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

Both U.S.GAAP and IFRS require the disclosure, in the notes to the financial statements, of selected information about business segments.

Ying Corporation, a Japanese construction firm, reported a balance in Income Taxes Payable of ¥3,700 million at the beginning of 2013 and ¥14,300 million at the end of 2013.Net income before income taxes for 2013 totaled ¥73,000 million.Assume that the firm is subject to an income tax rate of 43%.Compute the amount of cash payments made for income taxes during 2013.(Ying Corporation applies Japanese accounting standards, and reports its results in millions of yen (¥).In answering this question, assume that Ying Corporation uses either U.S.GAAP or IFRS; for purposes of this problem, this choice will not matter.)

Assume that a firm uses the accrual basis of accounting.Indicate the amount of expense the firm recognizes during the month of November for each independent transaction. a.Rent of $3,600 is paid on November 1 for the months November through January. b.Inventory costing $2,500 is ordered on account.The invoice is received on November 25 and the goods are received on December 5. c.Insurance premium of $900 is paid for a full year of coverage starting November 1. d.On December 3, an invoice for November utilities of $325 is received. e.On November 1, supplies costing $2,200 are purchased.At November 30, $500 of supplies remained on hand.

A potential investor can easily ascertain market value of common equity for a given publicly traded firm by looking up the most recent share price (as reported in various online services) and then multiplying this share price times the number of common shares outstanding, as reported on the balance sheet.

The transactions listed below relate to Mountain Corporation.Indicate whether or not each transaction immediately gives rise to an asset or liability of Mountain Corporation under generally accepted accounting principles.If accounting recognizes an asset or a liability, give the account title and amount. a.Mountain Corporation signs a 3-year employment contract with Robert Lindsey, the chief financial officer, for $375,000. b.Mountain Corporation sends a check for $2,400 for two years' property insurance coverage beginning next month that would normally cost $2,000 for a one-year policy. c.The firm paid $250 for one-year subscriptions to ski magazines. None of the magazines have been received to date. In addition, it will cost the publisher $100 to fulfill the subscription commitment. d.The firm acquires inventory with a list price of $2,000, at a 3% discount for cash payment. The firm treats cash discounts as a reduction of acquisition cost. e.The firm agrees to purchase 25,000 units of inventory from a supplier over the next 3 years at an agreed cost of $4/unit.

Assets are classified as current for reporting purposes when

To maintain balance sheet equality, it is necessary to report every event and transaction in a dual manner. If a transaction results in an increase in a Liability account, then which of the following must occur, to maintain the balance sheet equation?

T-accounts are frequently used in textbooks, demonstration problems, and examinations to accumulate information about the effects of business transactions on individual balance sheet accounts and to prepare the balance sheet.Alternatively, to accomplish the same objectives, some instructors and students might prefer to use

Before preparing the balance sheet and income statement, an accountant would use what accounting record to first record the firm's transactions?

A T-account is a device or convention for organizing and accumulating the accounting entries of transactions that affect an individual account. Which of the following is/are true?

Under IFRS, assets and liabilities appear in the statement of financial position in order of decreasing closeness-to-cash.

Current liabilities

Brice Foods Group, a European food retailer that operates supermarkets in seven countries, engaged in the following transaction during 2013: purchased and received inventory costing €500 million on account from various suppliers. Indicate the effects of the transaction on the balance sheet equation.Brice Foods Group applies IFRS, and reports its results in millions of euros.

Why does every accounting transaction have two effects?

Describe a typical balance sheet.

If a corporation issues 1,000 shares of $1 par value common stock at $5 per share, how should the transaction be accounted for?

A friend of yours has prepared the following balance sheet for his bicycle shop but it has a problem.He thought his total assets did not reflect the assets available to the firm.He has asked you to take a look at this balance sheet and help him out. Required: a.Prepare a corrected balance sheet for Eric's Bike Shop, Inc. b.Draft a memo to Eric explaining the errors you corrected. Include your reasons.

Benezra S.A., a large Brazilian petrochemical company, reported a balance of R$1,600 million in Accounts Receivable at the beginning of 2013 and R$1,500 million at the end of 2013.Its income statement reported total Sales Revenue of R$12,000 million for 2013.Assuming that Benezra makes all sales on account, compute the amount of cash collected from customers during 2013.Benezra applies Brazilian accounting standards, and reports its results in thousands of reals (R$), the Brazilian currency.(In answering this question, assume that Benezra uses either U.S.GAAP or IFRS; for purposes of this problem, this choice will not matter.)

The equation that describes the relationship between the balance sheet and the income statement through the Retained Earnings account is as follows:

The balance sheet equation shows the equality of assets with liabilities plus shareholders' equity. This equation requires that an entity's assets exactly balance, or offset, an equal amount of financing provided by creditors and owners of the corporation.