La Paz Company Engaged in the Following Transactions During 2012

question 163

Multiple Choice

La Paz Company engaged in the following transactions during 2012, its first year in operation: (Assume all transactions are cash transactions)
1) Acquired $3,000 cash from issuing common stock.
2) Borrowed $2,200 from a bank.
3) Earned $3,100 of revenues.
4) Incurred $2,400 in expenses.
5) Paid dividends of $400.
La Paz Company engaged in the following transactions during 2013:
1) Acquired an additional $500 cash from the issue of common stock.
2) Repaid $1,300 of its debt to the bank.
3) Earned revenues, $4,500.
4) Incurred expenses of $2,750.
5) Paid dividends of $640.
The amount of liabilities on La Paz's 2013 balance sheet was

• A) $900.
• B) $500.
• C) ($1,300).
• D) $240.

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Definitions:

Inventory Account

An account on the balance sheet that reports the value of a company's goods that are unsold at the end of the accounting period.

Indirect Method

A method used in cash flow statements to convert net income into net cash flow from operating activities, by adjusting for non-cash transactions.

Cash Dividends

Profits paid out to shareholders by a corporation from its earnings in the form of cash.

Financing Activities

Transactions and events that affect the equity and long-term liabilities of a company, including issuing shares, repaying loans, and paying dividends.