Financial Accounting 6th Canadian Edition Test Bank

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ExamName___________________________________MULTIPLE CHOICE.Choose the one alternative that best completes the statement or answers the question.1)What is the primary purpose of the statement of financial position?1)_______A)To measure the profit of a business up to a particular point in time.B)To report the financial position of the reporting entity at a particular point in time.C)To report the difference between cash inflows and cash outflows for the period.D)To report assets at their current market value at a particular point in time.2)On January 1, 20X1, two individuals invested $150,000 each to form HornbeckCorporation. Hornbeck had total revenues of $15,000 during 20X1 and $40,000 during20X2. Total expenses for the same periods were $8,000 and $22,000, respectively. Cashdividends paid out to shareholders totaled $6,000 in 20X1 and $12,000 in 20X2. Whatwas the ending balance in Hornbeck's retained earnings account at the end of 20X1 and20X2?2)_______A)$1,000 and $6,000 respectively.B)$1,000 and $7,000, respectively.C)$301,000 and $306,000 respectively.D)$7,000 and $19,000 respectively.3)The BAT Corporation had revenues of $110,000, expenses of $85,000, and an incometax rate of 20 percent in 20X2. What would profitaftertaxes be?3)_______A)$20,000.B)$25,000.C)$5,000.D)$15,000.4)Brown Corporation reported the following amounts at the end of the first year ofoperations, December 31, 20X1: Share capital $20,000; Sales revenue $95,000; Totalassets $85,000, No dividends, and Total liabilities $35,000. What would shareholders'equity and total expenses be?4)_______A)Shareholders' equity, $60,000 and expenses $75,000.B)Shareholders' equity, $50,000 and expenses $65,000.C)Shareholders' equity, $80,000 and expenses $40,000.D)Shareholders' equity, $80,000 and expenses $85,000.5)Which of the following wouldnotbe considered an internal user of accounting data?5)_______A)A creditor of a company.B)The controller of a company.C)The president of a company.D)A salesperson of a company.6)If total liabilities increased by $25,000 and shareholders' equity increased by $5,000during a period, then total assets must change by what amount and direction during thatsame period?6)_______A)$25,000 increase.B)$20,000 increase.C)$20,000 decrease.D)$30,000 increase.7)Which of the following activities involves raising the necessary funds to support thebusiness?7)_______A)Marketing.B)Financing.C)Investing.D)Operating.8)Buying assets needed to operate a business is an example of a(n)8)_______A)investing activity.B)purchasing activity.C)financing activity.D)operating activity.9)The common characteristic possessed by all assets is9)_______

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A)tangible nature.B)future economic benefit.C)long life.D)great monetary value.10)Expenses are incurred10)______A)to generate revenues.B)to produce assets.C)to produce liabilities.D)only on rare occasions.11)The financial statement that summarizes the changes in contributed capital and retainedearnings for a specific period of time is the11)______A)statement of earnings.B)statement of cash flows.C)statement of financial position.D)statement of changes in equity.12)Retained earnings at the end of the period is equal to12)______A)net earnings for the periodB)retained earnings at the beginning of the period plus net earnings minus liabilities.C)assets plus liabilities.D)retained earnings at the beginning of the period plus net earnings minus dividends.13)What form does financial accounting information provided by an entity to decisionmakers generally take?13)______A)Various forecasts and performance reports.B)Comparisons between the company and its competitors.C)An analysis of changes in the price of a corporation's shares.D)Financial statements.14)If the retained earnings account increases from the beginning of the year to the end of theyear, then14)______A)a loss is less than dividends.B)additional investments are less than reported losses.C)profit is greater than dividends.D)dividends were paid.15)Shareholders' equity can be described as claims of15)______A)debtors on total assets.B)creditors on total assets.C)owners on total assets.D)customers on total assets.16)Which financial statement would indicate whether the company relies more on debt orshareholders' equity to finance its assets?16)______A)Statement of earnings.B)Statement of financial position.C)Statement of changes in equity.D)Statement of cash flows.17)The statement of financial position and statement of changes in equity are relatedbecause17)______A)both contain information for the corporation.B)the ending amount on the statement of changes in equity is reported on thestatement of financial position.C)the ending amount on the statement of changes in equity is transferred to thestatement of cash flows.D)the total assets on the statement of financial position is reported on the statement ofchanges in equity.

