Midterm Study Guide
Midterm Study Guide MBUS 300
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This 5 page Study Guide was uploaded by Aimee Castillon on Wednesday March 2, 2016. The Study Guide belongs to MBUS 300 at George Mason University taught by Reza Rafi in Spring 2016. Since its upload, it has received 575 views. For similar materials see Managing Financial Resources in Business at George Mason University.
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Date Created: 03/02/16
Chapter 1 Formulas: assets = liabilities + stockholders equities liabilities = common stock + retained earnings end retained earnings = beginning retained earning + net income = dividend net income = revenue expenses Sample questions Young Company provided service to a customer for $6500 cash, as a result net income increases During 2013, Chi Company earned $950 of cash revenue, paid $600 of cash expenses, and paid a $100 cash dividend to its owners. Based on the information alone, t otal assets increased by $250, net income amounted to $350, and cash inflow from operating activities was $350 Grant Company purchased a delivery van for cash. The cash flow from this event should be shown on the statement of cash flows as an operating activity that decreases cash Retained Earnings at the beginning and ending of the accounting period was $300 and $700, respectively. If revenues were $1100, and dividends paid to stockholders were $200, expenses for the period must have been $ 500 beginning retained earning + net income (revenuesexpenses) dividend = ending retained earning Yi Company began operations on 1/1/13/. During 2013, the company engaged in the following cash transactions: 1. issued stock for $40,000 2. borrowed $25,000 from its bank 3. provided consulting services for $38,000 4. paid back $15,000 of the bank loan 5. paid rent expense for $9000 6. purchased equipment costing $12,000 7. paid $3000 dividends to stockholders 8. paid employees’ salaries, $21,000 what is Yi’s net cash flow from operating activitiesInflow of $8000 what is Yi’s net cash flow from investing activitieutflow of $12000 What is Yi’s cash flow from financing activitiesnflow of $47000 Petras Company engaged in the following transactions during 2012, its first year in operations: 1. Acquired $950 cash from common stock 2. Borrowed $420 from a bank 3. Earned $600 of revenues 4. paid expenses of $250 5. Paid $50 dividend During 2013, Petras engaged in the following transactions: 1. Issued an additional $325 of common stock 2. Repaid $220 of its debt to the bank 3. Earned revenues of $750 4. incurred expenses of $360 5. Paid dividends of $100 the net cash inflow from operating activities for 2012350 (600250) Balance sheet contains: cash accounts receivable inventory prepaid supplies PP&E (property, plant, equipment) intangible GAAP Stands for Generally Accepted Accounting Principles Cash received from customers at the time services were provided is an example of revenue Vandever Company’s balance sheet reported assets of $42000, liabilities of $15000 and common stock of $12000 as of 12/31/12. If Retained Earnings on the 12/31/13 balance sheet is $18000 and Vandever paid a $14000 dividend during 2013, then the amount of net income for 2013 was $17000. If Boyd Company reported assets of $500 and liabilities of $200, Boyd’s total claims totaled$500 (claim = assets) The total equity of Timberlake Company at the beginning of 2013 amounted to $5500. During 2013 the company reported net income of $1800 and paid a $500 dividend. If retained earnings at the end of 2013 is $2200, beginning common stock was $4600. As of 12/31/13, Bloch Company had $3800 of assets, $1600 of liabilities and $700 retained earnings. The balance in the common stock account on 12/31/13 balance sheet was $1500. Chapter 2 Issuing common stock is an asset source transaction Woodward Enterprises had the following events during 2013: 1. Business issued $20,000 of common stock to its stockholders 2. “ purchased land for $12,000 cash 3. Services were provided to customers for $16,000 cash 4. “ “ “ “ “ “ $5,000 on account 5. Company borrowed $16,000 from the bank 6. Operating expenses of $12,000 were incurred and paid in cash 7. Salary expense of $800 were incurred 8. A dividend of $4000 was paid to owners of Woodward Enterprises Assuming the company began operations during 2013, the amount of retained earnings as of 12/31/13 would be $4200 The following accounts and balances were drawn from the records