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

The asset and liability categories group individual accounts by the expected timing of cash receipts (for assets) or cash payments (for liabilities).

Energy Corporation, a U.S.diversified power management company, reported a balance in Retained Earnings of $2,800 million at the beginning of 2013 and $3,300 million at the end of 2013.Based on Energy Corporation's financial reports for fiscal 2013, it reported dividends declared and paid of $250 million for 2013.Compute the amount of net income for 2013.(Energy Corporation applies U.S.GAAP, and reports its results in millions of U.S.dollars.)

The balance sheet amount of shareholders' equity does not, and is not intended to, provide the user of the financial reports with a measure of the market value of common equity.

Monmath Corp.started operations in March of Year 3.The following transactions occur during March. a. On March 1, Year 3, Monty contributes $20,000 for 10,000 shares of $1 par value stock. b. On March 1, Year 3, Monmath borrows $50,000 on a note from the bank to finance the purchase of a building. c. Monmath buys $15,000 of inventory on account (this is the gross price before any possible discounts). d. Monmath pays a $12,000 account payable with cash. e. Monmath paid the annual rent of $11,760. f. Monmath pays for one half of the inventory purchased in (c) above. There are no discounts given. g. Issued 300 shares of $1 par value stock in settlement of $300 accounts payable. h. Received $400 from a customer for merchandise to be delivered on April 15, Year 3. Required: Prepare the journal entries for transactions a through h, assuming Monmath uses the accrual basis of accounting.

Describe T-accounts and how they are used.

Express the following transactions of Forman's Store, Inc., in journal entry form.If an entry is not required, indicate the reason.You may omit explanations for the journal entries. The store: (1) Receives $35,000 from John Forman in return for 1,000 shares of the firm's $35 par value common stock. (2) Gives a 60-day, 8% note to a bank and receives $8,000 cash from the bank. (3) Rents a building and pays the annual rental of $11,000 in advance. (4) Acquires display equipment costing $7,000 and issues a check in full payment. (5) Acquires merchandise inventory costing $22,000.The firm issues a check for $12,000, with the remainder payable in 30 days. (6) Signs a contract with a nearby restaurant under which the restaurant agrees to purchase $1,500 of groceries each week.The firm receives a check for the first two weeks' orders in advance. (7) Obtains a fire insurance policy providing $50,000 coverage beginning next month.It pays the one-year premium of $1,440. (8) Pays $625 for advertisements that will appear in newspapers next month. (9) Places an order with suppliers for $43,500 of merchandise to be delivered next month.

The first step in the accounting record-keeping process is recording each transaction in a file or other record in the form of a journal entry.

The first step in the accounting record-keeping process is:

Which of the following is/are true regarding the T-account?

Composite, Inc., a firm specializing in building materials, engaged in the following transaction during 2013: issued 2,000 shares of common stock for $7,500 million in cash.Indicate the effects of the transaction on the balance sheet equation.(Composite Inc.applies U.S.GAAP financial reporting standards, and reports its results in millions of dollars.)

Indicate the effects of the following transactions on the balance sheet equation, using the format: $\text { Transaction letter\quad\quad\quad Assets } \quad\quad=\quad \quad\text { Liabilities } \quad\quad+\quad\quad \text { Shareholders' equity }$ a. Issued 20,000 shares of $\$ 0.10$ par value common stock for $\$ 100,000$ . b. Issued 5,000 shares of $\$ 0.10$ par value common stock in full payment for land worth $\$ 25,000$ to be used as a future building site. c. Acquired equipment costing $\$ 7,500$ for a cash payment of $\$ 700$ with the balance payable over the next five years. d. Paid $\$ 1,000$ for rent for the next two months. e. Completed a consulting job and invoiced the client for $\$ 5,000$ , payable in 30 days. f. Ordered office supplies for the office, totaling $\$ 225$ . g. Purchased a three-year fire insurance policy and pays in advance $\$ 3,000$ . $\mathrm{h}$ . Received payment from the client for services rendered in (e) above. i. Received the office supplies. The invoice indicates payment is due within 10 days. j. Issued a check for the office supplies purchased in (i) above.

Supplies and More, a firm specializing in building materials, engaged in the following four transactions during 2014: (1) purchased and received inventory costing $18,600 million, of which $12,000 million was on account with the rest paid in cash; (2) purchased a machine for $4,800 million with cash; (3) issued 2,000 shares of common stock for $6,000 million in cash; (4) issued shares of common stock to its suppliers for the remaining amount due on purchases of inventory. REQUIRED: Indicate the effects of each of these four transactions on the balance sheet equation.Supplies and More applies U.S.GAAP financial reporting standards and reports its results in millions of U.S.dollars ($). Shareholders'

Horton Company reports the following: Contributed Capital \ 200 Total Revenues \ 800 Total Liabilities \ 1,200 Beginning Retained Earnings (\ 100) Total Expenses \ 500 Dividends \ 0 What are Total Assets?

A detailed system of accounts allows the preparer of financial statements to decompose, or __________, each transaction to convey information about the effects of the transaction.

The balance sheet groups individual accounts by type (asset, liability, or shareholders' equity) and lists these accounts with their balances as of the balance sheet date.

Under IFRS, assets and liabilities in the statement of financial position appear in order of

A balance sheet prepared according to U.S.GAAP lists liabilities starting with those that the firm will discharge soonest (the most current or closest to maturity liabilities) and ending with those that it will pay latest (the most noncurrent or distant to maturity liabilities).

Income statement accounts are temporary accounts and, as such, will have beginning and ending balances of zero.

The balance sheet equation maintains equality by reporting the financial statement effects of each event and transaction in a dual manner, or what are termed the dual effects of transactions.

Any single event or transaction will have which of the following effect(s) on the balance sheet?