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18)Carrington Company owes you $500 on account due within 15 days. Which of thefollowing amounts on its statement of financial position would help you to determine thelikelihood that you will be paid in full and on time?18)______A)Cash and trade receivables.B)Cash and property and equipment.C)Contributed capital and retained earnings.D)Cash and inventory.19)The statement of cash flows and the statement of financial position are interrelatedbecause19)______A)both disclose the corporation's profit.B)the ending amount of cash on the statement of cash flows must agree with theamount in the statement of changes in equity.C)the ending amount of cash on the statement of cash flows must agree with theamount on the statement of earnings.D)the ending amount of cash on the statement of cash flows must agree with theamount in the statement of financial position.20)Which of the following are the two primary components of shareholders' equity?20)______A)Long-term debt and retained earnings.B)Non-current assets and liabilitiesC)Short term debt and retained earningsD)Contributed capital and Retained earnings.21)The statement of changes in equity is dependent on the results from21)______A)the statement of financial position.B)the statement of cash flows.C)the statement of earnings.D)a company's share capital.22)The primary purpose of the statement of cash flows is to report22)______A)a company's investing transactions.B)information about cash receipts and cash payments of a company.C)the net increase or decrease in cash.D)a company's financing transactions.23)Kamil's Car Repair Shop Ltd. started the year with total assets of $70,000 and totalliabilities of $40,000. During the year, the business recorded $100,000 in car repairrevenues, $65,000 in expenses, and dividends of $5,000. Shareholders' equity at the endof the year was23)______A)$65,000.B)$70,000.C)$75,000.D)$60,000.24)The most significant expense for a merchandising company is24)______A)cost of goods soldB)income taxesC)equipment maintenanceD)salaries expense25)On the statement of financial position, assets may be presented25)______A)in order of liquidityB)in alphabetical orderC)in order of reverse liquidityD)either in order of liquidity or in order of reverse liquidity26)Retained earnings are26)______

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A)equal to cash.B)the shareholders' claim on total assets.C)the amount of profit kept in the corporation for future use.D)equal to revenues.27)What are business liabilities?27)______A)The increases in assets that result from profitable operations.B)Debts or obligations resulting from past business events.C)Amounts it expects to collect in the future from customers.D)The amounts that owners have invested in the business.28)Why would Parker Bank, in deciding whether to make a loan to Davis Company, beinterested in the amount of liabilities, Davis has on its statement of financial position?28)______A)Existing liabilities give an indication of how profitable Davis has been in the past.B)If Davis already has many other obligations, it might not be able to repay the loan.C)The liabilities represent resources that could be used to repay the loan.D)Parker would be interested in the amount of Davis's assets but not the amount ofliabilities.29)What are the two categories of shareholders' equity usually found on the statement offinancial position of a corporation?29)______A)Share capital and property, plant, and equipment.B)Contributed capital and retained earnings.C)Retained earnings and notes payable.D)Share capital and long-term liabilities.30)Jameson & Johnson Inc., recorded $250,000 of depreciation expense in December 20X6.The most likely effect on the company's accounting equation is30)______A)no effect on assets.B)a decrease in assets of $250,000.C)an increase in assets of $250,000.D)an increase in liabilities of $250,000.31)Allentown Corporation has on its statement of financial position the followingamounts:Total assets of $3,500,000Total liabilities of $500,000Contributed capital of$1,000,000.What is the amount of retained earnings that should appear on Allentown'sstatement of financial position?31)______A)$2,000,000.B)$5,000,000.C)$3,000,000.D)$4,000,000.32)Which financial statement for a business would you look at to determine the company'sperformance during an accounting period?32)______A)Statement of financial position.B)Statement of changes in equity.C)Statement of cash flows.D)Statement of earnings.33)Which of the following isnota principal type of business activity?33)______A)OperatingB)DeliveringC)FinancingD)Investing34)How do most businesses earn revenues?34)______A)By borrowing money from a bank.B)When they collect trade receivables.C)Through sales of goods or services to customers.D)By selling shares to shareholders.

