Questions and Answers of Accounting What The Numbers Mean

The similarities in the financial statement effects of buying an asset compared to using a capital lease to acquire the rights to an asset.
The meaning of various intangible assets, how their values are measured, and how their costs are reflected in the income statement.
The role of time value of money concepts in financial reporting and their usefulness in decision making.
The financial statement presentation of short-term debt and current maturities of iong-term debt.
The difference between interest calculated on a straight basis and on a discount basis.
What unearned revenues are and how they are presented in the balance sheet.
The accounting for an empioyer’s liability for payroii and payroll taxes.
The importance of making estimates for certain accrued liabiiities and how these items are presented in the balance sheet.
What financial leverage is and how it is provided by long-term debt.
The different characteristics of a bond, which is the formal document representing most long-term debt.
Why bond discount or premium arises and how it is accounted for.
What deferred income taxes are and why they arise.
What noncontroliing (minority) interest is, why it arises, and what it means in the balance sheet.
The characteristics of common stock and how common stock is presented in the balance sheet.
What preferred stock is, what its advantages and disadvantages to the corporation are, and how it is presented in the balance sheet.
The accounting for a cash dividend and the dates involved in dividend transactions.
What stock dividends and stock splits are and why each is used.
What the components of accumulated other comprehensive income (loss) are and why these items appear in owners’ equity.
What treasury stock is, why it is acquired, and how treasury stock transactions affect owners’ equity.
Flow owners’ equity transactions for the year are reported in the financial statements.
What revenue is and what the two criteria are that permit revenue recognition.
How cost of goods sold is determined under both perpetual and periodic inventory accounting systems.
The significance of gross profit (or gross margin) and how the gross profit (or gross margin) ratio is caiculated and used.
The principal categories and components of “other operating expenses” and how these items are reported on the income statement.
What “income from operations” includes and why this income statement subtotal is significant to managers and financial analysts.
The components of the earnings per share calculation and the reasons for some of the refinements made in that calculation.
The alternative income statement presentation models.
The meaning and significance of each of the unusual items that may appear on the income statement, including Noncontrolling (minority) interest in earnings of subsidiaries.Discontinued
The purpose and general format of the statement of cash flows.
The difference between the direct and indirect methods of presenting cash flows from operating activities.
Why the statement of cash flows is significant to financial analysts and investors.
The significance of corporate governance.
The types of financial reporting misstatements that have occurred in recent years.
That the explanatory notes are an integral part of the financial statements; the notes provide detailed disclosure of Information needed by users wishing to gain a full understanding of the financial
The kinds of significant accounting policies that are explained in the notes.
The nature and content of note disclosures relating to Accounting changes.Business combinations.Contingencies and commitments.Events subsequent to the balance sheet date.Impact of inflation.Segment
The role of the Securities and Exchange Commission and some of its reporting requirements.
Why a statement of management’s responsibility is included with the notes.
The significance of management’s discussion and analysis of the firm’s financial condition and results of operations.
What is included in the five-year (or longer) summary of financial information.
The meaning and content of the independent auditors’ report.
Record transactions and calculate financial statement amounts The transac- tions relating to the formation of Blue Co. Stores, Inc., and its first month of operations follow. Prepare an answer sheet
Record transactions and calculate financial statement amounts The following are the transactions relating to the formation of Cardinal Mowing Services, Inc., and its first month of operations.
Write journal entries Write the journal entry(ies) for each of the transactions of Exercise 4.1.
Write journal entries Write the journal entry(ies) for each of the transactions of Exercise 4.2.
Record transactions and adjustments Prepare an answer sheet with the column headings shown after the following list of transactions. Record the effect, if any, of the transaction entry or adjusting
Record transactions and adjustments Prepare an answer sheet with the column headings shown after the following list of transactions. Record the effect, if any, of the transaction entry or adjusting
Record transactions and adjustments Enter the following column headings across the top of a sheet of paper:Transaction/ Owners’ Net Situation Assets Liabilities Equity Income Enter the
Record transactions and adjustments Enter the following column headings across the top of a sheet of paper:Transaction/ Owners’ Net Situation Assets Liabilities Equity Income Enter the
Calculate retained earnings On February 1, 2009, the balance of the retained earn- ings account of Blue Power Corporation was $630,000. Revenues for February totaled $123,000, of which $115,000 was
Cash receipts versus revenues During the month of April, Simpson Co. had cash receipts from customers of $170,000. Expenses totaled $156,000, and accrual basis net income was $42,000. There were no
Notes receivable-interest accrual and collection On April 1, 2008, Tabor Co. received a $6,000 note from a customer in settlement of a $6,000 account receivable from that customer. The note bore
Effect of adjustments on net income Assume that Cater Co.'s accountant ne- glected to record the payroll expense accrual adjustment at the end of October. Required:a. Explain the effect of this
Effects of adjustments A bookkeeper prepared the year-end financial statements of Giftwrap, Inc. The income statement showed net income of $47,400, and the balance sheet showed ending retained
T-account analysis Answer these questions that are related to the following Inter¬ est Payable T-account:a. What is the amount of the February 28 adjustment?b. What account would most likely have
Transaction analysis using T-accounts This exercise provides practice in under- standing the operation of T-accounts and transaction analysis. For each situation, you must solve for a missing amount.
