1. Equity is a residual amount representing the owner's interest in the assets of the business. True False 2.

The primary ob e!ti"e of finan!ial reporting is to pro"ide useful information to managers in True False

3. The !losing entry for re"enue a!!ounts in!ludes a debit to retained earnings and a !redit to True False

4. The ad usting entry for an a!!rued re"enue has the effe!ts of in!reasing assets and in!reas True False

5. The ad usting entry for an a!!rued e$pense always in!ludes a debit to an e$pense a!!ount a True False

6. The ad usting entry for an unearned re"enue always in!ludes a debit to an asset a!!ount an True False

7. %urrent assets are assets that pro"ide a benefit to a !ompany o"er more than one year. (Po True False

8. & !lassified balan!e sheet separates assets into !urrent and long'term( and separates liabili True False 9. %urrent liabilities are liabilities due within one year. (Points : 2) True False

10. The balan!e of net re!ei"ables represents the amount e$pe!ted to be !olle!ted. (Points : 2 True False 11. )e re!ord di"idends re!ei"ed as a finan!ing a!ti"ity. (Points : 2) True False

12. The pur!hase of long'term assets by issuing debt is re!orded as both an in"esting a!ti"ity True

False

13. Finan!ing a!ti"ities in!lude !ash re!eipts and !ash payments for transa!tions relating to re True False 14. %omprehensi"e in!ome reports an e$panded "ersion of in!ome to in!lude !ertain types of True False 15. EP* dis!losure is required only for in!ome from !ontinuing operations. (Points : 2) True False

16. +ains( but not losses( from dis!ontinued operations must be separately reported in an in!o True False

17. The in!ome effe!t of a !hange in reporting entity is shown separately in the in!ome statem True False 18. Finan!ial reporting ob e!ti"es do not in!lude pro"iding information: (Points : 2) That tells about a !ompany's e!onomi! resour!es and !laims to those resour!es. To determine mar#et "alues( assess profit potential( and e"aluate management. ,seful to in"estors and !reditors in ma#ing de!isions. -elpful to in"estors in predi!ting !ash flows.

19. &!!ounting information that does not pro"ide measurement bias in fa"or of a parti!ular se .eutrality. /ateriality. 0ele"an!e. %onsisten!y. 20. +enerally &!!epted &!!ounting Prin!iples (+&&P) are best defined by: (Points : 2) *tandards or methods for presenting finan!ial a!!ounting information. The group of indi"iduals that !reate and enfor!e all a!!ounting rules. +o"ernment'mandated rules that !ompanies must follow. 0ules that help best estimate profitability for a !ompany. &ll of the abo"e.

21. 1f the following( the most important ob e!ti"e for finan!ial reporting is to pro"ide informa Predi!ting !ash flows. 2n!reasing future profits. 3etermining ta$able in!ome. Pro"iding a!!ountability.

22. &4% %orporation had re"enues of 5267(777 in its first year of operations. They ha"e not ! pur!hased. The !ompany had no in"entory on hand at the end of the year. The !ompany paid fi"e'year note. The !ompany paid 52(:77 in interest that was the amount owed for the year( a effe!ti"e in!ome ta$ rate of <7>. %ompute the !ash balan!e at the end of the first year before estimated ta$es are paid for &4% 8;7677

23. Firehouse pur!hased a two'year fire and e$tended !o"erage insuran!e poli!y on &ugust 8( year'end( what is the ne!essary ad usting entry? 2ndi!ate debit with 30 and !redit with %0. &lign e"erything on the left side of the bo$ and do

Prepaid 2nsuran!e 3r. 8:9; 2nsuran!e E$pense %r. 8:9;

24. 1n *eptember 8( 2788( Time /aga@ine sold A:7 one'year subs!riptions for 5A2 ea!h. The required ad usting entry at 3e!ember 68( 2788? 2ndi!ate debit with 30 and !redit with %0. &lign e"erything on the left side of the bo$ and do (Points : <) ,nearned *ubs!ription re"enue 3r B 8:A27 *ubs!ription re"enue %r. 8:A27 25.

