Q: Which formula correctly calculates net income on the income statement?

$\text{Net Income} = \text{Total Revenues} - \text{Total Expenses}$

Q: On the statement of stockholders' equity, how is the ending balance of retained earnings calculated?

$\text{Ending Retained Earnings} = \text{Beginning Retained Earnings} + \text{Net Income} - \text{Dividends Paid}$

Q: What is the correct formula for total stockholders' equity at year-end?

$\text{Total Stockholders' Equity} = \text{Common Stock} + \text{Retained Earnings}$

Q: Which of the following is the correct accounting equation?

$\text{Assets} = \text{Liabilities} + \text{Stockholders' Equity}$

Question 1

Which of the following best describes the purpose of the income statement for XYZ Corporation for the year ending December 31, 20x1?

Accepted Answer

To summarize the revenues and expenses, showing net income for the year.

Question 2

Given the following data for XYZ Corporation: Total Revenues $250,000, Salaries Expense $80,000, Rent Expense $30,000, Misc Operating Expenses $20,000. What is the net income for the year ending December 31, 20x1?

Accepted Answer

$100,000

Question 3

Which formula correctly calculates net income on the income statement?

Accepted Answer

$	ext{Net Income} = 	ext{Total Revenues} - 	ext{Total Expenses}$

Question 4

On the statement of stockholders' equity, how is the ending balance of retained earnings calculated?

Accepted Answer

$	ext{Ending Retained Earnings} = 	ext{Beginning Retained Earnings} + 	ext{Net Income} - 	ext{Dividends Paid}$

Question 5

If XYZ Corporation paid $45,000 in dividends and earned $100,000 in net income, what is the increase in retained earnings for the year?

Accepted Answer

$55,000

Question 6

Which of the following is NOT considered an asset on the balance sheet?

Accepted Answer

Accounts Payable

Question 7

What is the correct formula for total stockholders' equity at year-end?

Accepted Answer

$	ext{Total Stockholders' Equity} = 	ext{Common Stock} + 	ext{Retained Earnings}$

Question 8

XYZ Corporation reports the following at year-end: Cash $15,000, Supplies $10,000, Equipment $30,000, Building $200,000. What is the total assets reported on the balance sheet?

Accepted Answer

$255,000

Question 9

If XYZ Corporation has total assets of $255,000 and total liabilities of $150,000, what is total stockholders' equity?

Accepted Answer

$105,000

Question 10

Which of the following transactions would NOT affect net income?

Accepted Answer

Payment of dividends

Question 11

If the company contributed $50,000 for common stock at the beginning of the year, what is the ending balance of common stock at year-end, assuming no additional contributions?

Accepted Answer

$50,000

Question 12

Which of the following best describes the relationship between the balance sheet and the income statement?

Accepted Answer

Net income from the income statement increases retained earnings on the balance sheet.

Question 13

Which account is classified as a liability on the balance sheet?

Accepted Answer

Accounts Payable

Question 14

If XYZ Corporation has a building valued at $200,000 and a mortgage on the building of $100,000, what is the net equity in the building?

Accepted Answer

$100,000

Question 15

Which of the following is the correct accounting equation?

Accepted Answer

$	ext{Assets} = 	ext{Liabilities} + 	ext{Stockholders' Equity}$

Question 16

If total assets are $255,000 and total stockholders' equity is $105,000, what are total liabilities?

Accepted Answer

$150,000

Question 17

Which of the following would be classified as an operating expense on the income statement?

Accepted Answer

Salaries Expense

Question 18

If XYZ Corporation reports $50,000 in accounts payable and $100,000 in mortgage payable, what is the total liabilities?

Accepted Answer

$150,000

Question 19

Which of the following best explains why the building and mortgage are listed separately on the balance sheet?

Accepted Answer

Assets and liabilities must be reported separately to show the company's financial position.

Question 20

If the company earned $100,000 in net income and paid $45,000 in dividends, what is the ending retained earnings if beginning retained earnings were $0?

Accepted Answer

$55,000

Preparation and Analysis of Basic Financial Statements: Income Statement, Statement of Stockholders' Equity, and Balance Sheet

Study Guide - Practice Questions

Study Guide - Flashcards