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35)A group of individuals formed a new company with an investment of $100,000. Themost likely effect of this transaction on the company's accounting equation at the time ofthe formation is an increase in cash and35)______A)an increase in owners' capital.B)an increase in assets.C)an increase in revenue.D)an increase in liabilities.36)During 20X2, its second year in operation, Banner Company delivered goods tocustomers for which customers paid or promised to pay $5,850,000. The amount of cashcollected from customers was $5,960,000. The amount of trade receivables at thebeginning of 20X2 was $1,200,000. What is the amount of sales revenue that Bannershould report on its statement of earnings for 20X2?36)______A)$4,760,000.B)$5,850,000.C)$4,650,000.D)$5,960,000.37)During 20X2, its second year in operation, Banner Company delivered goods tocustomers for which customers paid or promised to pay $5,850,000. Assume all saleswere on account and the amount of cash collected from customers was $5,960,000. Theamount of trade receivables at the beginning of 20X2 was $1,200,000. Based on thisinformation, what is the amount of trade receivables that Banner would report at the endof 20X2?37)______A)$5,850,000.B)$1,310,000.C)$110,000.D)$1,090,000.38)What is the amount of revenue recognized in the statement of earnings by a companythat sells goods to customers?38)______A)The amount of cash collected plus the beginning amount of trade receivables.B)Total sales minus beginning amount of trade receivables.C)The cash collected from customers during the current period.D)Total sales, both cash and credit sales, for the period.39)The statement of cash flows and the statement of financial position are interrelatedbecause39)______A)the ending amount of cash on the statement of cash flows must agree with theamount in the statement of financial position.B)both disclose the corporation's profit.C)the ending amount of cash on the statement of cash flows must agree with theamount in the statement of changes in equity.D)the ending amount of cash on the statement of cash flows must agree with theamount on the statement of earnings.40)On January 1, 20X1, Taylor Corporation had retained earnings of $6,500,000. During20X1, Taylor had profit of $1,050,000 and dividends of $450,000. What is the amount ofTaylor's retained earnings at the end of 20X1?40)______A)$7,100,000.B)$6,050,000.C)$7,550,000.D)$6,950,000.41)What are the categories of cash flows that appear on a statement of cash flows?41)______A)Cash flows from operating, production, and internal activities.B)Cash flows from financing, production, and growth activities.C)Cash flows from investing, financing, and service activities.D)Cash flows from operating, investing, and financing activities.42)Borrowing money is an example of a(n)42)______A)investing activity.B)operating activity.

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C)financing activity.D)delivering activity.43)On the statement of cash flows, how would a company report the purchase ofmachinery?43)______A)As cash used in purchasing activities.B)As cash used in investing activities.C)As cash used in operating activities.D)As cash used in financing activities.44)When would a company report a net loss?44)______A)When its assets decreased during an accounting period.B)When its liabilities increased during an accounting period.C)When its expenses exceeded its revenues for an accounting period.D)When retained earnings decreased due to paying dividends to shareholders.45)Which of the following is the amount of rent expense reported on the statement ofearnings?45)______A)The amount of cash paid for rent in the current period.B)The amount of cash paid for rent for the future period.C)The amount of rent used up in the current period to earn revenue.D)The amount of cash paid for rent in the current period less any unpaid rent at theend of the period.46)What events cause changes in a corporation's retained earnings?46)______A)Declaration of dividends and issuance of shares to new shareholders.B)Profit issuance of shares, and borrowing from a bank.C)Profit or loss and declaration of dividends.D)Declaration of dividends and purchase of new machinery.47)The statement of financial position47)______A)presents the revenues and expenses for a specific period of time.B)summarizes the changes in retained earnings for a specific period of time.C)reports the assets, liabilities, and shareholders' equity at a specific date.D)reports the changes in assets, liabilities, and shareholders' equity over a period oftime.48)If you wanted to know how much of its profit a corporation distributed as dividends,which financial statement would you look at?48)______A)Statement of earnings.B)Statement of cash flows.C)Statement of changes in equity.D)Statement of financial position.49)Why is the operating activities section often believed to be the most important part of astatement of cash flows?49)______A)It gives the most information about how operations have been financed.B)It shows the net increase or decrease in cash during the period.C)It indicates a company's ability to generate cash from sales to meet current cashneeds.D)It shows the dividends that have been paid to shareholders.50)If you wanted to know what accounting rules a company follows related to its inventory,where would you look?50)______A)The statement of financial position.B)The statement of earnings.

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C)The headings to the financial statements.D)The notes to the financial statements.51)During 20X1, Burton Company delivered products to customers for which customerspromised to pay $3,820,000. The company collected $3,670,000 in cash from customersduring the year. Indicate which of these amounts will appear on the statement of earningsand which on the statement of cash flows.51)______A)$3,820,000 appears on the statement of cash flows, and $3,670,000 appears on thestatement of earnings.B)$3,670,000 appears on the statement of cash flows, and $3,820,000 appears on thestatement of earnings.C)$3,820,000 appears on both the statement of earnings and the statement of cashflows.D)$3,670,000 appears on both the statement of earnings and the statement of cashflows.52)At the beginning of 20X2, Rodriguez Corporation had assets of $820,000 and liabilitiesof $340,000. During the year, assets increased by $40,000 and liabilities decreased by$8,000. What was total shareholders' equity at the end of 20X2?52)______A)$528,000.B)$480,000.C)$432,000.D)$1,208,000.53)What term is used for probable future economic benefits owned by an entity, andobtained as the result of past transactions?53)______A)Retained earnings.B)Revenues.C)Assets.D)Liabilities.54)What results from the purchase of goods or services on credit and from borrowing?54)______A)Share capital.B)Assets.C)Revenues.D)Liabilities.55)How are the differing claims of creditors and investors recognized by a corporation?55)______A)The claims of both creditors and investors are liabilities, but only the claims ofinvestors are long term.B)The claims of creditors are liabilities; the claims of investors are recorded asshareholders' equity.C)The claims of creditors are liabilities; those of investors are assets.D)The claims of creditors and investors are essentially equivalent.56)In what order are assets are listed on a statement of financial position?56)______A)Dollar amount (largest first).B)Importance to the operation of the business.C)Ease of conversion to cash.D)Date of acquisition (earliest first).57)In what order, would the assets of Any Company be listed on their statement of financialposition?57)______A)Cash, Trade Receivables, Inventory, Plant and Equipment.B)Cash, Trade Receivables, Plant and Equipment, Inventory.C)Cash, Trade Receivables, Marketable Securities, Inventory.D)Cash, Inventory, Trade Receivables, Plant and Equipment.58)The ending retained earnings balance of the Brown Hat restaurant chain increased by$4.3

