Concept Introduction:
Financial statements: Financial statements are prepared to summaries the account at the end of the period. The statements prepared are Income statement, Balance sheet, Statement of owner’s equity and
Accounting equation represents the mathematical relationship between assets, liabilities and equity. According to this equation, assets are equal to the sum of liabilities and equity. The formal for basic accounting equation is as follows:
Statement of
Items reported on a retained earnings statement are explained as follows:
- Beginning Balance of Retained earnings is the ending balance of the retained earnings of the previous year.
- Net Income or Net loss is the amount of net income earned or net loss incurred for the year.
- Dividends Paid are taken for the year.
- Ending Balance of Retained earnings is calculated as follows:
Ending Balance of Retained earnings = Beginning Balance of Retained earnings + Net Income − Net income − Dividends Paid
To Calculate:
The missing amounts.
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Cornerstones of Financial Accounting
- Identify how each of the following separate transactions 1 through 10 affects financial statements. For increases, place a "+" and the dollar amount in the column or columns. For decreases, place a "-" and the dollar amount in the column or columns. Some cells may contain both an increase (+) and a decrease (-) along with dollar amounts. The first transaction is completed as an example. Required: a. For the balance sheet, identify how each transaction affects total assets, total liabilities, and total equity. For the income statement, identify how each transaction affects net income. b. For the statement of cash flows, identify how each transaction affects cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. Transaction 1. Owner invests $675 cash in business in exchange for stock 2. Receives $475 cash for services provided 3. Pays $595 cash for employee wages 4. Buys $725 of equipment on credit 5. Purchases $825 of…arrow_forwardThe following lettered items represent a classification scheme for a balance sheet, and the numbered items represent data found on balance sheets. In the blank next to each account, write the letter indicating to which category it belongs. А. Current assets В. Investments C. Property, plant, and equipment D. Intangible assets Е. Current liabilities F. Long-term liabilities G. Stockholders' equity Н. Not on the balance sheetarrow_forwardWhen the three sections of a statement of financial position are presented on a page in a downward sequence, it is called the O A. Account form O B. Report form O C. Horizontal form O D. Comparative formarrow_forward
- Vertical analysis: a. Is also known as common-size analysis b. Is a technique for evaluating financial statement data that expresses each item in a financial statement as a percentage of a base amount c. All of the above.arrow_forward1. Horizontal analysis is a lechnique for evaluating a series of financial statement data over a period of time a. that has been amranged from the loweet number to the highest number. b. to determine which iteme are in error. C to determine the amount and/or percentage increase or decrease that has taken place d. that has been arranged from the highest number to the lowest numberarrow_forwardIn performing vertical analysis, we express each item in a financial statement as a percentage of a base amount. What base amount is commonly used for income statement accounts? For balance sheet accounts?arrow_forward
- Which type of debit account is balanced in the income statement columns of a worksheet?arrow_forwardWhat is used to understand relationships among various items reported in one or more of the financial statements? Financial statement Balance Sheet Accountant's report Ratio analysisarrow_forwardWhich of the following is NOT a financial statement?Choose one answer.a. Income statement b. Balance sheet c. Company performance sheet d. Cash flow statementarrow_forward
- Determining amounts for items omitted from income statement One item is omitted in each of the following four lists of income statement data. Determine the amounts of the missing items, identifying them by ietter.arrow_forwardSuppose that you are doing a financial statement analysis. Assume you took a financial statement and divided every entry amount in the statement by the amount of total assets. The resulting statement is commonly called a? current ratio common base year income statement common size balance sheet common size income statement common base year balance sheet .DO NOT GIVE PLAGRIZED ANSWERarrow_forwardIn a common-size Balance Sheet, all items on the statement are divided by _________. a. total assets b. total liabilities c. net sales d. total shareholders' equityarrow_forward
- College Accounting, Chapters 1-27 (New in Account...AccountingISBN:9781305666160Author:James A. Heintz, Robert W. ParryPublisher:Cengage Learning