Module 2 i overview of business activities and

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dividend revenue as investing cash flows.
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Module 2 I Overview of Business Activities and Financial Statements 2-32 ODULE-END REVIEW At December 31, 2010, assume that the condensed balance sheet of Gateway shows the following. Cash . Noncash assets . $ 80,000 270,000 Liabilities . Contributed capital . Earned capital . Total liabilities and equity . $200,000 50,000 100,000 $350,000 Total assets . $350,000 Assume the following summary transactions occur during 2011. 1. Purchase inventory of $80,000 on credit. Pay employees $10,000 cash for wages earned this year. 3. Sell inventory costing $40,000 for $70,000 on credit. 4. Collect $15,000 cash from the accounts receivable in transaction 3. Pay $35,000 cash toward the accounts payable in transaction 1. 6. Purchase advertising for $25,000 cash that will air next year. Employees earn $5,000 in wages that will not be paid until next year. Record $3,000 depreciation on its equipment. Required a. Record transactions 1 through 8 using the financial statement effects template. b. Prepare the income statement and balance sheet for 2011. c. Show linkage(s) between the income statement and the balance sheet. The solution to the review problem ison page 2-51. P PEN D IX 2 A: Additional Information Sources four financial statements are only a part of the information available to financial statement users. Additional ation, from a variety of sources, provides useful insight into company operating activities and future pros- .This section highlights additional information sources. rm 10-K anies with publicly traded securities must file a detailed annual report and discussion of their business activi- in their Form lO-K with the SEC (quarterly reports are filed on Form lO-Q). Many of the disclosures in the - are mandated by law and include the following general categories: Item 1, Business; Item I A. Risk Factors; _.Properties; Item 3, Legal Proceedings; Item 4, Submission ofMatters toa Voteof Security Holders; Item 5, etfor Registrant's Common Equity and Related Stockholder Matters; Item 6, Selected Financial Data; Item - Aanagement's Discussion and Analysis of Financial Condition and Results of Operations; Item 7A, Quantita- _and Qualitative Disclosures About Market Risk; Item 8, Financial Statements and Supplementary Data; Item .Changes in and Disagreements WithAccountants on Accounting and Financial Disclosure; Item 9A, Controls Procedures. cription of the Business (Item 1) :=.::mpaniesmust provide a general description of their business, including their principal products and services, source and availability of required raw materials, all patents, trademarks, licenses, and important related agree- IS, seasonality of the business, any dependence upon a single customer, competitive conditions, including icular markets in which the company competes, the product offerings in those markets, and the status of its titive environment. Companies must also provide a description of their overall strategy. Apple's partial losure follows: The Company is committed to bringing the best user experience to its customers through its innovative hard- ware, software, peripherals, services, and Internet offerings. The Company's business strategy leverages its unique ability to design and develop its own operating systems, hardware, application software,
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