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ch03sm - Chapter 3 The Balance Sheet and External Financing...

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Chapter 3 The Balance Sheet and External Financing SOLUTIONS TO APPLY WHAT YOU HAVE LEARNED 3-12. 1. b Debts of the company 2. a Probable future economic benefits 3. a "Things" of value a company has 4. c The residual interest in the assets of an entity that remains after deducting its liabilities 5. b Probable future sacrifices of economic benefits 6. b What the company owes 7. c What the company has less what it owes 8. c The owner’s interest in the company 3-13. 1. a Cash 2. c Additional paid-in capital 3. b Bonds payable 4. a Land 5. c Common stock 6. c Retained earnings 7. b Notes payable 8. c Withdrawals 9. c Partners' capital 10. c Preferred stock Chapter 3 – The Balance Sheet and External Financing 50
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3-14. a. Assets = Liabilities + Stockholders’ Equity b. Assets – things of value a company has as a result of prior transactions – probable future economic benefits resulting from past transactions. Liabilities – what a company owes; the company’s debts resulting from past transactions – probable future sacrifices resulting from past transactions. Stockholders’ Equity – the owners’ interest in the company – the owners’ residual interest in company assets after deducting liabilities. c. Answers will vary but examples include: Assets – cash, accounts receivable, supplies, inventory, equipment, buildings, land Liabilities – accounts payable, notes payable, bonds payable Equity – capital, withdrawals, common stock, preferred stock, retained earnings 3-15. 1. h An arbitrary value placed on either common stock or preferred stock at the time a corporation is formed 2. f The group of men and/or women who have the ultimate responsibility for managing a corporation 3. d The owners of a corporation 4. i Any amount received by a corporation when it issues stock that is greater than the par value of the stock issued 5. b The formal document that legally allows a corporation to begin operations 6. g The group of men and/or women who manage the day-to-day operations of a corporation 7. a The person or persons who submit a formal application with the appropriate government agencies to form a corporation 8. e A legal document providing evidence of ownership in a corporation 9. c Rules established to conduct the business of a corporation 10. j The amount at which common stock sells Chapter 3 – The Balance Sheet and External Financing 51
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3-16. a. Chief Executive Officer is usually the president and is the individual responsible for every facet of the corporation. Chief Operating Officer is in charge of directing the daily operations of the corporation. Chief Financial Officer is responsible for the financial affairs of the corporation. Controller is in charge of all accounting functions of the corporation.
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