1) Using the information presented below, prepare a statement of owner’s equity and
balance sheet from the adjusted trial balance of Hanson Storage. Ms. Hanson’s capital
account balance of $40,340 consists of a $30,340 beginning-year balance plus a
$10,000 investment during the current year.
2) The four building blocks of financial analysis are (1) __________________, (2)
________________________, (3) ____________________ and (4)
___________________.
3) Explain the difference between direct and indirect expenses in accounting for
departments.
4) What are controlling accounts and subsidiary ledgers? What is the relationship
between them?
5) A product has a sales price of $20. Based on a 15,000-unit production level, the
variable costs are $12 per unit and the fixed costs are $6 per unit. Using a flexible
budget for an actual production and sales level of 18,000 units, what is the budgeted
operating income?
6) _________________ are probable future payments of assets or services that a
company is presently obligated to make as a result of past transactions or events.
7) On August 1, a corporation issued 15,000 shares of no-par common stock in
exchange for a tract of land having a market value of $215,000. The common stock has
a stated value of $10 per share. Prepare the general journal entry to record this
transaction.
8) The inventory manager’s compensation includes a bonus plan based on gross profit.
You discover that the inventory manager has knowingly overstated ending inventory by
$2 million. What effect does this error have on the financial statements of the company
and specifically gross profit? Why would the manager knowingly overstate ending
inventory? Would this be considered an ethics violation?
9) ________________________________ reports changes in the owner’s claim on the
business’s assets over a period of time.
10) Explain the concept of the future value of an annuity.