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billionfrom thebeginning of theyear.Thecompany haddeclaredadividendof $1.5billion.Whatwas theprofitearnedduringtheyear?58)______A)$3.0 billion.B)$2.8 billion.C)$5.8 billion.D)There is no way to determine net income as not enough information was given.59)What section of the statement of cash flows do bankers consider to be the mostimportant?59)______A)Financing.B)Operating.C)Investing.D)All the sections are equally important.60)Which of the following statements is TRUE?60)______A)The SEC is the most influential Canadian regulator of the flow of financialinformation provided by publicly traded companies in Canada.B)The Accounting Standards Board is a government body.C)Publicly traded enterprises must use IFRS for external reporting purposes.D)Publicly traded enterprises must use the accounting standards prescribed for privateenterprises for external reporting.61)Which of the following activities would cause investors to overpay for the acquisition ofa company from its current owners?61)______A)Understated assets and overstated revenues.B)Understated trade payables and overstated inventory.C)Understated assets and overstated expenses.D)Understated revenues and overstated expenses.62)Which of the following statements is true about the price earnings (P/E) ratio?62)______A)It is a ratio of importance to creditors.B)A high P/E ratio indicates investors have little confidence in the future profitpotential of the company.

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C)The P/E ratio increases as profit increases.D)The P/E ratio could be used to approximate the value investors would be willing topay for the company's acquisition from existing owners.63)Which government regulatory agency has the legal authority to prescribe financialreporting requirements for corporations that sell their securities in Canadian stockexchanges in the province of Ontario?63)______A)OSC.B)CRA.C)CICA.D)AcSB.64)Under IFRS, income includes increases in economic benefits from64)______A)increases in owners' equity related to owners' contributionsB)increases in liabilities not related to owners' contributionsC)All increases related to owners' contributions.D)enhancements of assets not related to owners' contributions65)Which securities regulator in the province of Ontario has broad powers to determinemeasurement rules for financial statements of publicly traded companies on the TorontoStock Exchange?65)______A)The Ontario Securities Commission.B)The Canada Revenue Agency.C)The Supreme Court.D)The Federal Accounting Office.66)Financial statements are prepared for the user. Which of the following best describes theresponsibility for the preparation of financial statements?66)______A)It is the responsibility of standard setters.B)It is the responsibility of management.C)It is the responsibility of external auditors.D)It is the responsibility of shareholders.67)With whom does primary responsibility for the information in a corporation's financialstatements rest?67)______A)The managers of the corporation.B)The public accountant who audited the financial statements.C)The shareholders of the corporation.D)The Ontario Securities Commission.68)What is an examination of the financial statements of a business to ensure that theyconform with international financial reporting standards called?68)______A)A certification.B)A verification.C)An audit.D)A validation.69)What is the purpose of an audit?69)______A)To establish that a corporation's shares are a sound investment.B)To lend credibility to an entity's financial statements.C)To prove the accuracy of an entity's financial statements.D)To endorse the quality of leadership that managers provide for a corporation.70)Why do the managers of a corporation hire independent auditors?70)______A)To handle some personnel issues and problems.B)To lobby the AcSB for changes in generally accepted accounting principles.C)To audit and report on the fairness of financial statement presentation.D)To guarantee annual and quarterly financial statements.

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71)Why is the auditor's role in performing audits, important to our society?71)______A)Auditors provide direct financial advice to potential investors.B)An audit of financial statements helps investors and others to know that they canrely on the information presented in the financial statements.C)Auditors issue reports on the accuracy of each financial transaction.D)Auditors have the primary responsibility for the information contained in financialstatements.72)What is one of the disadvantages of a corporation, when compared to a partnership?72)______A)The corporation provides continuity of life.B)The shareholders have limited liability.C)The shareholders are treated as a separate legal entity from the corporation.D)The corporation and its shareholders are potentially subject to double taxation.73)Which of the following statements is true about a sole proprietorship?73)______A)The owner and the business are separate legal entities but not separate accountingentities.B)Most large businesses in this country are organized as sole proprietorships.C)The owner and the business are separate accounting entities but not separate legalentities.D)The owner and the business are separate legal entities and separate accountingentities.74)For a business organized as a general partnership, which statement is true?74)______A)Formation of a partnership requires getting a charter from the province ofincorporation.B)A partnership is not considered to be a separate accounting entity.C)Each partner is potentially responsible for the debts of the business.D)The owners and the business are separate legal entities.75)For what reason might a group of people establishing a business prefer to set it up as acorporation rather than a partnership?75)______A)To avoid complex reporting procedure for government agenciesB)To have limited liability.C)Because of ease of formation.D)To avoid double taxation.TRUE/FALSE.Write 'T' if the statement is true and 'F' if the statement is false.76)Accounting is a system that collects and processes financial information about anorganization and reports that information to decision makers.76)______77)External users of accounting information include the managers who plan, organize, andrun a business.77)______78)In accounting and reporting for a business entity, the accounting and reporting for thebusiness must be kept separate from other economic affairs of its owners.78)______79)Accounting communicates financial information about a business to both internal andexternal users.79)______

