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Quick Check and Quiz Answers -- Chapter One

Quick Check and Quiz Answers -- Chapter One - Answers Quick...

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Answers Quick Check (pages 26 & 27) 1. B. A proprietorship has one owner. The other three statements are true. 2. A. Assets (economic resources) are generally valued at historical cost. 3. D. The accounting equation is: Assets = Liabilities + Owners’ equity. This can be reordered to: Assets – Liabilities = Owners’ Equity. This is actually a good description of owners equity. The owners are entitled to everything left in the business after the creditors have been paid. 4. C. An asset is an economic resource that is expected to benefit future operations. Assets don’t have to have physical form (patents are assets and they don’t have physical form) nor do they have to represent cash or have a ready market value. 5. D. This is an important question. There are three flow financial statements that cover a period of time: the income statement; the statement of owners’ equity (or retained earnings); and the statement of cash flows. These all show what happened over a period of time. In contrast, the balance sheet shows what the things a company owns (resources); the liabilities (debts); and the owners’ interest at a point of time.
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