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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