ACC 201: Practice Exercises for Chapters 1 & 2 � Financial Transactions and Statements

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Practice exercise 1 ACC 201: Practice Exercises for Chapters 1 & 2 – Financial Transactions and Statements
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Practice exercise 2 Chapter 1 and 2 practice exercise ACC: 201 Instructor: Date: Exercise 1 - 2: Assume that Kennedy Company acquires $1,600 cash from creditors and $1,800 cash from investors. Required a. Explain the primary differences between investors and creditors. Answer: a) The primary difference between creditors and investors is a creditor you must pay back the money borrowed and most of the time there is interest. An investor is someone that is investing in the company and normally has stock from doing so. If the company does not make it and dissolves creditors get paid first, and if there is still money left, investors get it. b. If Kennedy has a net loss of $1,600 cash and then liquidates, what amount of cash will the creditors receive? What amount of cash will the investors receive? Answer : b) The creditors will get $1,600, or all of their money, and the investors will get $200. c. If Kennedy has net income of $1,600 and then liquidates, what amount of cash will the creditors receive? What amount of cash will the investors receive? Answer :

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