Question

Softbyte Inc.

Balance Sheet

December 31, 2016

Assets

Cash                                                                 $7,000

Accounts Receivable                                         6,000

Supplies                                                              2,000

Equipment                                                       10,000

Total Assets                                                   $25,000

Liabilities & Equity

Accounts Payable                                           $3,000

Common Stock                                                 20,000

Retained Earnings                                              2,000

Total Liabilities & Equity                             $25,000

Open the balances in the general ledger (T-accounts).

Post the journal entries from the general journal to the general ledger (T-accounts).

Prepare the four financial statements: Income Statement, Statement of Retained Earnings, Balance Sheet, Statement of Cash Flows (Direct Method or Indirect Method.)

Transaction 1: Investment by Stockholders

Invest $25,000 cash in the business in exchange for $25,000 of common stock.

Journal Entry:                                                                                                    Dr.                              Cr.

Cash                                                                                                                   25,000

                  Common Stock                                                                                                                   25,000

Transaction 2: Purchase of Equipment for Cash

Purchases computer equipment for $9,000 cash.

Journal Entry:                                                                                                    Dr.                              Cr.

Equipment                                                                                                          9,000

                  Cash                                                                                                                                      9,000

Transaction 3: Purchase of Supplies on Credit

Purchases for $1,800 from Acme Supply Company computer paper and other supplies expected to last several months. Acme agrees to allow Softbyte to pay this bill at a later date.

Journal Entry:                                                                                                    Dr.                              Cr.

Supplies                                                                                                               1,800

                  Accounts Payable                                                                                                                 1,800

Transaction 4: Services Provided for Cash

Receives $1,600 cash from customers for programming services it has provided.

Journal Entry:                                                                                                    Dr.                              Cr.

Cash                                                                                                                    1,600

                  Service Revenue                                                                                                                  1,600

Transaction 5: Purchase of Advertising on Credit

Received a bill for $350 from the Daily News for advertising but postpones payment until a later date.

Journal Entry:                                                                                                    Dr.                              Cr.

Advertising Expense                                                                                            350

                  Accounts Payable                                                                                                                   350

Transaction 6: Services Rendered for Cash and Credit

Provides $3,700 of programming services for customers. The company receives cash of $1,700 from customers, and it bills the balance of $2,000 on account.

Journal Entry:                                                                                                    Dr.                              Cr.

Cash                                                                                                                   1,700

Accounts Receivable                                                                                        2,000

                  Service Revenue                                                                                                                  3,700

Transaction 7: Payment of Expenses

Pays the following expenses in cash: store rent $650, salaries and wages of employees $920, and utilities $230.

Journal Entry:                                                                                                    Dr.                              Cr.

Rent Expense                                                                                                       650

Salary Expense                                                                                                    920

Utilities Expense                                                                                                 230

                  Cash                                                                                                                                     1,800

Transaction 8: Payment of Accounts Payable

Pays $500 cash on accounts payable.

Journal Entry:                                                                                                    Dr.                              Cr.

Accounts Payable                                                                                                500

                  Cash                                                                                                                                        500

Transaction 9: Receipt of Cash on Account

Receives $900 in cash from customers who had been billed for services.

Journal Entry:                                                                                                    Dr.                              Cr.

Cash                                                                                                                      900

                  Accounts Receivable                                                                                                             900

Transaction 10: Dividends

The corporation pays a dividend of $1,350 in cash to the stockholders of Softbyte Inc.

Journal Entry:                                                                                                   Dr.                              Cr.

Dividends                                                                                                            1,350

                  Cash                                                                                                                                      1,350

What is the ending cash balance?

A.   $ 23,150

B. $ 23,250

C. $ 23,350

D.   $ 23,550

What is the ending accounts receivable balance?

$ 7,100

B.    $ 7,200

C.    $ 7,300

D.     $ 7,500

What is the ending supplies balance?

A. $ 3,200

B. $ 3,500

C.   $ 3,800

D. $ 4,100

What is the ending equipment balance?

A. $ 15,000

B. $ 18,000

C. $ 19,000

D. $ 20,000

What is the ending accounts payable balance?

A. $ 4,650

B.   $ 4,750

C.   $ 4,950

D. $ 5,250

What is the ending retained earnings balance?

A. $ 3,800

B. $ 4,100

C.   $ 3,500

D.   $ 3,900

What is the net income?

A.   $ 2,750

B. $ 3,150

C.   $ 3,350

D.   $ 2,950

What is the amount of total expenses?

A.   $ 1,650

B. $ 2,350

C.   $ 1,850

D.   $ 2,150

What is the net increase in cash for the period?

A.   $ 16,550

B.   $ 14,350

C.   $ 17,650

D. $ 15,150

What is the net cash provided by operating activities?

A. $ 1,500

B.   $ 1,800

C.   $ 1,900

D.   $ 2,100

What is the net cash used by investing activities?

A. $ (19,000)

B.   $ (10,000)

C.   $ (8,000)

D. $ (9,000)

What is the net cash provided by financing activities?

A.   $ 21,150

B.   $ 25,950

C.   $ 22,350

D.   $ 23,650

An asset is:

only acquired with cash

something the company owns

only contributed by stockholders

a company’s obligation to pay

Net income:

decreases equity

represents the amount of assets owners put into a business

equals assets minus liabilities

is revenues minus expenses

If assets are $300,000 and liabilities are $195,000, then equity equals:

$ 95,000

$ 105,000

$ 195,000

$ 300,000

Distributions of assets by a business to its stockholders are called:

dividends

expenses

assets

retained earnings

Assets created by selling goods and services on credit are:

accounts payable

accounts receivable

liabilities

expenses

Which of the following is a main category on the statement of cash flows?

revenue activities

expense activities

financing activities

equity activities

Of the following accounts, the one that normally has a credit balance is:

cash

office equipment

accounts payable

dividends

The process of transferring general journal information to the general ledger is:

double-entry accounting

posting

balancing an account

journalizing

Answer 1

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