Which of the following statements is CORRECT?
A) The balance sheet for a given year is designed to give us an idea of what happened to the firm during that year.
B) The balance sheet for a given year tells us how much money the company earned during that year.
C) The difference between the total assets reported on the balance sheet and the liabilities reported on this statement tells us the current market value of the stockholders' equity,assuming the statements are prepared in accordance with generally accepted accounting principles (GAAP).
D) If a company's statements were prepared in accordance with generally accepted accounting principles (GAAP),the market value of the stock equals the book value of the stock as reported on the balance sheet.
E) The assets section of a typical company's balance sheet begins with cash,then lists the assets in the order in which they will probably be converted to cash,with the longest-lived assets listed last.

Question

Quizplus · Accepted Answer

The assets section of a typical company's balance sheet does usually begin with cash, followed by the assets in the order in which they will probably be converted to cash, with the longest-lived assets listed last. Statement A is incorrect because the balance sheet is a snapshot of the company's financial position at a given point in time, not a summary of what happened during the year. Statement B is incorrect because the income statement, not the balance sheet, shows how much money the company earned during that year. Statement C is incorrect because the difference between assets and liabilities reflects the book value of equity, not the market value. Statement D is incorrect because the market value of stock can differ significantly from its book value on the balance sheet.

Which of the Following Statements Is CORRECT