Question

The following information pertains to the next three questions. At the beginning of the current year,...

  1. The following information pertains to the next three questions. At the beginning of the current year, X Company had assets of $1,800, liabilities of $900, and common stock of $300. During the current year, the company earned revenue of $2,250, incurred expenses of $1,500, and paid dividends of $300. All transactions were cash transactions.

    1. The amount of net income reported on the income statement for the current year would be

    1. $900.

    2. $750.

    3. $450.

    4. none of the above.

  2. Question 2

    The amount of retained earnings reported on the December 31 balance sheet for the current year would be

    1. $450

    2. $750

    3. $600

    4. none of the above.

  3. Question 3

    The amount of total assets reported on the December 31 balance sheet for the current year would be

    1. $2,250

    2. $1,800

    3. $2,550

    4. $300

  4. Question 4

    The balance sheet of XYZ Company reports liabilities of $120,000, common stock of $30,000, and retained earnings of $150,000. Based on this information alone, you would know that

    1. XYZ Company has enough cash to pay off its liabilities.

    2. since the company's inception, the total amount of net income exceeded total dividends by at least $180,000.

    3. total assets of the company amounted to $300,000.

    4. net assets of the company amounted to 60,000.

  5. Question 5

    The Southern Company began the accounting period with assets of $1,800, common stock of $600, and retained earnings of $750. During the period, revenue was $900, expenses were $600, and dividends were $150. Common stock was unchanged during the accounting period. Liabilities decreased by $300. Based on this information.

    1. total assets at the end of the period amounted to $1,650.

    2. net income amounted to $150.

    3. retained earnings at the end of the period amounted to $1,050.

    4. liabilities at the end of the period amounted to $300.

  6. Question 6

    The entry to record revenue on account

    1. increases liabilities.

    2. decreases equity.

    3. decreases assets.

    4. none of the above.

  7. Question 7

    Which of the following accounts is not closed at the end of the accounting period?

    1. Dividends

    2. Operating Expenses

    3. Retained Earnings

    4. Service Revenue

  8. Question 8

    K Company collected $1,500 cash on an account receivable that was due from L Company. Based on this information, which of the following statements is true?

    1. K Company's total assets would increase.

    2. K Company's equity would decrease.

    3. K Company's total assets would not change

    4. None of the above.

  9. Question 9

    On April 1, Flavin Co. paid $36,000 cash for an insurance policy that provides coverage for one year beginning immediately. On December 31, Flavin adjusted the books to recognize the amount of the insurance policy used during the year. The amount of the adjustment would be:

    1. $24,000.

    2. $36,000.

    3. $27,000.

    4. $0.

  10. Question 10

    Use the following information to answer the next two questions. BBC Company received $29,700 cash on February 1, 2019, from XYZ Company as advance payment for services BBC promised to perform for XYZ over the next three years on a continuous basis. Assume that BBC Company's year-end is December 31.

    12. On its 2019 income statement, BBC would report revenue of

    1. $9,900.

    2. $29,700.

    3. $8,250

    4. $9,075.

  11. Question 11

    On its December 31, 2020 balance sheet BBC would report liabilities of

    1. $9,900

    2. $10,725.

    3. $29,700.

    4. $20,625.

Homework Answers

Answer #1

As we know that the Net Income is arrived after subtracting expenses from the revenue.

Here Revenue is 2250, expenses are $1500 and dividends are $300

Net Income is Revenue - Expenses - interest expenses - depriciaition - tax

We will not subtract dividends because dividend is not an expense

We deduct dividend to arrive at Retained earnings from Net income

Thus Net income = 2250 - 1500 = 750

Retained Earnings = Net Income - Dividends = 750-300 = $450

Company had assets of $1800 in previous year and they would increase exactly by which the Equity and Liability side increases. Thus it will increase by $450 (assuming everything else remains same)

Thus Assets = 1800 + 450 = $2250

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