1. Which of the following statements is false concerning forms of business organization?

a.It is easier for a corporation to raise large sums of money than it is for a sole proprietorship or
partnership.
b.A sole proprietorship is an easy type of business to form.
c.A corporation always has tax advantages over the other forms of business organization.
d.Owners of sole proprietorships and partnerships have personal liability for the debts of the business
while owners of corporations have limited legal liability.

2. Which of the following are all considered external decision makers of financial statements?
a.Governments, suppliers, investors, lenders (banks)
b.Board of directors, employees, investors, lenders (banks)
c.Lenders (banks), suppliers, functional managers, government
d.Investors, governments, executive management, employees

3. Which of the following statements regarding business activities is true?

a.Financing activities include obtaining the funds necessary to begin and operate a business.
b.Companies spend a relatively small amount of time on operating activities.
c.Investing activities centre around earning interest on a company's investments.
d.Operating activities involve buying the long-term assets that enable a company to generate revenue.

4. At December 31, Perugia Ltd. has assets of $10,500 and liabilities of $5,800. What is the
shareholders' equity for Perugia at December 31?
a.$16,300
b.$15,200
c.$5,800
d.$4,700

5. Which of the following is not one of the four basic financial statements?
a.Statement of cash flows
b.Statement of financial position
c.Auditor's report
d.Statement of earnings

6. What types of questions do the financial statements help answer?

a.For what did a company use its cash during the year?
b.What resources does the company have?
c.Is the company better off at the end of the year than at the beginning of the year?
d.All of these choices are correct.

7. Which of the following is not shown in the heading of a financial statement?

a.The name of the auditor
b.The name of the company
c.The time period covered by the financial statement
d.The title of the financial statement

8. At December 31, Marker reported the following items: cash, $8,200; inventory, $3,700; accounts
payable, $6,300; accounts receivable, $3,900; common shares, $5,900; property, plant, and
equipment, $10,000; interest payable, $1,400; retained earnings, $12,200.
What is the total of Marker's current assets?
a.$25,800
b.$15,800
c.$16,000
d.$10,100
 9. At December 31, Marker reported the following items: cash, $8,200; inventory, $3,700; accounts
payable, $6,300; accounts receivable, $3,900; common shares, $5,900; property, plant, and
equipment, $10,000; interest payable, $1,400; retained earnings, $12,200.
What is Marker's shareholders' equity?
a.$25,800
b.$5,900
c.$12,200
d.$18,100

10. Which of the following statements regarding the statement of earnings is true?
a.The statement of earnings provides information about the future profitability and growth of a company.
b.Typical statement of earnings accounts include sales revenue, unearned revenue, and cost of goods
sold.
c.The statement of earnings shows the results of a company’s operations at a specific point in time.
d.The statement of earnings consists of assets, expenses, liabilities, and revenues.

11. Using the Basic Accounting Equation

Listed below are three independent scenarios.
Required:
Use the basic accounting equation to find the missing amounts.
Scenario Assets Liabilities Equity
1 77,000 $33,000 $44,000
2 110,000 42,000 68,000
3 49,000 32,000 17,000

12. Using the Basic Accounting Equation

Listed below are three independent scenarios.
Required:
Use the basic accounting equation to find the missing amounts.
Scenario Assets Liabilities Equity
1 78,400 $33,400 $45,000
2 111,000 46,000 65,000
3 49,000 32,000 17,000

13. At the beginning of the year, Mumbai Company had total assets of $440,000 and total liabilities of
$285,000.
Required:
Use the basic accounting equation to answer the following independent questions:
a. What is total shareholders' equity at the beginning of the year?
$155,000
b. If, during the year, total assets increased by $85,000 and total liabilities increased by $38,000,
what is the amount of total shareholders' equity at the end of the year?
$202,000
c. If, during the year, total assets decreased by $65,000 and total shareholders' equity increased by
$45,000, what is the amount of total liabilities at the end of the year?
$175,000
d. If, during the year, total liabilities increased by $95,000 and total shareholders' equity decreased
by $75,000, what is the amount of total assets at the end of the year?
$460,000
14. At the beginning of the year, Mumbai Company had total assets of $440,000 and total liabilities of
$280,000.
Required:
Use the basic accounting equation to answer the following independent questions:
a. What is total shareholders' equity at the beginning of the year?
$160,000
b. If, during the year, total assets increased by $85,000 and total liabilities increased by $38,000,
what is the amount of total shareholders' equity at the end of the year?
$207,000
c. If, during the year, total assets decreased by $65,000 and total shareholders' equity increased by
$45,000, what is the amount of total liabilities at the end of the year?
$170,000
d. If, during the year, total liabilities increased by $95,000 and total shareholders' equity decreased
by $75,000, what is the amount of total assets at the end of the year?
$460,000

