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Unformatted text preview: CHAPTER ASSIGNMENTS 242 CHAPTER 4 Financial Reporting and Analysis Short Exercises LO1 Objectives and Qualitative Characteristics SE 1. Identify each of the following statements as related to either the objec- tive (0) of financial information or a qualitative (Q) characteristic of accounting information: 1. Information about business resources, claims to those resources, and changes in them should be provided. 2. Decision makers must be able to interpret accounting information. 3. Information that is useful in making investment and credit decisions should be furnished. 4. Accounting information must exhibit relevance and faithful representation. 5. Information useful in assessing cash flow prospects should be provided. LO2 Accounting Conventions SE 2. State which of the accounting conventionsconsistency, materiality, con- servatism, full disclosure, or cost-benefitis being followed in each of the cases listed below. 1. Management provides detailed information about the company's long-term debt in the notes to the financial statements. 2. A company does not account separately for discounts received for prompt payment of accounts payable because few of these transactions occur and the total amount of the discounts is small. 3. Management eliminates a weekly report on property, plant, and equipment acquisitions and disposals because no one finds it useful. 4. A company follows the policy of recognizing a loss on inventory when the market value of an item falls below its cost but does nothing if the market value rises. 5. When several accounting methods are acceptable, management chooses a single method and follows that method from year to year. L03 Classification of Accounts: Balance Sheet SE 3. Tell whether each of the following accounts is a current asset; an invest- / ment; property, plant, and equipment; an intangible asset; a current liability; a long-term liability; stockholders' equity; or not on the balance sheet: 1. Delivery Trucks 6. Prepaid Insurance 2. Accounts Payable 7. Trademark 3. Note Payable (due in 90 days) 8. Investment to Be Held Six Months 4. Delivery Expense 9. Income Taxes Payable 5. Common Stock 10. Factory Not Used in Business L03 Classified Balance Sheet SE 4. Using the following accounts, prepare a classified balance sheet at year end, May 31, 2010: Accounts Payable, $800; Accounts Receivable, $1,100; Accu- mulated DepreciationEquipment, $700; Cash, $200; Common Stock, $1,000; Equipment, $3,000; Franchise, $200; Investments (long-term), $500; Merchan- Stop &amp; Review 241 Classified income statements for external reporting can be in multistep or single- step form. The multistep form arrives at income before income taxes through a series of steps; the single-step form arrives at income before income taxes in a single step. A multistep income statement usually has a separate section for other revenues and expenses....
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This note was uploaded on 02/18/2012 for the course ACCOUNTING 2301 taught by Professor Dr.susaneason during the Spring '12 term at San Jacinto.
- Spring '12