Exam 2: The Basics of Record Keeping and Financial Statement Preparation: Balance Sheet

To maintain the balance sheet equality, it is necessary to report every event and transaction in a dual manner. If a transaction results in an increase in the left hand side of the balance sheet, dual transactions recording requires that which of the following must occur, to maintain the balance sheet equation?

Explain how tenants record rent paid in advance for an office building and how a landlord or owner of the property rented records the receipt of the advance payment. Show journal entries as part of your answer.

Explain the difference between inventories for a retailer versus a manufacturer.

For manufacturing firms, the balance sheet reports the costs of incomplete items as

What is goodwill and how is it classified in terms of the accounting equation?

Both U.S.GAAP and IFRS require firms to report balance sheet accounts for the prior year in addition to the current year.

Describe the balance sheet equation and the dual effects of transactions.

Shareholders' equity is a residual interest or claim-that is, the owners (shareholders) of a firm have a claim on assets not required to meet the claims of creditors.

The T-account looks like the letter T, with a horizontal line bisected by a vertical line.Increases in assets appear on the left side, and decreases in assets appear on the right side of T-accounts.

In computerized systems, posting occurs instantly and automatically after journalizing.

A balance sheet prepared according to U.S.GAAP lists assets from most liquid to least liquid, where liquid refers to the ease of converting the asset into cash.

Under U.S.GAAP, assets and liabilities in the balance sheet appear in order of increasing closeness-to-cash.

The T-account looks like the letter T, with a horizontal line bisected by a vertical line.Increases in liabilities appear on the right side, and decreases in liabilities appear on the left side of T-accounts.

Skyway Company, a U.S.airplane manufacturer, reported a balance of $8,100 million in Inventory at the beginning of 2013 and $9,600 million at the end of 2013.Its income statement reported Cost of Products Sold of $45,400 million for 2013.Compute the cost of inventory either purchased or manufactured during 2013.(Skyway Company applies U.S.GAAP, and reports its results in millions of U.S.dollars.)

Under U.S.GAAP, assets and liabilities in the balance sheet appear in order of

Depreciation allocates the asset's cost to the periods of benefit in some systematic and rational way, and it attempts to track changes in the asset's fair value.

Which of the following is false regarding a merchandising firm?

The T-account looks like the letter T, with a horizontal line bisected by a vertical line.Increases in shareholders' equity appear on the right side, and decreases in shareholders' equity appear on the left side of T-accounts.

Collette and Cohen incorporate as CC Designs, Inc.on January 1, Year 1.CC Designs creates custom wall finishes and sells painting products.The following transactions occur during January. a. Cohen contributes cash of $75,000 and receives 15,000 shares of $1 par value stock. b. Collette contributes $35,000 cash, office furniture with a value of $5,000, and computer equipment with a value of $10,000 and receives 15,000 shares of $1 par value stock. The furniture and equipment is expected to last 5 years and has no salvage value. c. On January 2, $10,000 of painting products are purchased. CC paid $8,000 cash with the remaining amount on account. d. During January, painting products are sold for $8,000 cash. The cost of the products is $2,000. e. Additional painting products with a value of $5,000 are sold, with a cost of $1,500, but the cash is not collected as of January 31st. It is expected that the $5,000 will be collected in full by February 15th. f. Cohen is paid a salary of $2,000. g. CC paid $1,200 for January and February rent. Required: Prepare appropriate accrual basis journal entries.