Record transactions Use the horizontal model, or write the journal entry, for each of the following transactions that occurred during the first year of operations at Kissick Co.a. Issued 200,000
Prepare an income statement and balance sheet from transaction dataa. Based on your answers to Problem 4.17, prepare an income statement (ignoring income taxes) for Kissick Co.'s first year of
Calculate income from operations and net income Selected information taken from the financial statements of Verbeke Co. for the year ended December 31, 2009, follows:a. Calculate income from
Calculate income from operations and net income Selected information taken from the financial statements of Graff Co. for the year ended December 31, 2009, follows:Net cash provided byoperations. $
Alternative adjustments—supplies On January 10, 2009, the first day of the spring semester, the cafeteria of The Defiance College purchased for cash enough paper napkins to last the entire 16-week
Analyze several accounts using Intel Corporation annual report data Set up a horizontal model in the following format:Assets Liabilities Revenues Expenses Marketing, General, and Cash and Cash
Make corrections and adjustments to income statement and balance sheet Big Blue Rental Corp. provides rental agent services to apartment building owners. Big Blue Rental Corp.’s preliminary income
Capstone analytical review of Chapters 2-4. Calculate liquidity and profitabil¬ ity measures and explain various financial statement relationships for a realty firm DeBauge Realtors, Inc., is a
Capstone analytical review of Chapters 2-4. Calculate liquidity and profit- LO 6, 7 ability measures and explain various financial statement relationships for an excavation contractor Gerrard
What transactions are.
The kind of information reported in each financial statement and how financial statements are related to each other.
The meaning and usefulness of the accounting equation.
Several limitations of financial statements.
Why financial statement ratios are important.
The importance and calculation of return on investment.
The significance and calculation of return on equity.
The meaning of liquidity and why it is important.
How trend analysis can be used most effectively.
]^etained Earnings is nota. increased by net income.b. decreased by expenses.c. increased by revenues.d. decreased by dividends declared.e. decreased by gains and losses.
The definition of accounting.
The variety of professional services that accountants provide.
The development of accounting from a broad historical perspective.
How financial reporting standards evolve.
The key elements of ethical behavior for a professional accountant.
The FASB's Conceptual Framework project.
The objectives of financial reporting for business enterprises.
The plan of the book.
Obtain an annual report Throughout this course, you will be asked to relate the material being studied to actual financial statements. After you complete this course, you will be able to use an
Read and outline an article The accounting profession is frequently in the news, not always in the most positive light. The purpose of this assignment is to increase your awareness of an issue facing
Your ideas about accounting Write a paragraph describing your perceptions of what accounting is all about and the work that accountants do.
Your expectations for this course Write a statement identifying the expectations you have for this course.
Identify factors in an ethical decision Jennifer Rankine is an accountant for a local manufacturing company. Jennifer's good friend, Mike Bortolotto, has been op- erating a retail sporting goods
Identify information used in making an informed decision Charlie and Maribelle Brown have owned and operated a retail furniture store for more than 20 years. They have employed an independent CPA
Auditor independence Using the search engine you are most comfortable with, identify at least five sources on the general topic of auditor independence. Write a brief memo to provide an update on the
Find financial information From the set of financial statements acquired for E1.1, determine the following:a. Who is the chief financial officer?b. What are the names of the directors? C. Which firm
The meaning of each of the captions on the financial statements illustrated in this chapter.
The broad, generally accepted concepts and principles that apply to the accounting process.
Why investors must carefully consider cash flow information in conjunction with accrual accounting results.
What a corporation's annual report is and why it is issued.
Business practices related to organizing a business, fiscal year, par value, and parent- subsidiary corporations.
It means that there has been some sort of economic interchange; for example, you have agreed to pay tuition in exchange for classes.
It means the person doing this is really mixed up because the balance sheet pre- sents data as of a point in time. It's a balance sheet as of August 31, 2009.
It means that the organization's financial position at a point in time has been determined and summarized.
It means that each individual financial statement provides unique information but focuses on only a part of the big picture, so all four statements need to be reviewed to achieve a full understanding

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