Question 1

Which of the following is an essential characteristic of the traditional accounting model?

Accepted Answer

All three characteristics, going concern assumption, cost principle, and entity concept, are essential to the traditional accounting model. The going concern assumption assumes that the company will continue its operations in the future, and therefore its assets have long-term value. The cost principle requires that assets be recorded at their original purchase price rather than their current market value. The entity concept requires that the financial records of the business be kept separate from its owners and any other entities.

Question 2

The idea that businesses must be accounted for as though they will exist at least for the foreseeable future is the

Accepted Answer

The Going concern concept assumes that a business will continue to operate for the foreseeable future, and therefore its financial statements should reflect that assumption. This concept guides the preparation of financial statements, assumptions made in business plans, and investments, among others.

Question 3

On December 31, 2013, Skidmore Company had the following cash flow data:
 
Skidmore Company had a cash balance of $750,000 on January 1, 2013. Given the above information, compute the following items:

Accepted Answer

The answer of On December 31, 2013, Skidmore Company had...

Question 4

Financial accounting is based on certain fundamental concepts and assumptions. The importance of these items is that they allow the accountant to determine which events to account for and in what manner. Define the following:

Accepted Answer

The answer of Financial accounting is based on certain fundamental...

Question 5

The following information was taken from the Hall Corporation's books:
 
Prepare an income statement for the year ended December 31, 2013 (assume that 10,000 shares of stock are outstanding).

Accepted Answer

The answer of The following information was taken from the...

Question 6

On December 31, 2013, Halloway Company had the following financial information on its books:
 
Additional information for Halloway's 2013 operations revealed that the company had beginning retained earnings of $120,000 for the year, a beginning cash balance of $35,000, and dividends paid of $45,000. Based on this information, compute the following items at December 31, 2013:

Accepted Answer

The answer of On December 31, 2013, Halloway Company had...

Question 7

The following financial statement was prepared by Schenck Corporation's accountant:
 
Based on the above Balance Sheet for Schenck Corporation, what are the correct balances for the accounts listed below:

Accepted Answer

The answer of The following financial statement was prepared by...

Question 8

List the three categories of the balance sheet. For each category, provide the definition and examples of two types of accounts that are found in that particular category.

Accepted Answer

The answer of List the three categories of the balance...

Question 9

Markanich Company purchased land for $90,000 in 2010. In 2013, the land is valued at $115,000. The land would appear on the company's books in 2013 at

Accepted Answer

According to the historical cost principle in accounting, assets are recorded at their original purchase price, not their current market value. Therefore, the land would still be recorded at $90,000.

Question 10

The following information was taken from Hemp Corporation's books as of December 31, 2013:
 
Prepare a classified balance sheet for the year ended December 31, 2013.

Accepted Answer

The answer of The following information was taken from Hemp...

Question 11

On January 1, 2013, Sorenson Company had a retained earnings balance of $780,000. During 2013, Sorenson Company earned a net income of $145,000. Cash dividends of $50,000 were paid during the year. Using this information, prepare a Statement of Retained Earnings, in good form, for the year 2013.

Accepted Answer

The answer of On January 1, 2013, Sorenson Company had...

Question 12

For the year ended December 31, 2012, Southern Company had the following account balances:
 
Given the above information, compute the following items:

Accepted Answer

The answer of For the year ended December 31, 2012,...

Question 13

Match between columns
                        Premises: Cash payments for dividends paid to stockholders
Cash payments for taxes
Cash payments for the purchase of equipment
Cash proceeds from a long-term loan
Cash receipts from providing services
Cash proceeds from the sale of land
Cash payments for interest
Issuance of stock for cash

Accepted Answer

The Answer of Financing and Operating and Investing is...

Question 14

The income statement for Highline Corporation is presented below:
 
Additional information for Highline's 2013 operations revealed that the company had beginning retained earnings of $65,000 for the year, $60,000 dividends were paid, and 10,000 shares of capital stock were outstanding. Based on this information, compute the items below.

Accepted Answer

The answer of The income statement for Highline Corporation is...

Question 15

Suppose you decide to purchase a stereo and an independent store dealer offers to sell you a system that retails for $4,000 for a price of $3,695. After some negotiation, you purchase the system for $3,400. The $3,400 is considered the accounting measurement for the transaction because of the

Accepted Answer

The $3,400 price is considered the accounting measurement for the transaction because of the arm's-length transaction assumption, which assumes that the buyer and seller are acting independently and in their own best interest to arrive at a fair transaction price. This is supported by the fact that there was some negotiation involved in the final price. The other options (A, B, and C) are not relevant to determining the accounting measurement for this transaction.

Question 16

While the three financial statements contain a lot of information, they don't tell the readers everything they may need to know about a company. Additional information can be found in the notes to the financial statements. Identify the four types of notes (be specific).

Accepted Answer

The answer of While the three financial statements contain a...

Question 17

On December 31, 2012, Pipe Company had the following account balances:
 
Given the above information, compute the following items:

Accepted Answer

The answer of On December 31, 2012, Pipe Company had...

Question 18

The comparative balance sheet for Earthwork Company is presented below:

Accepted Answer

The answer of The comparative balance sheet for Earthwork Company...

Quiz 2: Financial Statements: An Overview

Which of the following is an essential characteristic of the traditional accounting model?

The idea that businesses must be accounted for as though they will exist at least for the foreseeable future is the

On December 31, 2013, Skidmore Company had the following cash flow data: Skidmore Company had a cash balance of $750,000 on January 1, 2013. Given the above information, compute the following items:

Financial accounting is based on certain fundamental concepts and assumptions. The importance of these items is that they allow the accountant to determine which events to account for and in what manner. Define the following:

The following information was taken from the Hall Corporation's books: Prepare an income statement for the year ended December 31, 2013 (assume that 10,000 shares of stock are outstanding).

The following financial statement was prepared by Schenck Corporation's accountant: Based on the above Balance Sheet for Schenck Corporation, what are the correct balances for the accounts listed below:

List the three categories of the balance sheet. For each category, provide the definition and examples of two types of accounts that are found in that particular category.

Markanich Company purchased land for $90,000 in 2010. In 2013, the land is valued at $115,000. The land would appear on the company's books in 2013 at

The following information was taken from Hemp Corporation's books as of December 31, 2013: Prepare a classified balance sheet for the year ended December 31, 2013.

On January 1, 2013, Sorenson Company had a retained earnings balance of $780,000. During 2013, Sorenson Company earned a net income of $145,000. Cash dividends of $50,000 were paid during the year. Using this information, prepare a Statement of Retained Earnings, in good form, for the year 2013.

For the year ended December 31, 2012, Southern Company had the following account balances: Given the above information, compute the following items:

For each of the following items, indicate whether it would be classified as an operating activity, an investing activity, or a financing activity on the statement of cash flows.

Suppose you decide to purchase a stereo and an independent store dealer offers to sell you a system that retails for $4,000 for a price of $3,695. After some negotiation, you purchase the system for $3,400. The $3,400 is considered the accounting measurement for the transaction because of the

While the three financial statements contain a lot of information, they don't tell the readers everything they may need to know about a company. Additional information can be found in the notes to the financial statements. Identify the four types of notes (be specific).

On December 31, 2012, Pipe Company had the following account balances: Given the above information, compute the following items:

The comparative balance sheet for Earthwork Company is presented below: