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Accrual Accounting and Financial Statements

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1. Define the classified balance sheet. Why is it useful for financial statement purposes? Expand on response

2. The return on equity is a very popular financial statistic. How does the DuPont equation/formula assist with analyzing it? Expand on response

3. Define adjusting entries. Provide two examples.

Textbooks

Introduction to Financial Accounting, 11/E, Charles T. Horngren, Stanford University, Gary L. Sundem, University of Washington, John A. Elliott, Baruch College, The City University of New York, Donna Philbrick, Portland State University, ISBN-10: 0133489361 | ISBN-13: 9780133489361 ©2014 • Prentice Hall • Cloth, 648 pp

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Solution Summary

The solution provides a classified balance sheet explanation and describes its purposes. The DuPont equation is related to return on equity and adjusting entries are identified.

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1. Define the classified balance sheet.

The classified balance sheet separates current and non-current assets and liabilities. A non-classified balance sheet does not separate assets and liabilities in this way. All balance sheets show assets, liabilities and equity.

Why is it useful for financial statement purposes? Expand on response.

The classified balance sheet by separating current and non-current assets and liabilities makes it easier for the reader to compute ratios to study liquidity and solvency ...

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Carol Sargent, PhD
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  • MSc, University of Virginia
  • PhD, Georgia State University
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