1. Although GGE Enterprises Inc. received a good deal on a used truck, the amount recorded in the accounting records is the amount the company paid, not the amount the truck was actually worth.	Historical cost principle Business entity assumption Expense recognition principle Going concern assumption Historical cost principle Measurement principle Monetary unit assumption Revenue recognition principle Time period assumption
   Thomas Company records The total amount charged to customers for merchandise sold, including cash sales and sales on account.sales for the month along with the expenses incurred to produce the sales.	Revenue recognition principle Business entity assumption Expense recognition principle Going concern assumption Historical cost principle Measurement principle Monetary unit assumption Revenue recognition principle Time period assumption
   GGE Enterprises records a deposit received from a customer for work to be performed later in the month. The customer is billed for the remaining amount after the work is complete, and the customers payment is recorded.	Business entity assumption Business entity assumption Expense recognition principle Going concern assumption Historical cost principle Measurement principle Monetary unit assumption Revenue recognition principle Time period assumption
   Several years after Thomas Company purchased new office equipment, the companys accounting records still show the original purchase price.	Monetary unit assumption Business entity assumption Expense recognition principle Going concern assumption Historical cost principle Measurement principle Monetary unit assumption Revenue recognition principle Time period assumption
   The accounting records of Thomas Company are in dollars, not euros, although the Ohio-based company is owned by a German firm.	Business entity assumption Business entity assumption Expense recognition principle Going concern assumption Historical cost principle Measurement principle Monetary unit assumption Revenue recognition principle Time period assumption
   The home of Rob Elliot, the owner of GGE Enterprises Inc., is not listed among the companys assets.	Historical cost principle Business entity assumption Expense recognition principle Going concern assumption Historical cost principle Measurement principle Monetary unit assumption Revenue recognition principle Time period assumption
   Thomas Company provides earnings information to investors at the end of every quarter.	Time period assumption Business entity assumption Expense recognition principle Going concern assumption Historical cost principle Measurement principle Monetary unit assumption Revenue recognition principle Time period assumption
   Despite several years of falling sales, Thomas Company continues to forecast sales and make strategic plans to raise revenues and cut expenses.	Expense recognition principle Business entity assumption Expense recognition principle Going concern assumption Historical cost principle Measurement principle Monetary unit assumption Revenue recognition principle Time period assumption

   2. Thomas Company has decided to purchase a company vehicle. The accountant was given all of the purchase details. Which should be used to record the vehicle in the accounting records?

   The amount of the loan with the bank.

   • The amount of the loan with the bank.
   • The average selling price of similar vehicles in the area.
   • The manufacturers suggested retail price (MSRP).
   • The price negotiated with the dealer.

   Feedback

   1. Look carefully at the definition of each term.

   2. What amount is initially recorded in the accounting records at the time of purchase? Think about which amount best represents objective evidence, providing accounting records with stability and reliability.

   Financial Statements

   A business will construct its financial statements in a particular order because they are interrelated. This means that items formulated in an earlier statement feed into the subsequent statements, and changes to items on one financial statement can have compounding effects on the overall financial position of a company.

   Which of the following is one reason the statement of stockholders' equity is prepared after the income statement?

   • Net income is the beginning retained earnings amount.
   • Net income is part of the computation for ending retained earnings.
   • Retained earnings are computed on the income statement.
   • Retained earnings is really an asset.

   Which of the following is one reason the statement of stockholders'equity is prepared before the balance sheet?

   • Common stock and retained earnings are really assets.
   • Common stock and ending retained earnings must be computed for the balance sheet.
   • Retained earnings feeds into revenues and expenses.
   • Revenues end up in the Assets section.

   Feedback

   Review the definitions of the financial statements and their interrelationships:

   A summary of the revenue and expenses for a specific period of time, such as a month or a year.Income Statement
   Net income (loss)		A summary of the changes in the stockholders' equity in a corporation that have occurred during a specific period of time.Statement of Stockholders' Equity
   				A list of the assets, liabilities, and stockholders equity as of a specific date, usually at the close of the last day of a month or a year.Balance Sheet

   GGE Enterprises Inc.

   On November 1 of the current year, Rob Elliot invested $29,500 of his cash to form a A business organized under state or federal statutes as a separate legal entity.corporation, GGE Enterprises Inc., in exchange for shares of common stock. No other common stock was issued during November or December. After a very successful first month of operations, the retained earnings as of November 30 were reported at $5,000. After all transactions have been entered into the accounting equation for the month of December, the ending balances for selected items on December 31 follow. On that date, the financial statements were prepared. The balance sheet reported total assets of $55,900 and total stockholders' equity of $36,825.

   Cash

   Supplies

   Land

   Accounts Payable

   Common Stock

   Retained Earnings

   Dividends

   Fees Earned

   Wages Expense

   Rent Expense

   Supplies Expense

   Utilities Expense

   Miscellaneous Expense

   ?

   $7,600

   $16,500

   ?

   ?

   $5,000

   $6,250

   $26,500

   $6,450

   ?

   $4,675

   $1,280

   $370

   Review the following questions. Indicate which financial statement(s) report the desired information. Enter the amount reported on the financial statement.

   (Select "Yes" or "No" from the below dropdowns.)

   	Balance Sheet	Income Statement	Statement of Stockholders' Equity	Amount
   1. What is the amount reported for total liabilities and stockholders' equity on December 31?	Yes No	Yes No	Yes No	$
   2. What is the retained earnings amount reported on December 31?	Yes No	Yes No	Yes No	$
   3. How much does GGE Enterprises Inc. owe to its creditors?	Yes No	Yes No	Yes No	$
   4. How much cash is being held by GGE Enterprises Inc.?	Yes No	Yes No	Yes No	$
   5. By what amount did retained earnings increase or decrease during the period?	Yes No	Yes No	Yes No	$
   6. What is the amount of profit or loss during December?	Yes No	Yes No	Yes No	$
   7. What were the total expenses for December?	Yes No	Yes No	Yes No	$
   8. How much was paid for rent?	Yes No	Yes No	Yes No	$