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80)A statement of financial position should be dated for a period (such as "For the yearended December 31, 20X1"), whereas a statement of earnings should be dated at a pointin time (such as "At December 31, 20X1").80)______81)Expenses are the cost of assets consumed or services used in the process of generatingrevenue.81)______82)Financing activities for corporations include borrowing money and selling shares.82)______83)Total assets are $60,000, total liabilities, $30,000, and share capital is $20,000; therefore,retained earnings is $5,000.83)______84)Investing activities involve collecting the necessary funds to operate the business.84)______85)The purchase of equipment is an example of a financing activity.85)______86)The reasons for a decrease in cash can be determined by examining the statement ofearnings.86)______87)Economic resources that are owned by a business are called shareholders' equity.87)______88)The accounting model for the statement of financial position is: Assets + Liabilities-Shareholders' Equity.88)______89)Assets are resources owned by a business that provide current services or benefits to thebusiness.89)______90)Profit is the excess of total revenues over total expenses incurred to generate revenueduring a specific period.90)______91)The financial statements prepared by a corporation include a statement of financialposition, statement of earnings, statement of cash flows, and statement of money.91)______92)A banker who is considering making a loan to a corporation would be one of thecorporation's internal decision makers.92)______93)Assets are economic resources controlled by the entity as a result of past transactions orevents and from which future economic benefits can be obtained.93)______94)The financial statement that shows an entity's economic resources and its liabilities is thestatement of retained earnings.94)______95)The statement of comprehensive income reports the change in shareholders' equityduring a period from business activities other than investments by shareholders ordistributions to shareholders.95)______96)A note payable is a borrowing instrument that generally does not involve the payment ofinterest.96)______97)If a corporation does not pay its obligations when they are due, its creditors may be ableto force the sale of the business's assets to pay their claims.97)______

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98)When a company ships products to a customer and bills the customer, the companyshould recognize revenue as earned.98)______99)The amount of cash paid by a business for office rent would be reported on the statementof cash flows as a financing activity.99)______100)Repayment of a bank loan is classified on the statement of cash flows as an operatingactivity.100)_____101)Liabilities are the entity's legal obligations that result from past business events.101)_____102)International Financial Accounting Standards are produced by the InternationalAccounting Standards Board (IASB), which is an independent standard-setting boardconsisting of 15 members from twelve countries.102)_____103)Accounting is based on man-made rules that sometimes undergo change.103)_____104)Primary responsibility for the information in the financial statements lies withmanagement.104)_____105)The AcSB iscurrentlythe body responsible for establishing accounting standards.105)_____106)The Accounting Standards Board (AcSB) is an agency of the federal government thatestablishes generally accepted accounting principles for businesses.106)_____107)Generally accepted accounting principles are essentially identical in most developedcountries.107)_____108)One of the disadvantages of a corporation when compared to a partnership is the limitedliability of the owners.108)_____109)A partnership is an incorporated entity that has more than one owner.109)_____110)Accountants generally must meet educational requirements, pass a rigorous exam, andmeet experience requirements before becoming licensed CAs, CGAs, or CMAs.110)_____111)Independent CAs in the public practice of accounting are viewed as employees of theirclients.111)_____112)An audit involves the examination of the financial reports (prepared by the managementof the company) to ensure that they represent what they claim and conform with IFRS.112)_____113)Many opportunities exist for managers to intentionally prepare misleading financialreports.113)_____114)Failure to comply with professional rules of conduct can result in serious penalties forprofessional accountants, but not the rescinding of the professional designation of anoffending member.114)_____115)High standards of ethics are not required for preparers of financial information.115)_____ESSAY.Write your answer in the space provided or on a separate sheet of paper.

