Santa Fe Company Was Started on January 1, Year 1

question 68

Multiple Choice

Santa Fe Company was started on January 1, Year 1, when it acquired $9,000 cash by issuing common stock. During Year 1, the company earned cash revenues of $4,500, paid cash expenses of $3,750, and paid a cash dividend of $250. Based on this information, which of the following statements is true?

• A) The balance sheet at December 31, Year 1 would show total stockholders' equity of $8,750.
• B) The Year 1 income statement would show net income of $500.
• C) The Year 1 statement of cash flows would show net cash inflow from operating activities of $4,500.
• D) The Year 1 statement of cash flows would show a net cash flow from financing activities of $8,750.

Understand the purpose and process of creating a trial balance and its role in proving the equality of debits and credits.

Identify common errors in the accounting process and know the steps for their correction.

Differentiate between the general journal and general ledger in terms of information content.

Recognize the impact of transposition and slide errors on the trial balance.

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Definitions:

Profit Margins

A financial metric that assesses the percentage of profit made from sales after all expenses have been deducted.

Return on Investment

A measure of the profitability of an investment, calculated by dividing the net gains from the investment by its cost.

Investment Turnover

A ratio measuring how efficiently a company generates sales from its inventory investments.

Profit Margin

A financial metric expressing the percentage of revenue that remains as profit after all operating expenses are deducted.