need information from Pepsico's financial statements? B) If you were a potential investor in PepsiCo stock, what information would you want from its financial statements? C) If you were a labor negotiator for a uni on that represents a group of PepsiCo's employees, which financial statement would provide you with the most useful information?

Murphy Corporation's end-of-year balance sheet consisted of the following amounts: ? $\begin{array} { l r l r } \text { Cash } & \$ 35,000 & \text { Accounts receivable } & \$ 46,000 \\\text { Property, plant, and equipment } & 69,000 & \text { Long-term debt } & 41,000 \\\text { Capital stock } & 107,000 & \text { Accounts payable } & 22,000 \\\text { Retained earnings } & ? & \text { Inventory } & 33,000\end{array}$ What is Murphy's owners' equity balance at the end of the current year?

Taryn Corporation The accountant for Taryn Corporation prepared the following list of account balances from the company's records for the year ended December 31,2017: ​ ​ $\begin{array}{lrlr}\text { Sales revenue } & \$ 165,000 & \text { Cash } & \$ 30,000 \\\text { Accounts receivable } & 14,000 & \text { Selling expenses } & 44,000 \\\text { Equipment } & 42,000 & \text { Common stock } & 41,000 \\\text { Accounts payable } & 12,000 & \text { Interest income } & 3,000 \\\text { Sal aries and wages expense } & 40,000 & \text { Cost of sales } & 51,000 \\\text { Inventories } & 22,000 & \text { Prepaid expenses } & 2,000 \\\text { Income taxes payable } & 5,000 & \text { Income taxes expense } & 18,000 \\\text { Notes payable } & 20,000 & \text { Retained earnings } & ?\end{array}$ ​ -Read the information for Taryn Corporation and determine the following amounts. A) The balance of retained earnings at the end of 2017 .____________ B) The total stockholders' equity at the end of 2017 .________________ C) Name the two events that might cause stockholders' equity to increase.

Develop an ethical dilemma scenario that an accountant may face, and give examples of key elements (listed below) that should be considered when analyzing the decision. 1. Those who may benefit or be harmed 2. What potential benefits or harm could result from the situation 3. The rights or claims violated 4. The specific interests in conflict 5. The responsibilities and obligations

Owners of corporations are called ____________________.

Cerrato Company has assets of $350,000,liabilities of $130,000,and retained earnings of $180,000.How much is total owners' equity?

Dimension Inc.had net income for 2017 of $24,000.It declared and paid a $13,000 cash dividend in 2017.If the company's retained earnings for the end of the year was $39,600,what was the company's retained earnings balance at the beginning of 2017?

Owners' equity is the residual interest that remains after deducting liabilities from assets.