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116)Identify which of the following accounts appear on a statement of financial position.(a) Servicerevenue(b) Cash(c) Common shares(d) Accounts payable(e) Rent expense(f) Supplies(g) Land117)For the items listed below, fill in the appropriate code letter to indicate whether the item is an asset,liability, or shareholders' equity item.CodeAssetALiabilityLShareholders' EquitySE________ 1. Rent expense________ 7. Trade receivables________ 2. Office equipment________ 8. Retained earnings________ 3. Trade payables________ 9. Service revenue________ 4. Common shares________ 10. Bank loan payable________ 5. Insurance expense________ 11. Dividends________ 6. Cash________ 12. Unearned revenue118)Classify each of these items as an asset (A), liability (L), or shareholders' equity (SE).________ 1. Rent receivable________ 6. Cash________ 2. Salaries payable________ 7. Mortgage payable________ 3. Preferred shares________ 8. Land________ 4. Office supplies________ 9. Dividends________ 5. Retained earnings________ 10. Office supplies expense119)Match each definition with its related term or abbreviation by entering the appropriate letter in thespace provided.________ 1. OSC________ 2. CICA________ 3. AcSB________ 4. CA________5. IFRSTerm or Abbreviation DefinitionA. A system that collects and processes financialinformation about an organization and reports that information to decision makers.B. Measurementof information about an entity in the monetary unit–dollars or other national currency.C. Anunincorporated business owned by two or more persons.D. The organization for which financialdata are to be collected (separate and distinct from its owners).E. An incorporated entity that issuesshares as evidence of ownership.F. Initial recording of financial statement elements at acquisitioncost.G. An examination of the financial reports to assure that they represent what they claim andconform with international financial reporting standards.H. Chartered Accountant.I. Anunincorporated business owned by one person.J. A report that describes the auditors' opinion of thefairness of the financial statement presentations and the evidence gathered to support that opinion.K.Ontario Securities Commission.L. Accounting Standards Board.M. Company that can be boughtand sold by investors on established stock exchanges.N. International financial reportingstandardsO. Canadian Institute of Chartered Accountants.120)Using the income statement model and the statement of financial position model, fill-in the missingamounts for each independent case below. Assume the amounts given are at the end of the first fullyear of operations of the company.CaseTotalRevenueTotal AssetsTotalExpensesTotalLiabilitiesProfit (Loss)Shareholders'EquityA$500,000$300,000$425,000$110,000$$B75,000$$70,00015,00055,000C$145,00070,000$(10,000)90,000

