Exam 2: Basic Financial Statements

A transaction that causes an increase in an asset may also cause a decrease in another asset,an increase in a liability,or an increase in owners' equity.

Thirty percent of the total assets of Shanahan Corporation have been financed through borrowing.The total liabilities of the company are $600,000.What is the amount of owners' equity?

Total assets plus total liabilities must equal total owners' equity.

Computation of assets,liabilities,and owners' equity after a series of transactions The December 31,2014 balance sheet of Charles Realty reported total assets of $900,000,total liabilities of $350,000,and owners' equity of $550,000.The following transactions occurred in January of 2014: (1)The business purchased land for $250,000,paying $100,000 cash and issuing a note payable for the balance. (2)The business collected accounts receivable totaling $45,000. (3)The business sold land costing $50,000 for $60,000 cash. (4)The business paid $50,000 of the note payable. Compute the following at January 31,2014: (A.)Total assets $___________ (B.)Total liabilities $___________ (C.)Owners' equity $___________

During the current year,the assets of Wheatley's increased by $362,000,and the liabilities increased by $260,000.The owners' equity in the business must have:

Bob Bertolucci,owner of Bob's Bazaar,also owns a personal residence that costs $575,000.The market value of his residence is $725,000.During preparation of the financial statements for Bob's Bazaar,the accounting principle most relevant to the presentation of Bob's home is:

Which of the following is correct if at the end of Crystal Imports' first year of operations,Assets are $800,000 and Owners' Equity is $720,000?

A business entity is regarded as separate from the personal activities of its owners whether it is a sole proprietorship,a partnership,or a corporation.

The purchase of an asset,such as office equipment,for cash will cause owners' equity to decrease.

The practice of showing assets on the balance sheet at their cost,rather than at their current market value is explained,in part,by the fact that cost is supported by objective evidence that can be verified by independent experts.

Completion of balance sheet Use the following information to complete the December 31,2014 balance sheet of Copper Supplies Company. (1)Owners' equity as of January 1,2014,totaled $175,000,which included capital stock of $150,000. (2)Additional capital stock was issued during 2014 in exchange for $40,000 cash. (3)Net income for 2014 amounted to $200,000; no dividends were paid during 2014. (4)Cash and accounts receivable together amount to 3 times as much as accounts payable.

To appear in a balance sheet of a business entity,an asset need not:

According to the Sarbanes-Oxley Act,CEOs and CFOs must certify to the accuracy of their company's financial statements:

From an accounting viewpoint,when is a business considered as an entity separate from its owner(s)?

Deerpark Corporation recently borrowed $70,000 cash from its bank.Which of the following was unaffected by this transaction?

Profitability may be defined as:

The accounting principle that assumes that a company will operate in the foreseeable future is:

Eton Corporation purchased land in 1998 for $190,000.In 2014,it purchased a nearly identical parcel of land for $430,000.In its 2014 balance sheet,Eton valued these two parcels of land at a combined value of $860,000.Reporting the land in this manner violated the:

At the end of the current year,the owners' equity in Barclay Bakery is $246,000.During the year,the assets of the business had increased by $120,000 and the liabilities had increased by $72,000.Owners' equity at the beginning of the year must have been:

Which of the following best describes liquidity?