The year'end ad usted trial balan!e of the CDE %orporation in!luded the foll balan!es: retained earnings( 528<(777F sales re"enue( 5:==(777F !ost o 5;=6(777F salaries e$pense( 58A<(777F rent e$pense( 568(777F and inte 589(777. Prepare the ne!essary !losing entries.

2ndi!ate debit with 30 and !redit with %0. &lign e"erything on the left side of th not tab o"er within your answer.
(Points : =) *ales 0e"enue 3r. :==777 2n!ome *ummary %r :==777

2n!ome *ummary 3r. A:A777 %ost of goods sold %r B ;=6777 *alaries e$pense %r B 8A<777 0ent E$pense %r B 68777 2nterest E$pense %r ' 89777

2n!ome *ummary 3r B A9777 0etained Earnings %r ' A9777

26. The following is a 3e!ember 68( 2788( post'!losing trial balan!e for .orth)estern Ele!tri!( 2n! &!!ount Title %ash &!!ounts re!ei"able 2n"entories Prepaid insuran!e Equipment &!!umulated depre!iationGequipment Patent( net &!!ounts payable 2nterest payable .ote payable (due in 87( equal annual installments) %ommon sto!# 0etained earnings Totals 3ebits ;A(777 <7(;77 <=(977 8=(677 87=(777 <7(:77 %redits

66(277 69(677 2(777 9<(777 =;(;77 A6(;77 67A(;77

67A(;77

Prepare a !lassified balan!e sheet in report form for .orth)estern Ele!tri!( 2n!. 4e sure to al the left side of the bo$H (Points : 87) %urrent &ssets %ash ;A777 &!!ount 0e!ei"able <7;77 2n"entories <=977 Prepaid 2nsuran!e 8=677 Total %urrent &ssets I 8=7A77

Property Plant J Equipment Equipment 87=777 Kess: &!!umulated 3epre!iation 66277 Property Plant J Equipment .et A2:77 Patent <7:77 Total &ssets Kiabilities %urrent Kiabilities &!!ount Payable 2nterest Payable .ote due in one year Total %urrent liabilities Kong Term liabilities .ote Payable :<=77 Total Kong term liabilities :<=77 Total Kiabilities 86;677 69677 2777 9<77 ;7A77 2A<677

*to!#holder Equity %ommon *to!# =;;77 0etained Earning A6;77 Total *to!#holder equity 869777

Total liabilities and sto!#holder equity 2A<677 27. 0amsay %ompany had the following in!ome statement items for the year ended 3e!ember 68( 777s): 8:(777 277 87(:77 2(;77 :77

.et sales 2nterest in!ome 2nterest e$pense E$traordinary gain

%ost of goods sold

*elling and administrati"e e$penses 6;7 0estru!turing !osts 2(:77

2n addition( during the year the !ompany !ompleted the disposal of its plasti!s business an from operations of 58.< million and a gain on disposal of the !omponentLs assets of 58.: numbers are not in!luded abo"e.) <;7(777 shares of !ommon sto!# were outstanding t

2n!ome ta$ e$pense has not yet been a!!rued. The in!ome ta$ rate is 67> on all items of in!o Required: Prepare a multiple'step in!ome statement for 2788( in!luding EP* dis!losures. (Points : 87) *ales 8:777 Kess %ost of goods sold 87:77 +ross Profit A277 1perating E$pense *elling and administrati"e e$pense 2;77 1perating 2n!ome <A77 1ther in!Me$pense 2nterest in!ome 277 2nterest e$pense 6;7 0estru!turing e$pense :77 .et other in!omeMe$p (9;7) 2n!ome from !ontinuing operation I 6A;7 2n!ome from dis!ontinuing operation (net of ta$) 2:7 E$traordinary gain 2:77 2n!ome Ta$ e$pense 89=; .et 2n!ome I <;:; Earning per share from !ontinuing operation ;.:6 Earning per share for net in!ome 87.89

28. Portions of the finan!ial statements for .ordstrom 0a!# are pro"ided below. .ordstrom 0a!# 2n!ome *tatement For the Dear Ended 3e!ember 68( 2787 0e"enues 5 689(777 E$penses: %ost of goods sold 5 8:2(=77 1perating e$penses =2(777 3epre!iation e$pense 8;(A77 22(<;7 2n!ome ta$ e$pense Total e$penses .et in!ome 2:2(A;7 5 6=(2;7

.ordstrom 0a!# *ele!ted 4alan!e *heet 3ata 3e!ember 68 3e!rease in a!!ounts re!ei"able 2n!rease in in"entory 3e!rease in prepaid rent 2n!rease in operating e$penses payable 3e!rease in a!!ounts payable 2n!rease in in!ome ta$ payable

A(777 86(777 9(977 ;(:77 :(<77 89(:77

Required: Prepare the operating activities section only of the statement of !ash flows for .ordstrom indire!t method. (Points : :) .et 2n!ome 6=2;7 &dd: 3epre!iation 8;A77 &ddMKess !hanges in wor#ing !apital 3e! in a!!ount re!ei"able A777 2n! in in"entory (86777) 3e! in prepaid rent 9977 2n! in ope e$p payable ;:77 3e! in a!!ount payable (:<77) 2n! in in!ome ta$ payable 89:77 %ash flow from operating a!ti"ities I A67;7

29. The in!ome statement( balan!e sheets( and additional information for /al'/art( 2n!.( are pro" /al'/art( 2n!. 2n!ome *tatement For the Dear Ended 3e!ember 68( 2787 0e"enues 5 6(76=(;77 E$penses: %ost of goods sold 8(9<2(777 1perating e$penses :;A(777 3epre!iation e$pense 2<(977 Koss on the sale of land A(;77

2nterest e$pense 2n!ome ta$ e$pense Total e$penses .et in!ome

8<(977 <;(:77 2(:92(877 5 8<<(<77

/al'/art( 2n!. 4alan!e *heet 3e!ember 68 &ssets %urrent &ssets: %ash &!!ounts re!ei"able 2n"entory Prepaid rent Kong'Term &ssets: 2n"estment in bonds Kand Equipment &!!umulated depre!iation Total &ssets Kiabilities and *to!#holders' Equity %urrent Kiabilities: &!!ounts payable 2nterest payable 2n!ome ta$ payable Kong'Term Kiabilities: .otes payable *to!#holders' Equity: %ommon sto!# 0etained earnings Total Kiabilities and Equity

2787 5 2<9(:77 :6(777 872(777 86(777 ::(777 96(<;7 292(777 (=A(277) 5 976(:;7

2779 5 8<=(777 A7(777 8=7(777 =(<77 7 826(<;7 22:(777 (<2(677) 5 =98(;;7

5 =8(277 ;(;77 8;(7;7 2:9(777 2;6(777 267(677 5 :;<(7;7

5 :7(877 9(<77 86(7;7 22;(777 2;6(777 888(777 5 =98(;;7

&dditional 2nformation for 2787: 8. Pur!hase in"estment in bonds for 5::(777. 2. *ell land !osting 567(777 for only 522(;77( resulting in an 5A(;77 loss on sale of land. 6. Pur!hase 5=<(777 in equipment by borrowing 5=<(777 with a note payable due in three y e$!hanged in the transa!tion. <. 3e!lare and pay a !ash di"idend of 52;(877.

Required: Prepare the entire statement of !ash flows for /al'/art( 2n!. using the dire!t method. 3is! transa!tions. (Points : 82)

Cash flow from operating activities Cash collected from customer 3023500 Cash paid for goods 1902900 Cash paid for operating expense 863600 Interest expense 18800 Income tax expense 3800 Cash flow from operating activities ! 19 Cash flow from investing activities "urchase of e#uipment $6 000% &ale of land 22500 Investment in 'onds $88000% Cash outflow from investing activities ! 129500 Cash flow from financing activities (ividend pa)ment $25100% Inc in note pa)a'le 6 000 Cash flow from financing activities ! 38900 *et inc in cash ! 103800 +pening cash 1 6000 Closing cash ! 2 9800 *on cash transaction "urchased ,6 000 of e#uipment ') 'orrowing ,6 000 in note pa)a'le00