Exam 4: Statements of Financial Position and Changes in Equity; Disclosure Notes

Which of the following subsequent events (post-balance sheet events) would require adjustment of the accounts before issuance of the financial statements?

Which of the following is a limitation of the balance sheet?

For financial statement purposes, a company's operating cycle is deemed to be at least one year.

The following balance sheet for XYZ Corporation has a number of format, classification, and terminology deficiencies. Assume that all of the figures are correct. Balance Sheet Year Ended December 31, Year 3

assets
current assets:
cash in banks		$11,800
due from customres & employees	$9,700
less reserve for uncollectables	600
bond sinking fund		15,000
inventories		22,320
total current asstes		58,300
property, plamt& equipment
land& builldings		41,000
furniture & fixtures		17,600
used property held for sale		4,000
total		62,500
less accumulated depreciation		19,000
total property and equipment		43,600
deferred charges:
unamortized bond discount		1,200
supplies on hand		2,000
goodwill		14,000
total		17,200
other assets:
treasury stock(at cost)		$6,600
total assets		$124,500
equites
liabilities
accured bond interest expense		$900
accounts & notes payable		21,000
bonds payable		30,000
accumulated other comprehensive income		10,000
total liabilites		61,900

Net worth: Common Shares 40,000 Retained earnings 7,600 Reserve for bond sinking fund 15,000 Total net worth 62,600 Total equities \ 124,500 Required: List 10 deficiencies in the above statement.

A corporation had total assets of $40,000, total liabilities of $20,000, and total contributed capital of $8,000 at the beginning of the year. For the year, the corporation earned net income of $50,000 and paid cash dividends of $10,000. At the end of the year, the company had total assets of $80,000 and its total contributed capital remained at $8,000. At the end of the year, the corporation had total liabilities of:

Accumulated Other Comprehensive Income is essentially a deferred credit which appears under the Liabilities section of the Balance Sheet.

At the end of its first year of operations, and before the adjusting entries at December 31, a company had a balance in accounts receivable of $250,000. The adjustments included a $2,000 write-off of an uncollectible account and recording bad debt expense of $3,500. What should the company report on its balance sheet at December 31, as net accounts receivable?

Prepaid insurance usually should be classified on the balance sheet under the caption:

Owners' Equity items are classified and presented based on time to maturity.

Investment properties under IFRS must be shown at Fair Value.

Capital transactions are essentially transaction between owners and as a result, must never appear on the income statement.

Events that occur after the balance sheet date but prior to its issuance are called:

Current assets are cash and those items, which are reasonably expected to be realized in cash, or to be sold or consumed during the normal operating cycle or within one year from the balance sheet, date, whichever is longer.

A statement of compliance and summary of significant accounting policies are often among the first notes to be disclosed in annual report.

A corporation discovered the following information subsequent to the year 1 balance sheet date, but prior to its issuance: (A) the corporation will be able to sell $20,000 common shares as originally planned. (B) The president of the corporation had a heart attack five days after the balance sheet date. (C) a long-time major customer filed for bankruptcy and would not be able to pay the large debt owed to the company. (D) due to an electrical shortage, the estimated useful life of a large machine was reduced by three years. How many of the above items must be disclosed in the tabular portion of the year 1 financial statements?

A corporation was organized on January 1. At that time, 10,000 shares of common were sold and issued at $10.00 per share cash. $20,000 of the proceeds was used to purchase equipment. The corporation had promised to pay $2.00 per share in dividends during the year if income exceeded $40,000. As it turned out, income was $60,000 however, due to a severe cash shortage the corporation declared a scrip dividend (resulting in a current liability) rather than an immediate cash dividend. If no other transaction occurred which would affect retained earnings, the corporation should report on December 31, retained earnings of:

A contingency is an event or transaction that will occur only if some other uncertain event happens.

Guarantees and contingencies do not necessarily need to be accrued, but they may have to be disclosed in certain instances.

Ambo Inc. earned $200,000 for the current year. This means:

Gain contingencies, which are remote and can be reasonably estimated: