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Fall 2010_Section Problem Set 1 (Chap 1)

# Fall 2010_Section Problem Set 1 (Chap 1) - AEM 2210 Section...

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AEM 2210 Section Problem Set 1 Covering Material from Chapter 1 Name:_______________________________ Section:______________________ Material Review. Four Basic Financial Statements o Balance Sheet – financial position at a point in time Assets = Liabilities + Stockholders’ Equity Assets listed in order of decreasing liquidity (ease of conversion to cash) Liabilities listed by maturity date (due date) o Income Statement (aka statement of income, statement of earnings, or statement of operations) – measures financial performance for a period of time Revenues – Expenses = Net Income o Statement of Retained Earnings – reports the way net income and payment of dividends affected the company’s financial position for a period of time Beginning Retained Earnings + Net Income – Dividends = Ending Retained Earnings Shows the relationship between the income statement and the balance sheet Ending retained earnings is one of the components of stockholders’ equity on the balance sheet o Statement of Cash Flows – reports cash inflows and outflows for a period of time +/- Cash Flows from Operating Activities +/- Cash Flows from Investing Activities +/- Cash Flows from Financing Activities Change in Cash Change in cash added to cash on beginning of year balance sheet equals cash on end of year balance sheet

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Multiple Choice 1. The Beta Corporation had 2009 revenues of \$200,000, expenses of \$140,000, and an income tax rate of 30 percent. Net income after taxes would be A) \$60,000. B) \$18,000. C) \$42,000. D) \$48,000. E) None of the above is correct. 2. Assume a company's January 1, 2009, financial position was: Assets, \$150,000 and Liabilities, \$60,000. During January 2009, the company completed the following transactions: (a) paid on a note payable \$10,000 (no interest was paid); (b) collected an accounts receivable, \$9,000; (c) paid an accounts payable, \$5,000; and (d) purchased a truck, \$5,000 cash, and a \$20,000 note payable. The company's January 31, 2009 financial position is Assets Liabilities Stockholders’ Equity
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