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Identify accounts by category and financial statement & understanding financial statement relationships

1. Identify accounts by category and financial statement(s). Listed here are a number of financial statement captions. Indicate in the spaces to the right of each caption the category of each item and the financial statement(s) on which the item can usually be found. Use the following abbreviations:

Category Financial Statement

Asset A Balance Sheet BS

Liability L Income statement IS

Owners' equity OE

Revenue R

Expense E

Gain G

Loss LS

Cash _________ ___________

Accounts Payable ______ _______

Common Stock _______ ______

Depreciation Expense _____ _____

Net Sales _______ _______

Income Tax Expense ______ ______

Short-term Investments _____ _____

Gain on sale of land _____ _____

Retained earnings _____ _____

Dividends payable _____ ______

Accounts receivable _____ _____

Short-term debt _____ _____

2. Understanding financial statement relationships. The information presented here represents selected data from the December 31, 2007, balance sheets and income statements for the year then ended for three firms.

Firm A Firm B Firm C

Total assets, 12/31/07...................... $420,000 $540,000 $325,000
Tota1 liabilities, 12/31/07.....................215,000 145,000 ?
Paid-in capital, 12/31/07......................75,000 ? 40,000
Retained earnings, 12/31/07................ ? 310,000 ?
Net income for 2007............................ ? 83,000 113,000
Dividends declared and paid during 2007...50,000 19,000 65,000
Retained earnings, 1/1/07........................78,000 ? 42,000

Calculate the missing amounts for each firm.

3. Calculate retained earnings. From the following data, calculate the retained earnings balance as of December 31, 2006.

Retained earnings, December 31,2006....................................$311,800
Cost of equipment purchased during 2007............................... 32,400
Net loss for the year ended December 31, 2007....................... 4,700
Dividends declared and paid in 2007........................................ 18,500
Decrease in cash balance from January 1, 2007, to December 31, 2007..... 13,600
Decrease in long-term debt in 2007...................................... 14,800

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