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D250,000375,000200,00060,000$$E$$64,00088,0003,00065,000121)Plants Supreme, Inc., a small retail store which sells house plants, started business on January 1,20X1. At the end of January, 20X1, the following information was available:Sales of plants for cash$50,000Sales of plants for credit3,000Cost of plants which were sold and paid for during January30,000Cash expenditures during January:Salaries$4,500Telephone100Office Supplies (all used)100Electricity200Rent on the store for January, 20X1800(will not be paid until February, 20X1)A. Using the above information, prepare the income statement for Plants Supreme for the monthended January 31, 20X1.B. What is the amount of cash flows provided by operating activities to bepresented on the statement of cash flows?122)Calculate the missing amount in each category of the accounting equation.AssetsLiabilitiesShareholders' Equity(a)$360,000$ __?__$98,000(b)$178,000$73,000$ __?__(c)$ __?__$302,000$310,000123)Rockaway Corporation's shareholders' equity equals one-fifth of the company's total assets. Thecompany's liabilities are $125,000. What is the amount of the company's shareholders' equity?124)Lopez Corporation began operations at the start of 20X3. During the year, it made cash and creditsales totaling $974,000 and collected $860,000 in cash from its customers. It purchased inventorycosting $508,000, paid $25,000 for dividends and the cost of goods sold was $445,000. Thecorporation incurred the following expenses:Salary expense$180,000Interest expense15,000Insurance expense10,000Supplies expense18,000Income tax expense65,000Required:1. Prepare an income statement showing revenues, expenses, pretax profit, income taxexpense, and profit for the year ended December 31, 20X3.2. Based on the above information, whatis the amount of trade receivables on the statement of financial position prepared at the end of20X3?3. Based on the above information, what is the amount of retained earnings on the statementof financial position prepared at the end of 20X3?125)Delft Corporation was established on December 31, 20X1, by a group of investors who invested atotal of $100,000 for shares of the new corporation. During the month of January, 20X2, Delftprovided services to customers for which the total revenue was $40,000. Of this amount, $4,500 hadnot been collected by the end of January. Delft recorded salary expense of $17,000, of which 90%had been paid by the end of the month; rent expense of $3,000, which had been paid on January 1,20X2; and other expenses of $8,500, which had been paid by check. On January 31, 20X2, Delft

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purchased a vanbypayingcash of$25,000.Therewere noother events that affected cash.Required:1. In which section of the statement of cash flows wouldthe amount of cash paid for salaries be reported?2. In which section of the statement of cash flowswould the amount of cash paid for the van be reported?3. By how much did Delft's cash increase ordecrease during January?4. If the amount of cash was $100,000 at the beginning of January, howmuch cash did Delft have at the end of the month?5. What was Delft's profit or loss (after incometax expense) for the month of January? The income tax rate was 25%.6. Explain why the netincrease or decrease in cash for a business generally will be different than the profit, or net loss, forthe same period.126)Pool Supply, Inc., reported the following items for the year ended December 31, 20X3:Wages and salary expense$825,000Cost of goods sold1,400,000Rent expense490,000Sales revenue3,417,000Interest expense50,000Income tax expense161,000Trade receivables25,000Required:Prepare an income statement for the year.127)Empire Stores, Ltd., reported the following amounts on its statement of financial position onDecember 31, 20X2:Inventory$710,000Notes payable160,000Cash300,000Share capital900,000Net property, plant and equipment425,000Trade receivables88,000Trade payables131,000Retained earnings?Required:1. What is the amount of Empire's total assets at the end of 20X2?2. Identify the itemslisted above that are liabilities.3. What is the amount of Empire's retained earnings at the end of20X2?4. Prepare a statement of financial position for Empire Stores as of December 31, 20X2.5.Empire Stores wishes to purchase merchandise from your company on account. The amount of thepurchases would probably be about $5,000 per month, and the terms would require Empire to makepayment in full within 30 days. Would you recommend that your company grant credit to Empireunder these terms? Explain the reasoning for your response.128)During 20X2, Wilmont Company performed services for which customers promised to pay$286,000. Of this amount, $270,000 had been collected by year end. Wilmont paid $125,000 in cashfor employee wages and owed the employees $5,000 at the end of the year for work that had beendone but had not paid for. Wilmont paid interest expense of $1,700 and $80,000 for other serviceexpenses. The income tax rate was 25%, and income taxes had not yet been paid at the end of theyear. Wilmont declared and paid dividends of $6,000. There were no other events that affectedcash.Required:1. What was the amount of the increase or decrease in cash during the year?2.Prepare an income statement for Wilmont for the year.129)Alfred Company manufactures men's clothing. During 20X2, the company reported the followingitems that affected cash. Indicate whether each of these items is a cash flow from operatingactivities (O), investing activities (I), or financing activities (F).DescriptionClassification

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