15. Listed below are elements of the financial statements.

Required:
Match each financial statement element with its financial statement: statement of financial position
(SFP), statement of earnings (SE), statement of retained earnings (RE), or statement of cash flows
(CF).
a. Liabilities Statement of financial position
b. Net change in cash Statement of cash flows
c. Assets Statement of financial position
d. Revenue Statement of earnings
e. Cash flow from operating activities Statement of cash flows
f. Expenses Statement of earnings
g. Shareholders' equity Statement of financial position
h. Dividends Statement of retained earnings

16. Listed below are items that may appear on a statement of financial position.
Required:
Match each item with its appropriate classification on the statement of financial position.
Item Classification
1. Accounts payable Current liabilities
2. Machinery Property, plant, and equipment
3. Inventory Current assets
4. Common shares Contributed capital
5. Notes payable (due in 5 years) Long-term liabilities
6. Cash Current assets
7. Copyright Intangible assets
8. Net income less dividends Retained earnings
9. Accumulated depreciation Property, plant, and equipment
10. Accounts receivable Current assets

17. An analysis of the transactions of Cavernous Homes Ltd. yields the following totals at December
31, 2022: cash, $3,200; accounts receivable, $4,500; notes payable, $5,000; supplies, $8,100;
common shares, $7,000; retained earnings, $3,800.
Required:
Prepare a statement of financial position for Cavernous Homes Ltd. at December 31, 2022. (Ignore
current vs. noncurrent classification.)
Cavernous Homes Ltd.
Statement of Financial Position
31-Dec-22

Assets
Cash $3200
Accounts receivable 4500
Supplies 8100
Total assets 15800

Liabilities
Notes payable $5000
Total liabilities $5000

Shareholders' Equity
Common shares $7000
Retained earnings 3800
Total shareholders' equity 10800
Total liabilities and
$15800
shareholders' equity

18. An analysis of the transactions of Cavernous Homes Ltd. yields the following totals at December
31, 2022: cash, $3,400; accounts receivable, $4,500; notes payable, $4,600; supplies, $8,100;
common shares, $7,700; and retained earnings, $3,700.
Required:
Prepare a statement of financial position for Cavernous Homes Ltd. at December 31, 2022. (Ignore
current vs. noncurrent classification.)
Cavernous Homes Ltd.
Statement of Financial Position
December 31, 2022

Assets
Cash $3400
Accounts receivable 4500
Supplies 8100
Total assets 16000

Liabilities
Notes payable $4600
Total liabilities $4600

Shareholders' Equity
Common shares $7700
Retained earnings 3700
Total shareholders' equity 11400
Total liabilities and
$16000
shareholders' equity
19. The following accounts exist in the ledger of Huang Company: accounts payable, accounts
receivable, accumulated depreciation, bonds payable, building, common shares, cash, equipment,
 income taxes payable, inventory, notes payable (due in five years), prepaid insurance, retained
earnings, trademarks, wages payable.
Required:
1. Organize the above items into a properly prepared classified statement of financial position.
Huang Company
Statement of Financial Position
Specific Point in Time
Assets
Current assets:
Cash
Accounts receivable
Inventory
Prepaid insurance
Total current assets
Property, plant, and equipment:
Building
Equipment
Less: Accumulated depreciation
Intangible assets:
Trademarks
Total assets
Liabilities and Shareholders' Equity
Liabilities:
Current liabilities:
Accounts payable
Income taxes payable
Wages payable
Total current liabilities
Long-term liabilities:
Notes payable
Bonds payable
Total long-term liabilities
Total liabilities
Shareholders' equity:
Common shares
Retained earnings
Total shareholders' equity
Total liabilities and shareholders' equity

