Question

The retained earnings statement

	A.	will, in some cases, fail to reconcile the beginning and ending retained earnings balances.
	B.	is the owners' equity statement for a corporation.
	C.	will not reflect net losses.
	D.	will show an addition to the beginning retained earnings balance for an understatement of net income in a prior year.

Vega Corporation's December 31, 2013 balance sheet showed the following:

8% preferred stock, $20 par value, cumulative, 15,000 shares

authorized; 10,000 shares issued $200,000

Common stock, $10 par value, 1,000,000 shares authorized;

975,000 shares issued, 960,000 shares outstanding $9,750,000

Paid-in capital in excess of par—preferred stock $30,000

Paid-in capital in excess of par—common stock $13,500,000

Retained earnings $3,750,000

Treasury stock (15,000 shares) $315,000

Vega's total paid-in capital was

	A.	$23,165,000.
	B.	$23,795,000.
	C.	$23,480,000.
	D.	$13,530,000.

Accounts receivable arising from sales to customers amounted to $45,000 and $50,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $160,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is

	A.	$155,000.
	B.	$160,000.
	C.	$205,000.
	D.	$165,000.

Answer 1

1)answer option D will show an addition to the beginning retained earnings balance for an understatement of net income in a prior year. 2)
	Total paid in capital
	preferred stock				200,000
	common stock				9,750,000
	paid in capital in excess of par-PS				30,000
	paid in capital in excess of par-CS				13,500,000
	total paid in capital				23,480,000
	answer)	option C
		23,480,000

	cash from operating acitivities
	net income				160,000
	less decrease in account receivable				-5000
	cash from operating activities				155,000
	answer)	option a
		155,000