Reference no: EM132486007

Question 1: 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. Retained earnings on the December 31, Year 2 balance sheet is $18,000 and Stosch paid a $14,000 dividend during Year 2. What is the amount of net income for Year 2?

A) $17,000

B) $19,000

C) $13,000

D) $21,000

Question 2: Hazeltine Company issued common stock for $200,000 cash. What happened as a result of this event?

A) Assets increased.

B) Equity increased.

C) Claims increased.

D) Assets, claims, and equity all increased.

Question 3: Ballard Company reported assets of $500 and liabilities of $200. What amount will Ballard's report for stockholders' equity?

A) $300

B) $500

C) $700

D) Cannot be determined

Question 4: A company's total assets increased during the period while its liabilities and common stock were unchanged. No dividends were declared or paid during the period. Which of the following would explain this situation?

A) Revenues were greater than expenses during the period.

B) Retained earnings were less than net income during the period.

C) No dividends were paid during the period.

D) The company must have purchased assets with cash during the period.

Question 5: Li Company paid cash to purchase land. What happened as a result of this business event?

A) Total assets decreased.

B) Total assets were unaffected.

C) Total equity decreased.

D) Both assets and total equity decreased.

Question 6: Turner Company reported assets of $20,000 (including cash of $9,000), liabilities of $8,000, common stock of $7,000, and retained earnings of $5,000. Based on this information, what can be concluded?

A) 25% of Turner's assets are the result of prior earnings.

B) $5,000 is the maximum dividend that can be paid to shareholders.

C) 40% of Turner's assets are the result of borrowing from creditors.

D) 25% of Turner's assets are from prior earnings, $5,000 is the maximum possible dividend, and 40% of assets are the result of borrowed resources.

Question 7: At the time of liquidation, Fairchild Company reported assets of $200,000, liabilities of $120,000, common stock of $70,000 and retained earnings of $10,000). What is the maximum amount of Fairchild's assets that the shareholders are entitled to receive?

A) $200,000

B) $80,000

C) $90,000

D) $100,000

Question 8: As of December 31, Year 2, Bristol Company had $100,000 of assets, $40,000 of liabilities and $25,000 of retained earnings. What percentage of Bristol's assets were obtained through investors?

A) 60%

B) 25%

C) 40%

D) 35%

Question 9: On January 1, Year 2, Chavez Company had beginning balances as follows: total assets of $12,500, total liabilities of $4,500, and common stock of $3,000. During Year 2, Chavez paid dividends to its stockholders of $2,000. Given that retained earnings amounted to $6,000 at the end of Year 2, what was Chavez's net income for Year 2?

A) $3,000

B) $5,000

C) $7,000

D) $2,000

Question 10: When a business provides services for cash, which elements of the accounting equation are affected?

A) Revenue and Expense

B) Cash and Revenue

C) Cash and Expense

D) Cash and Dividends