Business Organization and Financial Statements
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Questions and Answers

What is the total amount of assets reported on the balance sheet?

  • $117,800 (correct)
  • $36,000
  • $80,000
  • $30,000

    • What was the total amount of operating expenses for Overnight Auto Service?

  • $1,400 (correct)
  • $1,000
  • $800
  • $2,200

    • What is the net income reported on the income statement for the period of January 20-31, 2015?

  • $2,200
  • $1,000
  • $800 (correct)
  • $1,200

    • Which of the following represents the total liabilities listed in the balance sheet?

    <p>$37,000</p> Signup and view all the answers

    What components contribute to owners' equity in the balance sheet?

    <p>Capital Stock and Retained Earnings</p> Signup and view all the answers

    What is the total amount of assets listed on the balance sheet as of January 26, 2015?

    <p>$123,800</p> Signup and view all the answers

    What was the amount of cash on hand for Overnight Auto Service after the partial payment on January 27, 2015?

    <p>$15,800</p> Signup and view all the answers

    How much is the total liabilities for Overnight Auto Service on January 31, 2015?

    <p>$37,000</p> Signup and view all the answers

    What was the value of retained earnings for Overnight Auto Service on January 31, 2015?

    <p>$2,200</p> Signup and view all the answers

    Which of the following amounts was recorded for auto repair services provided on January 31, 2015?

    <p>$2,200</p> Signup and view all the answers

    What was the total amount paid by Overnight Auto Service for operating expenses on January 31, 2015?

    <p>$1,400</p> Signup and view all the answers

    What change occurred to the accounts payable after the partial payment on January 27, 2015?

    <p>Decreased by $6,800</p> Signup and view all the answers

    What was the impact on cash as a result of the operating expenses paid on January 31, 2015?

    <p>Decreased by $1,400</p> Signup and view all the answers

    What type of ownership equity is reported for a sole proprietorship?

    <p>Owner's Equity</p> Signup and view all the answers

    Which financial statement summarizes revenue and expenses over a specific period?

    <p>Income Statement</p> Signup and view all the answers

    What component is included in the owners' equity section for a corporation?

    <p>Retained Earnings</p> Signup and view all the answers

    What does the balance sheet describe?

    <p>Where the enterprise stands at a specific date</p> Signup and view all the answers

    Which of the following is NOT a primary financial statement?

    <p>Profit and Loss Statement</p> Signup and view all the answers

    How is total stockholders' equity represented in a corporation’s financials?

    <p>Capital Stock plus Retained Earnings</p> Signup and view all the answers

    What does the statement of cash flows depict?

    <p>Changes in cash during a designated period</p> Signup and view all the answers

    Which ownership type lists capital for each partner in its equity section?

    <p>Partnership</p> Signup and view all the answers

    What is the total net cash provided by operating activities?

    <p>$800</p> Signup and view all the answers

    What amount was the cash used in investing activities?

    <p>$64,200</p> Signup and view all the answers

    What was the cash balance at the end of the period, January 31, 2015?

    <p>$16,600</p> Signup and view all the answers

    How much cash was received from the sale of tools?

    <p>$600</p> Signup and view all the answers

    Which activity resulted in an increase of cash due to financing?

    <p>Sale of Capital Stock</p> Signup and view all the answers

    What was the net cash flow over the entire period?

    <p>$16,600</p> Signup and view all the answers

    Which of the following activities is NOT part of investing activities?

    <p>Sale of Capital Stock</p> Signup and view all the answers

    What is the total amount spent on purchasing land, building, and tools?

    <p>$64,200</p> Signup and view all the answers

    What is the total amount of cash on the Balance Sheet for Overnight Auto Service as of January 31, 2015?

    <p>$16,600</p> Signup and view all the answers

    Which line item represents the total liabilities on the Balance Sheet?

    <p>$37,000</p> Signup and view all the answers

    What was the net cash provided by operating activities during the period?

    <p>$800</p> Signup and view all the answers

    Which of the following is not included in the Assets section of the Balance Sheet?

    <p>Notes payable</p> Signup and view all the answers

    What was the total cash flows from investing activities?

    <p>($64,200)</p> Signup and view all the answers

    What is the total amount of owners' equity displayed on the Balance Sheet?

    <p>$80,000</p> Signup and view all the answers

    What items contributed to the cash flows from financing activities?