20. Identifying Current Assets and Liabilities

Dunn Sporting Goods sells athletic clothing and footwear to retail customers. Dunn's accountant
indicates that the firm's operating cycle averages six months. At December 31, 2022, Dunn has the
following assets and liabilities:
a. Prepaid rent in the amount of $8,500. Dunn's rent is $500 per month.
b. A $9,700 account payable due in 45 days.
c. Inventory in the amount of $46,230. Dunn expects to sell $38,000 of the inventory within three
months. The remainder will be placed in storage until September 2023. The items placed in storage
should be sold by November 2023.
d. An investment in marketable securities in the amount of $1,900. Dunn expects to sell $700 of the
marketable securities in six months. The remainder are not expected to be sold until 2025.
e. Cash in the amount of $1,050.
f. An equipment loan in the amount of $60,000 due in February 2027. Interest of $4,500 is due in
February 2023 ($3,750 of the interest relates to 2022, with the remainder relating to the first two
months of 2023).
g. An account receivable from a local university in the amount of $2,850. The university has promised to
pay the full amount in three months.
h. Store equipment at a cost of $9,200. Accumulated depreciation has been recorded on the store
equipment in the amount of $1,250.
Required:
1. Prepare the current asset and current liability portions of Dunn's December 31, 2022, statement of
financial position.
Dunn Sporting Goods
Partial Statement of Financial Position
December 31, 2022
Current assets:
Cash $1050
Short-term investment in marketable
2600
securities
Accounts receivable 2850
Inventory 46230
Prepaid rent 8500
Total current assets $61230
Current liabilities:
Accounts payable $9700
Interest payable on equipment loan 3750
Total current liabilities $13450
2. Compute Dunn's working capital and current ratio at December 31, 2022. Round current ratio
answer to two decimal places.
Working Capital $47780
Current Ratio 4.55

21. Hanson Construction has an operating cycle of nine months. On December 31, 2022, Hanson has
the following assets and liabilities:
a. A note receivable in the amount of $1,200 to be collected in six months.
b. Cash totalling $475.
c. Accounts payable totalling $1,800, all of which will be paid within two months.
d. Accounts receivable totalling $12,000, including an account for $8,000 that will be paid in two months
and an account for $4,000 that will be paid in 18 months.
e. Construction supplies costing $8,800, all of which will be used in construction within the next 12
months.
f. Construction equipment costing $60,000, on which depreciation of $22,400 has accumulated.
g. A note payable to the bank in the amount of $7,600 is to be paid within the next year.
Required:
1. Prepare the current asset and current liability portions of Hanson's statement of financial position
at December 31, 2022.
Hanson Construction
Partial Statement of Financial Position
December 31, 2022
Current assets:
Cash $475
Accounts receivable 24000
 Notes receivable 1200
Supplies 8800
Total current assets $34475
Current liabilities:
Accounts payable $1800
Notes payable 7600
Total current liabilities $9400

22. On January 1, 2022, Mulcahy Manufacturing Inc., a newly formed corporation, issued 1,000
common shares in exchange for $135,600 cash. No other shares were issued during 2022, and no
shares were repurchased by the corporation. On November 1, 2022, the corporation's major
shareholder sold 300 shares to another shareholder for $43,800. The corporation reported net income
of $25,300 for 2022.
Required:
Prepare the shareholders' equity section of Mulcahy's statement of financial position at December 31,
2022.
Mulcahy Manufacturing Inc.
Partial Statement of Financial Position
December 31, 2022
Shareholders' equity:
Common shares $135600
Retained earnings 25300
Total shareholders'
$160900
equity

23. College Spirit sells sportswear with logos of major universities. At the end of 2022, the following
statement of financial position account balances were available.
Accounts payable $104,700 Income taxes payable $11,400
Accounts receivable 6,700 Inventory 481,400
Accumulated depreciation 23,700 Long-term investment 110,900
Bonds payable 180,000 Note payable, short-term 50,000
Cash 13,300 Prepaid rent (current) 54,000
Common shares 300,000 Retained earnings, 12/31/2022 84,500
Furniture 88,000
Required:
1. Prepare a classified statement of financial position for College Spirit at December 31, 2022.
College Spirit
Statement of Financial Position
December 31, 2022

Assets
Current assets:
Cash $13300
Accounts receivable 6700
Inventory 481400
Prepaid rent 54000
Total current assets $555400
Long-term investments:
Investment 110900
 Property, plant, and
equipment:
Furniture 88000
Less: Accumulated
23700 64300
depreciation
Total assets $730600

