1-Chapter 1 Review Questions - Solutions

# 1-Chapter 1 Review Questions - Solutions - CHAPTER 1 Review...

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The following information pertains to the next four questions . At the beginning of 2010, X Company had assets of \$300, liabilities of \$150, and common stock of \$50. During 2010 the company earned revenue of \$400, incurred expenses of \$250, and paid dividends of \$100. All transactions were cash transactions. ACCOUNTING EQUATION: For Year 2010 Equity Events Assets = Liabilities + Common Stock + Retained Earnings Beginning Balances \$ 300 = \$ 150 + \$ 50 + \$ 100 1. Effect of Revenue 400 400 2. Effect of Expense (250) (250) 3. Effect of Dividends (100) (100) −−−−− −−−−− −−−−− −−−−− Ending Balances \$350 = \$150 + \$50 + \$ 150 ===== ═════ ═════ ═════ 1. What is the amount of retained earnings at the beginning of 2010? a. \$ 50. b. \$100. c. \$150. d. none of the above. Solution: Put the information in the problem into the accounting equation and solve for the missing information (“X”). REMEMBER that the accounting equation must be in balance. 300 = 150 + 50 + X X = 300 – 150 – 50 X = 100 2. The amount of net income reported on the 2010 income statement would be a. \$400. b. \$150. c. \$ 50. d. none of the above. Solution: Net Income = Revenue – Expense Net Income = \$400 - \$250 = \$150 3. The amount of retained earnings reported on the December 31, 2010 balance sheet would be a. \$100. b. \$250. c. \$650. d. none of the above. 1

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Solution: Ending Retained Earnings = Beginning RE + Distributions + Net Income Ending Retained Earnings = \$100 + (\$100) + \$150 = \$150 4. The amount of total assets reported on the December 31, 2010 balance sheet would be a. \$350. b. \$300. c. \$450.
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## This note was uploaded on 02/10/2011 for the course ACC 201 taught by Professor Cromartie during the Spring '11 term at UNC Greensboro.

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1-Chapter 1 Review Questions - Solutions - CHAPTER 1 Review...

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