Lerner Company Had the Following Transactions in 2013, Its First

question 72

Multiple Choice

Lerner Company had the following transactions in 2013, its first year of operations. • Issued 20 000 ordinary shares. Shares were issued at $14.00 per share.
• Issued 1 000 preference shares at $100 each.
• Earned net profit of $35 000.
At the end of 2013, what is the total amount of Shareholders' equity?

• A)$415 000
• B)$380 000
• C)$120 000
• D)$260 000

Identify and classify different types of accounts (assets, liabilities, revenues, expenses) and their effects on financial statements.

Calculate corrected net income after adjusting entries.

Recognize the relationship between prepaid expenses, accrued expenses, and their adjustments.

Understand how unearned revenues are recognized and adjusted in financial statements.

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Definitions:

Contra Asset

An account that is used to reduce the value of a related asset, such as accumulated depreciation reducing the book value of fixed assets.

Normal Balance

The side (debit or credit) of an account that is expected to have a higher balance, indicating the side which increases the account.

Allowance Method

A financial method that estimates the value of debts unlikely to be collected by determining uncollectible accounts each period's end.

Allowance for Doubtful Accounts

A contra asset account that represents the estimated proportion of accounts receivable that may not be collectable.