Exam 2: Constructing Financial Statements

Which of the following is the justification of reporting certain assets at historical cost?

Operating expenses include interest expense related to a company's financing activities.

Identify the effects of the following transactions in the table below:

With few exceptions, why do we report most assets at their original acquisition price (historical cost) and not at current market value?

Select from choices of its balance sheet classification. If the item should not appear on the balance sheet, select H. -Value of company logo

Accrual accounting recognizes revenues only when cash is received and expenses only when cash is paid.

Select from choices of its balance sheet classification. If the item should not appear on the balance sheet, select H. -Mortgage payable

Assets such as inventory and property, plant, and equipment are reported on the balance sheet at their current market value.

An income statement does not include which of the following?

Which of the following will properly record the payment of a one-year insurance policy?

Select from choices of its balance sheet classification. If the item should not appear on the balance sheet, select H. -Income taxes payable in 30 days

Which of the following is one effect of a purchase of $1,000 of inventory on credit?

If Umbrella Company paid $2,000 cash dividends to its shareholders, retained earnings would be reduced by $2,000.