Liabilities
Current liabilities:
Accounts payable $104700
Note payable 50000
Income taxes payable 11400
Total current liabilities $166100
Long-term liabilities:
Bonds payable 180,000
Total liabilities 346,100

Shareholders' Equity
Common shares 300,000
Retained earnings 84,500
Total shareholders' equity 384,500
Total liabilities and
$730,600
shareholders' equity
2. Compute College Spirit's working capital and current ratio at December 31, 2022. Round current
ratio answer to two decimal places.
Working Capital $564,500
Current Ratio 4.4

24. Multiple-Step Statement of Earnings

The following information is available for Bergin Pastry Shop.
Gross margin $34,700
Income from operations 9,200
Income tax expense (15% of income before taxes) ?
Interest expense 1,800
Net sales 85,300
Required:
Prepare a multiple-step statement of earnings for Bergin.
Bergin Pastry Shop
Statement of Earnings
For One Year
Net sales $85,300
Cost of goods sold 50,600
Gross margin 34,700
Operating expenses 25,500
Income from operations 9,200
Other expenses and losses:
Interest expense 1,800
Income before taxes 7,400
Income tax expense 6,290
Net income $1,110
25. An analysis of the transactions of Rutherford Company for the year ended December 31, 2022,
yields the following information: sales revenue, $65,000; insurance expense, $4,300; interest income,
$3,900; cost of goods sold, $28,800; and loss on disposal of property, plant, and equipment, $1,200.
Required:
Prepare a single-step statement of earnings.
Rutherford Company
Statement of Earnings
For the year ended December 31, 2022
Revenues and gains:
Sales revenue $65,000
Interest income 3,900
Total revenues $68,900
Expenses and losses:
Cost of goods sold $28,800
Insurance expense 4,300
Loss on disposal of property, plant, and equipment 1,200
Total expenses and losses 34,300
Net income $34,600

26. Statement of Retained Earnings

Listed below are events that may affect shareholders' equity.
Required:
For each of the events, indicate whether it increases retained earnings (I), decreases retained
earnings (D), or has no effect on retained earnings (NE).
a. Reported net income of $85,000 I
b. Paid a cash dividend of $10,000 D
c. Reported sales revenue of $120,000 I
d. Issued common shares for $50,000 NE
e. Reported a net loss of $20,000 D
f. Reported expenses of $35,000 D

27. Statement of Cash Flows

Listed below are items that would appear on a statement of cash flows.
Required:
Indicate in which part of the statement of cash flows each of the items would appear: operating
activities (O), investing activities (I), or financing activities (F).
a. Cash received from customers O
b. Cash paid for dividends F
c. Cash received from a bank loan F
d. Cash paid to suppliers O
e. Cash paid to purchase equipment I

28. Relationships among the Financial Statements

Listed below are three independent scenarios.
Required:
Compute the missing amount in each row. Assume no withdrawals or dividends.
 Statement of Statement of Statement of
Financial Position: Earnings: Financial Position:
Scenario Beginning Retained Earnings Net Income Ending Retained Earnings
1. $30,000 $25,000 $55,000
2. 64,000 30,000 94,000
3. 50,000 20,000 70,000

29. Annual Report Items

Listed below are several descriptions related to other items found in an annual report.
Required:
Description Location in the Annual
1. An integral part of the financial statements that helps to
fulfill the accountant's responsibility for full disclosure of all Notes to the financial sta
relevant information
2. An opinion as to whether the financial statements fairly
present the financial position and result of operations of the Report of independent acc
company
3. A discussion and explanation of various items reported in
Management's discussion a
the financial statements
4. Clarification of or expansion upon the information
Notes to the financial sta
presented in the financial statements
Match each of the descriptions with the location in the annual report in which it may be found.

30. Accounting Concepts

A list of accounting concepts and related definitions is presented below.
Required:
Match each of the concepts with its corresponding definition.
Concept Definition
1. Revenue Increase in assets from the sale of goods or services
2. Expenses Cost of assets consumed in the operation of a business
3. Net income (loss) The difference between revenues and expenses
4. Dividend Distribution of earnings to shareholders
5. Assets Economic resources of a company
6. Liabilities Creditors' claims on the resources of a company
7. Shareholders' equity Owner’s claim on the resources of a company