    <p>Sale of Capital Stock only</p> Signup and view all the answers

    What is the increase in cash for the period reported?

    <p>$16,600</p> Signup and view all the answers

    Which of the following components makes up total assets?

    <p>Assets = Liabilities + Owners' Equity</p> Signup and view all the answers

    In the Income Statement, what was the total amount of operating expenses?

    <p>$1,400</p> Signup and view all the answers

    Which activity resulted in cash outflows of the largest magnitude?

    <p>Investing activities</p> Signup and view all the answers

    What was the total investment in land and buildings combined?

    <p>$58,000</p> Signup and view all the answers

    What does the retained earnings amount to as of January 31, 2015?

    <p>$800</p> Signup and view all the answers

    Which equation correctly summarizes the relationship among Assets, Liabilities, and Owners' Equity?

    <p>Assets = Liabilities + Owners' Equity</p> Signup and view all the answers

    Study Notes

    ### Forms of Business Organization

    • Sole proprietorships, partnerships, and corporations are forms of business organization.

    Reporting Ownership Equity in the Statement of Financial Position

    • Ownership equity is reported differently in the statement of financial position depending on the form of organization.
    • Sole proprietorships report owner's equity as "Owner's equity".
    • Partnerships report owner's equity as "Partners' equity" and show individual partners' capital accounts.
    • Corporations report ownership equity as "Stockholders' equity" and include accounts for "Capital Stock" and "Retained Earnings".

    Introduction to Financial Statements

    • There are three primary financial statements: the Balance Sheet, the Income Statement, and the Statement of Cash Flows.
    • The Balance Sheet describes the financial position of the enterprise at a specific date.
    • The Income Statement depicts the revenue and expenses for a specific period of time.
    • The Statement of Cash Flows depicts the ways cash has changed during a specific period of time.

    Overnight Auto Service Balance Sheet

    • As of January 26, 2015, Overnight Auto Service had total assets of 123,800andtotalliabilitiesandowner′sequityof123,800 and total liabilities and owner's equity of 123,800andtotalliabilitiesandowner′sequityof123,800.
    • On January 27, 2015, Overnight made a partial payment of 6,800onitsaccountspayable,whichreducedtotalliabilitiesandowner′sequityto6,800 on its accounts payable, which reduced total liabilities and owner's equity to 6,800onitsaccountspayable,whichreducedtotalliabilitiesandowner′sequityto117,000.
    • On January 31, 2015, Overnight recorded 2,200inrevenuereceivedincash,increasingtotalassetsandowner′sequityto2,200 in revenue received in cash, increasing total assets and owner's equity to 2,200inrevenuereceivedincash,increasingtotalassetsandowner′sequityto119,200.
    • On January 31, 2015, Overnight paid 1,400incashoperatingexpenses,whichdecreasedtotalassetsandowner′sequityto1,400 in cash operating expenses, which decreased total assets and owner's equity to 1,400incashoperatingexpenses,whichdecreasedtotalassetsandowner′sequityto117,800.

    Overnight Auto Service Income Statement and Statement of Cash Flows

    • The Income Statement for Overnight Auto Service for January 20-31, 2015, shows a net income of $800.
    • The Statement of Cash Flows for Overnight Auto Service for January 20-31, 2015, shows a net increase in cash of $16,600.
    • The Statement of Cash Flows is divided into three categories: operating activities, investing activities, and financing activities.

    Relationships Among Financial Statements

    • The Balance Sheet, Income Statement, and Statement of Cash Flows are interconnected.
    • The Balance Sheet shows the financial position of the company at a specific point in time.
    • The Income Statement shows the company's revenues and expenses for a specific period of time.
    • The Statement of Cash Flows shows the company's cash inflows and outflows for a specific period of time.

    Financial Statement Articulation

    • The Balance Sheet, Income Statement, and Statement of Cash Flows are linked together.
    • Changes in cash flows from operating activities are reflected in the net income on the Income Statement, and net income is reflected in retained earnings on the Balance Sheet.
    • The Income Statement is used for preparing the Statement of Cash Flows.
    • Investors and creditors use financial statements together to make informed decisions about an organization.

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    Unit 1 - Chapter 1 & 2 Finance & Accounting (PDF)

    Description

    Explore the different forms of business organization, including sole proprietorships, partnerships, and corporations. Understand how ownership equity is reported in financial statements such as the Balance Sheet, Income Statement, and Statement of Cash Flows.

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