Homework Chapter 1

Question 2

Which of the following statements regarding the income statement is true?
a. Typical income statement accounts include sales revenue, unearned revenue, and cost of goods sold.
b. The income statement shows the results of a company’s operations at a specific point in time.
c. The income statement consists of assets, expenses, liabilities, and revenues.
d. The income statement provides information about the profitability and growth of a company.

Answer 2

D

Question 3

What type of business activity is described: Payment of a dividend

Answer 3

Financing

Question 4

At December 31, Marker reported the following items: cash, $7,500; inventory, $3,900; accounts payable, $5,900; accounts receivable, $3,100; common stock, $6,000; property, plant, and equipment, $10,500; interest payable, $1,600; retained earnings, $11,500.
What is the total of Marker’s current assets?

Answer 4

$14500
Current assets consist of those assets that are reasonably expected to be converted to cash within one year or one operating cycle, whichever is longer. PPE does not count as a “current asset”

Question 5

Which of the following is not shown in the heading of a financial statement?
a. The time period covered by the financial statement
b. The name of the company
c. The name of the auditor
d. The title of the financial statement

Answer 5

C

Question 6

What type of business activity is described: Sale of goods or services

Answer 6

Operating

Question 7

What form of business organization is: Most complex to organize?

Answer 7

Corporation

Question 8

What form of business organization is: Limited personal liability for the debt of the organization

Answer 8

Corporation

Question 9

What is the missing number in this fundamental accounting equation?
Assets: $116200
Liabilities: ?
Equity: $55400

Answer 9

Assets - Equity = $60800

Question 10

What form of business organization is: Owners generally pay higher taxes than owners of other forms of business organizations

Answer 10

Corporation

Question 11

What type of business activity is described: Purchase of supplies

Answer 11

Operating

Question 12

What form of business organization is: The greatest percentage of businesses are organized in this manner

Answer 12

Sole Proprietorship

Question 13

What is the missing number in this fundamental accounting equation?
Assets: $212600
Liabilities: $145900
Equity: ?

Answer 13

Assets - Liabilities = $66700

Question 14

What is the missing number in this fundamental accounting equation?
Assets: ?
Liabilities: $22500
Equity: $48300

Answer 14

Liabilities + Equity = $70800

Question 15

What form of business organization is: Access to the individual skills of each of the owners

Answer 15

Partnership

Question 16

What form of business organization is: Easier to raise large amounts of capital

Answer 16

Corporation

Question 17

What type of business activity is described: Purchase of equipment

Answer 17

Investing

Question 18

What type of business activity is described: Sale of equipment

Answer 18

Investing

Question 19

What type of business activity is described: Borrow money from a bank

Answer 19

Financing

Question 20

Prepare a balance sheet for Cavernous Homes Inc. at December 31 with this information:
An analysis of the transactions of Cavernous Homes Inc. yields the following totals at December 31: cash, $3,200; accounts receivable, $4,500; notes payable, $5,000; supplies, $8,100; common stock, $7,000; and retained earnings, $3,800.

Answer 20

Assets:
Cash: $3200
Accounts receivable: $4500
Supplies: $8100
Total assets: $15800
Liabilities
Notes payable: $5000
Total liabilities: $5000
Stockholders’ Equity
Common Stock: $7000
Retained Earnings:$3800
Total stockholders’ equity: $10800
Total liabilities and stockholders’ equity: $15800

Question 21

Prepare a single-step income statement for Rutherford Company for the year ended December 31 yields the following information:
sales revenue, $65,000; insurance expense, $4,300; interest income, $3,900; cost of goods sold, $28,800; salaries expense, $22,500; income taxes expense, $2,400; and loss on disposal of property, plant, and equipment, $1,200

Answer 21

Revenues and Gaines
Sales revenue: $65000
Interest income: $3900
Total revenues: $68900
Expenses and losses
Cost of goods sold: $28800
Salaries expense: $22500
Insurance expense: $4300
Loss on disposal of property plant and equipment: $1200
Income tax expense: $2400
Total expenses and losses: $59200
Net income: $9700

Question 22

What form of business organization is: Owner(s) have personal responsibility for the debt of the organization

Answer 22

Sole Proprietorship and Partnership (unlimited liability)