Shareholders equity or RE at the beginning of the perios was 200000; at the end of the period, assets were 255000 and liabilities 40000. If there were no additional investments during the period, did the usiness incur a net income or loss? In what amount?

Aldonzo Corporation is ready to prepare financial statements at the end of 2012. Unless stated, all transactions have been recorded but not necessarily all adjusting entries. The company has a trial balance. The various account groups on that trial balance have been combined and summed and listed below as 12/31/12.

Debit Credit
Contributed Capital 60,000
Cost of Goods Sold 80,000
Current Assets 150,000
Current Liabilities 75,000
Dividends Paid 10,000
Expenses (Other) 200,000
Gains 20,000
Noncurrent Assets 630,000
Noncurrent Liabilities 100,000
Retained Earnings, January 1, 2012 390,000
Sales Revenues _______ 425,000
Totals 1,070,000 1,070,000


1) What is reported as retained earnings as of December 31, 2012?

2) Assume that this company has exactly the same transactions every year – never any variation. On what day was this company started?

3) Insurance of $20,000 is paid for the next four months on December 1, 2012 and recorded as insurance expense. No further journal entry or adjusting entry is made in connection with this insurance. What is the proper balance for working capital on December 31, 2012?

4) Near the end of 2012, the company sold inventory costing $12,000 for $20,000. The company debited cash for $20,000 and credited inventory for $20,000 but made no other journal entry or adjusting entry. What was the proper balance that should be reported on the income statement as its gross profit for the year ended December 31, 2012?

3. If operations for an accounting period resulted in cash fees of $95,000, fees on account of $10,000, and expenses paid in cash of $77,000, did the business incur a net income or a net loss for the period? What was the amount of the net income or net loss?

4. Glitter Company employees earn $10,000 in salary per month. The December amount was paid on December 31. The amount had not been recorded during the month by the accounting system. However, when the payment was recorded the accountant thought that the accrued expense had been recorded during the month.
Would Net Income be overstated, understated, or unaffected?

5. Insurance of $20,000 is paid for the next four months on December 1 and recorded as a prepaid expense. No further journal entry or adjusting entry is made in connection with this insurance.
Would Net Income be overstated, understated, or unaffected?

6. The net income reported on the income statement is $65,000. However, adjusting entries have not been made at the end of the period for depreciation expense of $15,000 and expired insurance of $10,450. Net income, as corrected, is _$______________.

7. If the balance in the supplies account on January 1 is $20,500, supplies purchased during the year were $17,500, and the supplies on hand at December 31 were $8,500, the amount for the appropriate adjusting entry at December 31 is _$________________.

2. T / F Under the perpetual inventory system, the cost of merchandise purchased is recorded in the Purchases account.
3. T / F With credit terms of 2/10, n/30, the seller is offering the purchaser a 2% cash discount if the amount is paid within 10 days of the invoice date. Otherwise, the full amount is due in 30 days.

4. T / F If goods are shipped FOB shipping point, the seller does not record revenue from the sale until the goods arrive at their destination because the transaction is not complete until that point.

5. T / F When a credit customer returns merchandise, a seller that uses the perpetual system would debit Sales Returns and Allowances and credit Accounts Receivable and also debit Merchandise Inventory and credit Cost of Goods Sold.

Multiple Choice

1. The accounting principle that requires the matching of revenues to expenses is called
a. Revenue Matching
b. Matching Principle
c. Standards of Accounting
d. None of the above

2. The journal entries made at the end of the accounting period to properly match revenues and expenses are called
a. Adjusting entries
b. Closing entries
c. Matching entries
d. GAAP entries

3. The expense associated with the decrease in economic usefulness of a fixed asset with the passage of time is called
a. Depletion
b. Depreciation
c. Market Value
d. All of the above

4. Rules of Accounting and Disclosure for financial reporting are _________________.

a. Financial Accounting Standards Board
b. Generally Accepted Accounting Principles
c. Generally Accepted Auditing Practices
d. Government Accounting Standards Board

5. The governing body that develops the rules in the US is _____________________.

a. Financial Accounting Standards Board
b. Generally Accepted Accounting Principles
c. Generally Accepted Auditing Practices
d. Government Accounting Standards Board