of Hoover Company on 12/31/13: cash= $1000 accounts receivable = $850 dividends = $500 common stock = $975 land = $800 revenue = $800 accounts payable = $450 expense = $550 total assets on 12/31/13 balance sheet would amount to: a. $3150 b. $3450 c. $1800 d. 2650 amount of net income shown on the 12/31/13 income statement would amount to $250 Amount of retained earnings of 1/1/14 was $975 Norris Company experienced the following transactions during 2013, its first year in operation 1. issued $6000 of common stock to stockholders 2. provided $2300 of services on account 3. paid $1600 cash for operating expenses 4. Collected $1900 of cash from A/R 5. Paid a $100 cash dividend to stockholders how much net income was shown on the 2013 income statement? $ 700 What was the amount of the Norris Company 12/31/13 balance sheet? $6600 Chapter 3 Formula: beginning inventory balance + inventory purchased during the period = cost of goods available for sale Sample problems Baxter Company merchandise inventory at the start of 2014 was $85000. The company purchased inventory during 2014 in the amount of $323000, and its inventory at the end of the year was $102000. What was Baxter’s Cost of Goods Sold for the year 2014? $408,000 what is the relationship between gross margin and net income? Gross Margin selling and administrative expenses = net income Chapter 4 Formulas: Bank reconciliation unadjusted bank balance + deposit in transit ± bank error outstanding checks unadjusted book balance service charge NSF (nonsufficient funds) ± bookkeeper error + colection of A/R by bank + interest Sample problems In preparing bank reconciliations, typical adjustments to the bank balance include deposits in transit In preparing bank reconciliations, typical adjustments to the book balance include interest earned on the checking account Effective internal controls for cash include making cash payments bre numbered check, depositing cash in the bank on a timely basis, and giving written cash receipts to customers as evidence of payment Using prenumbered checks i s not a procedure for the control of cash receipts Using unnumbered receipts and purchase orders i s not a feature of an internal control system Chapter 5 Formulas: sales cost of goods sold = gross profit/gross margin gross profit sales and administrative expenses = operating income operating income taxes = net income Sample problems Ellen Company loaned $10,000 cash to Ann Company on August 1, Year 1. The loan had a one year term and a 6% interest rate. What would the company’s financial statement show? $252 At the end of 2014, Duffau Company had outstanding A/R of $109760. Before recording the adjusting entry for uncollectible accounts, the balance in the allowance for doubtful accounts was $350. If Duffau estimates it will not collect 4% of its A/R, what amount of uncollectible accounts expense should Duffau record? 4040 Olin Company had A/R of $449000. Before it recorded the adjusting entry for uncollectible accounts, the balance in the allowance for Doubtful Accounts was $870. Olin Company estimates that it will not collect 3% of of A/R. What’s the amount of uncollectible accounts expenses? $12600 On 6/1/14, Siebens Enterprises loaned $20,000 to Tyler Company for one year at 8% interest. Under the terms of the promissory note, Tyler will repay the principal and pay one year’s interest on 5/31/15. Related to this note receivable, what amount of interest income would Siebens report on its 2014 income statement? $933 (use 7/12) what amount of interest income would Siebens report on its 2015 income statement? $667 (use 5/12) what would be the total amount of receivables on Siebens’ 12/31/14 balance sheet? $20933($20,000 + $933) Rosierre Company purchased two identical inventory items. One of the items cost $6 and was purchased in January. The other was purchased in February, and the company paid $7 for it. One of the items was sold in March at a price of $10. Use FIFO cost flow assumption to find the answer:The balance in ending inventory would be $7 When prices are falling IFO will result in higher income and a higher ending inventory than will FIFO During 11/2014, Hall Company purchased two identical inventory items. THe item purchased first cost $12, and the item purchased second cost $15. Hall sold one of the inventory items for $20. Based on the information, the amount of ending inventory will be $12 if Hall used LIFO cost flow method
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