The paid-in capital section of the balance sheet consists of two classifications:
______________________ and ______________________.
Answer:
Aeroplane Insurance Agency prepares monthly financial statements. Presented below is
an income statement for the month of June that is correct on the basis of information
considered.
Additional Data: When the income statement was prepared, the company accountant
neglected to take into consideration the following information:
1>A utility bill for $2,500 was received on the last day of the month for electric and gas
service for the month of June.
2> A company insurance salesman sold a life insurance policy to a client for a premium
of $25,000. The agency billed the client for the policy and is entitled to a commission of
20%.
3> Supplies on hand at the beginning of the month were $3,000. The agency purchased
additional supplies during the month for $4,000 in cash and $2,200 of supplies were on
hand at June 30.
4> The agency purchased a new car at the beginning of the month for $22,000 cash.
The car will depreciate $5,400 per year.
5> Salaries owed to employees at the end of the month total $6,100. The salaries will be
paid on July 5.
Instructions
Prepare a correct income statement.
Answer:
Horizontal and vertical analyses are analytical tools frequently used to analyze financial
statements. What type of information or insights can be obtained by using these two
techniques? Explain how the output of horizontal analysis and vertical analysis can be
compared to industry averages and/or competitive companies.
Answer:
Owners’ claims to total business assets take precedence over the claims of creditors
because owners invest assets in the business and are liable for losses.
Answer:
A large stock dividend and stock split can frequently have the same effect on the market
price of a corporation’s stock. Explain how stock dividends and stock splits affect the
market price of a corporation’s stock.
Answer:
Three factors that affect the computation of periodic depreciation expense are (1)
_______________, (2) _______________, and (3) _________________.
Answer:
Trade receivables occur when two companies trade or exchange notes receivables.
Answer:
Many companies prepare a stockholders’ equity statement instead of presenting a
detailed stockholders’ equity section in the balance sheet.
Answer:
Match the items below by entering the appropriate code letter in the space provided.
1> A twelve month accounting period
2> Expenses paid before they are incurred
3> Cost less accumulated depreciation
4> Divides the economic life of a business into artificial time periods
5> Efforts are related to accomplishments
6> A contra asset account
7> Recognition of revenue when the performance obligation is satisfied
8> Revenues recognized but not yet received
9> Expenses incurred but not yet paid
10> A cost allocation process
Answer:
Management is responsible for establishing a system of internal control.
Answer: