Financial Reporting and other Accounting concepts
1)Calculation of net income from the change in stockholders' equity.
Presented below is certain information pertaining to Edson Company.
Assets, January 1 $240,000
Assets, December 31 230,000
Liabilities, January 1 150,000
Common stock, December 31 80,000
Retained earnings, December 31 31,000
Common stock sold during the year 10,000
Dividends declared during the year 13,000
Compute the net income for the year.
2)ncome statement relationships.
Fill in the appropriate blanks for each of the independent situations below.
Company A Company B Company C
Sales (a) $_______ $343,400 $540,000
Beginning inventory 52,600 (d) _______ 90,000
Net purchases 175,300 255,600 (g) _______
Ending inventory 52,200 108,000 63,000
Cost of goods sold (b) _______ (e) _______ 407,000
Gross profit 85,300 98,000 (h) _______
Operating expenses (c) _______ 50,000 48,000
Income before taxes 6,000 (f) _______ (i) _______
Provide clear, concise answers for the following.
1. What is the accrual basis of accounting?
2. What is an accrued expense?
3. What is accrued revenue?
4. What is a prepaid expense?
5. What is unearned revenue?
Present, in journal form, the adjustments that would be made on July 31, 2011, the end of the fiscal year, for each of the following.
1. The supplies inventory on August 1, 2010 was $7,350. Supplies costing $20,150 were acquired during the year and charged to the supplies inventory. A count on July 31, 2011 indicated supplies on hand of $8,810.
2. On April 30, a ten-month, 9% note for $20,000 was received from a customer.
*3. On March 1, $12,000 was collected as rent for one year and a nominal account was credited.
Listed below are several information characteristics and accounting principles and assumptions. Match the letter of each with the appropriate phrase that states its application. (Items a through k may be used more than once or not at all.)
a. Economic entity assumption g. Matching principle
b. Going concern assumption h. Full disclosure principle
c. Monetary unit assumption i. Relevance characteristic
d. Periodicity assumption j. Reliability characteristic
e. Historical cost principle k. Consistency characteristic
f. Revenue recognition principle
1. Stable-dollar assumption (do not use historical cost principle).
2. Earning process completed and realized or realizable.
3. Presentation of error-free information with representational faithfulness.
4. Yearly financial reports.
5. Accruals and deferrals in adjusting and closing process. (Do not use going concern.)
6. Useful standard measuring unit for business transactions.
7. Notes as part of necessary information to a fair presentation.
8. Affairs of the business distinguished from those of its owners.
9. Business enterprise assumed to have a long life.
10. Valuing assets at amounts originally paid for them.
11. Application of the same accounting principles as in the preceding year.
12. Summarizing significant accounting policies.
13. Presentation of timely information with predictive and feedback value.
6)Objectives of financial reporting.
What are the objectives of financial reporting by business enterprises?
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