Exam 1: Accounting and the Financial Statements

What is the purpose of an income statement?

Match each statement to the item listed below. a.Audit report b.Fiscal year c.Financial statements d.Management's discussion and analysis e.Notes to the financial statements -Section in the annual report that highlights favorable or unfavorable trends and significant risks facing the company

Blackbeard's Restaurant began operations on January 1, 2011, with a total investment of $100,000 by its stockholders. The restaurant had a net loss its first year of business of $15,000. During 2012 and 2013, the business was profitable with net incomes of $25,000 and $50,000, respectively. The company paid $5,000 per year in dividends to its shareholders in 2012 and 2013.

In the stockholders' equity section of a classified balance sheet, a distinction is made between amounts invested by owners and amounts financed by creditors.

-Refer to Bay Camera. What amount will be reported as Retained Earnings on the Balance Sheet at December 31, 2013, assuming this is the first year of operations?

-Refer to Baloon-E-Tunes. Prepare the current assets section of the Balance Sheet at December 31, 2013. You may omit the heading. How does the concept of liquidity apply?

What is unearned revenue?

Which set of items below are current assets?

Match each statement to the item listed below. a.Audit report b.Fiscal year c.Financial statements d.Management's discussion and analysis e.Notes to the financial statements -A set of reports that communicate a company's financial position and results of operations

The Statement of Cash Flows, like the Income Statement, reports only operating activities and other activities of a company.

Match each statement to the item listed below. a.Current assets e.Intangible assets b.Current liabilities f.Long-term investments c.Gross margin g.Long-term liabilities d.Income from operations h.Net profit margin -Net income divided by sales revenue

List the four financial statements. Explain the connection between these four statements.

The company's annual report is contained within the company's 10-K filing with the Securities Exchange Commission.

Match each statement to the item listed below. a.Current assets e.Intangible assets b.Current liabilities f.Long-term investments c.Gross margin g.Long-term liabilities d.Income from operations h.Net profit margin -Investment in the debt and stock of other companies that is expected to be held for more than a year

Which one of the following financial statements reports an entity's financial position at a specific date?

The following balances were taken from the company's records: -Refer to Bass Tours. If the average current ratio for similar companies is 2.0 to 1, what does this tell you about this company's liquidity?

-Refer to Bargain Spot Fabrics. What amount should the company report on its Balance Sheet for Total Assets?

Match each statement to the item listed below. a.Current assets e.Intangible assets b.Current liabilities f.Long-term investments c.Gross margin g.Long-term liabilities d.Income from operations h.Net profit margin -Obligations that will require payment beyond one year

Which of the following accounts are normally reported as current liabilities on a classified balance sheet?

Determine the following amounts for Ben & Terry's Ice Cream: