Grass Gadgets had sales of $30 million and net income of $2 million in 2008. Grass paid a dividend of $1.5 million

Grass Gadgets had sales of $30 million and net income of $2 million in 2008. Grass paid a dividend of $1.5 million. Assuming that their beginning balance for retained earnings was $3 million, calculate their ending balance for retained earnings.

A) $2.5 million

B) $3 million

C) $3.5 million

D) $4 million

Total equity on the balance sheet increases as dividends paid increases.

Answer:  FALSE

A balance sheet is a statement of the financial position of the firm on a given date, including its asset holdings, liabilities, and equity.

Answer:  TRUE

Under current accounting rules, plant and equipment appear on a company's balance sheet valued at replacement value.

Answer:  FALSE

When a corporation sells common stock to investors, the amount is added to revenue on the income statement.

Answer:  FALSE

An advantage of balance sheet numbers is that assets reflect current market values.

Answer:  FALSE

A firm's balance sheet provides a representation of the current market value of the company.

Answer:  FALSE

Gross plant and equipment minus accumulated depreciation represents the fair market value of a company's fixed assets.

Answer:  FALSE

Frosty Inc. has the following balances on December 31 prior to closing entries:

Frosty Inc. has the following balances on December 31 prior to closing entries:

Revenues $ 35,000

Retained Earnings, Jan. 1 10,000

Cash 7,000

Expenses 23,000

Accounts Payable 4,000

Dividends 1,000

Supplies 18,000

Based upon the balances above, what net adjustment would be made to Retained Earnings due to closing entries?

A) Increase of $11,000.

B) Increase of $13,000.

C) Increase of $12,000.

D) Increase of $14,000.

Answer: A

Which of the following is a possible closing entry?

A) Debit Cash, credit Service Revenue.

B) Debit Cash, credit Retained Earnings.

C) Debit Service Revenue, credit Retained Earnings.

D) Debit Dividends, credit Retained Earnings.

Answer: C

The closing entry for expenses includes:

A) A debit to Dividends and a credit to all expense accounts.

B) A debit to Retained Earnings and a credit to all expense accounts.

C) A debit to Revenues and a credit to Retained Earnings.

D) A debit to Revenues and a credit to all expense accounts.

Answer: B

For the first three years of operations, the company reports net income of $1,000, $2,000, and $3,000, and pays dividends of $500, $1,000, and $1,000

For the first three years of operations, the company reports net income of $1,000, $2,000, and $3,000, and pays dividends of $500, $1,000, and $1,000. What is the balance of retained earnings at the end of the third year?

A) $2,000.

B) $2,500.

C) $3,500.

D) $6,000.

Answer: C

In the first three years of operations, Lindsey Corporation reported net income(loss) of $(150,000), $100,000, and $250,000. At the end of the third year, Lindsey Corporation has a balance of $120,000 in its Retained Earnings account. What is the total amount of dividends Lindsey Corporation paid over the three years?

A) $130,000.

B) $120,000.

C) $80,000.

D) $380,000.

Answer: C

The Retained Earnings account had a beginning credit balance of $26,000. During the period, the business had a net loss $12,000, and the company paid dividends of $8,000. The ending balance in the Retained Earnings account is:

A) $6,000.

B) $30,000.

C) $22,000.

D) $14,000.

Answer: A

How many of the items listed above are generally long-term assets?Land Accounts Receivable Notes Payable

Consider the following items:

Land

Accounts Receivable

Notes Payable (due in three years)

Accounts Payable

Retained Earnings

Prepaid Rent

Deferred Revenue

Buildings

Notes Payable (due in six months)

Equipment

How many of the items listed above are generally long-term assets?

A) Two.

B) Three.

C) Four.

D) Five.

Answer: B

Resources owned by the company that will provide a benefit for more than one year are called:

A) Current assets.

B) Current liabilities.

C) Long-term assets.

D) Revenues.

Answer: C

Long-term productive assets used in the normal course of business are typically classified as:

A) Current assets.

B) Investments.

C) Intangible assets.

D) Property, plant, and equipment.

Answer: D

In the statement of stockholders' equity, the balance of Retained Earnings increased by $32,000. The company declared a dividend of $10,000 during the year. What was the net income for the year?

A) $10,000.

B) $32,000.

C) $42,000.

D) $22,000.

Answer: C

A classified balance sheet ________.

A) Shows only current assets and current liabilities

B) Shows changes in assets, liabilities, revenues and expenses

C) Contains confidential information

D) Shows subtotals for current assets and current liabilities

Answer: D

Which financial statement provides information for a point in time only?

A) Statement of cash flows.

B) Income statement.

C) Statement of stockholders' equity.

D) Balance sheet.

Answer: D

In the statement of stockholders' equity, Retained Earnings had a beginning balance of $60,000. During the period, the company reports a net loss of $10,000 and net cash outflows of $15,000. The ending balance in the Retained Earnings account is:

A) $60,000.

B) $35,000.

C) $50,000.

D) $45,000.

Answer: C

In the statement of stockholders' equity, Retained Earnings had a beginning balance of $25,000. During the period, the company reports a net income of $10,000 and a dividend of $4,000. The ending balance in the Retained Earnings account is:

A) $10,000.

B) $35,000.

C) $39,000.

D) $31,000.

Answer: D

The statement of stockholders' equity includes:

A) Net income from the income statement.

B) The amount of stock issued in the current period.

C) Dividends declared to stockholders in the current period.

D) All of the other answers are correct.

Answer: D

A company's accountant is trying to prepare an adjusted trial balance from the list of accounts below. Cash $ 12,000

A company's accountant is trying to prepare an adjusted trial balance from the list of accounts below.

Cash $ 12,000

Retained Earnings 31,000

Prepaid Rent 2,000

Salaries Expense 15,000

Equipment 68,000

Service Revenue 40,000

Miscellaneous Expense 10,000

Supplies 4,000

Dividends 3,000

Accounts Payable 5,000

Common Stock 38,000

What is the total amount of credits?

A) $111,000.

B) $81,000.

C) $114,000.

D) $86,000.

Answer: C

A company's accountant is trying to prepare an adjusted trial balance from the list of accounts below.

Cash $ 12,000

Retained Earnings 31,000

Prepaid Rent 2,000

Salaries Expense 15,000

Equipment 68,000

Service Revenue 40,000

Miscellaneous Expense 10,000

Supplies 4,000

Dividends 3,000

Accounts Payable 5,000

Common Stock 38,000

What is the total amount of debits?

A) $114,000.

B) $86,000.

C) $81,000.

D) $11,000.

Answer: A

Which of the following trial balances shows account balances that incorporate current year deferrals and accruals?

A) Adjusted trial balance.

B) Final trial balance.

C) Unadjusted trial balance.

D) Cash-basis trial balance.

Answer: A

Quirk Corporation issued a 100% stock dividend of its common stock which had a par value of $10 before and after the dividend

Quirk Corporation issued a 100% stock dividend of its common stock which had a par value of $10 before and after the dividend. At what amount should retained earnings be capitalized for the additional shares issued?

a. There should be no capitalization of retained earnings.
b. Par value
c. Market value on the declaration date
d. Market value on the payment date


Answer: Par value

The payout ratio can be calculated by dividing

a. dividends per share by earnings per share.
b. cash dividends by net income less preferred dividends.
c. cash dividends by market price per share.
d. dividends per share by earnings per share and dividing cash dividends by net income less preferred dividends.


Answer: cash dividends by net income less preferred dividends