MCProblems 5,6, and 7Chapter 3 TAPQ, TF, NC, P 5,6, and 7TAPQ1. At the beginning of the year, assets=420 and stockholders’ equity=70. If assets increased 94 during the yearand liabilities decreased 12 during the year, what is ending balance of stockholders’ equity?2. Net loss=97Total expenses=874.What are total revenues?3. Cash from operating activities decreased 73.Cash from investing activities increased 46.Cash from financing activities increased 37.Ending cash=105.What is beginning cash?4. On 1/1/X1, a company was started with assets of 170 and liabilities of 146. Information for the first year of operations is as follows:Additional investments by owners 30Cash dividends declared and paid 22Total assets at 12/31/X1 127What are 1/1/X1 retained earnings?What are 12/31/X1 retained earnings?What is 20X1 net income?TF1. ____ The income statement reports a company’s revenues and expenses for one particular day of the year.2. ____ An increase in the net assets of a business that results from the sale of inventory is reported as a gain.3. ____ A business reports a retained earnings balance of $156,000. This figure represents the monetary amounts contributed to the business by its owners.4. ____ Assets and liabilities can be broken down into the categories of current and noncurrent.5. ____ Income tax expense is typically reported separately from other expenses.6. ____ Conservatism helps reporting companies look better to potential investors.7. ____ The dividends paid balance is reported on the balance sheet.8. ____ Companies receive money each time their stock is sold on a stock exchange such as the New York Stock Exchange.9. ____ A balance sheet must always balance.10. ____ The statement of cash flows is broken up into operating, investing, and financing activities.11. ____ If a business reports current assets of $300,000 and current liabilities of $200,000, it has working capital of $500,000.12. ____ Sales revenue less cost of goods sold is referred to as net income.13. ____ A gain is the amount of net income earned by a company over its life less any dividends it has paid.14. ____ The purpose of the balance sheet is to report the assets and liabilities of a company on a specific date.15. ____ The accounting equation identifies how retained earnings are calculated.16. ____ If a company has a possible loss, conservatism requires that this loss must always be reported.17. ____ A company buys merchandise for $175,000 and sells it to various customers for $240,000. The gross profit is $65,000.Jessica Hujber9/1/14Business18. _____The Bagranoff Company has a current ratio of 3:1. The company collects a $20,000 accounts receivable. The current ratio will rise as a result of this collection.19. _____ The Clikeman Company has been in business for several years. The company starts the current year with net assets of $300,000 and ends the year with net assets of $430,000. For the current year, the company’s net income less its dividends must have been $130,000.20. _____ The Richmond Company has been in business for five years and now reports contributed capital as $310,000. This figure means that the owners put $310,000 worth of assets (probably cash) into the businessfive years ago when it was created.21. ______ A company needs money to build a new warehouse. Near the end of the current year (Year One), the company borrows $900,000 in cash from a bank on a ten-year loan. The company does not start the construction project until the next year (Year Two). On a statement of cash flows for Year One, a cash inflow of $900,000 should be reported as a financing activity.22. ______ Near the end of the current year, a company spent $27,000 in cash on a project that the accountant believed had future economic benefit. The accountant reported it in that manner. In truth, the project only had past economic benefit. The company went on to report net income of $200,000 for the current year along with total assets of $800,000. The company should have reported net income of $227,000 for the yearand total assets of $773,000.23. ______ Assume the Albemarle Company buys inventory for $9,000. It pays 60 percent immediately and will pay the rest next year. The company then spends $900 in cash on advertising in order to sell 70 percent of the inventory for $14,000. Of that amount, it collects 80 percent immediately and will collect the remainder next year. The company pays a cash dividend this year of $2,000. As a result of just the operatingactivities, the company will report that its cash increased by $4,900 during the period.24. ______ A company is being sued because a product it made has apparently injured a few people. The company believes that it will win the lawsuit, but there is uncertainty. There is some chance (a 33 percent chance) that the company might lose $20,000. To arrive at fairly presented financial statements in connection with this uncertainty, this lawsuit should be reported on the income statement of this year as a $6,600 loss.25. ______ A company has the following account balances: revenues—$120,000, salary payable—$7,000, costof goods sold—$50,000, dividends paid—$3,000, rent expense—$12,000, gain on sale of land—$4,000, accounts receivable—$13,000, cash—$15,000, and advertising expense—$8,000. Reported net income for the period is $54,000.26. ______ A company gets $10,000 cash from its owners when it is started at the beginning of Year One. It gets another $15,000 from a bank loan. Revenues for that year were $70,000, expenses were $39,000, and dividends paid to the owners were $3,000. The retained earnings balance at the start of Year Two was $38,000.27. ______ The Watson Corporation reported net income of $334,000. During the year, a $10,000 expenditure was erroneously recorded by this business as an asset when it should have been reported as an expense. Foran error, $10,000 is not viewed as material by this company. Therefore, net income is fairly presented as reported at $334,000.MC1. You are the chief executive officer of Fisher Corporation. You are very concerned with presenting the best financial picture possible to the owners so you can get a big bonus at the end of this year. Unfortunately, Fisher has a lawsuit pending that could result in the company having to pay a large sum of money. Lawyersbelieve the company will win and pay nothing. However, they believe there is a 20 percent chance of a $100,000 loss and a 10 percent chance of a