2 information that is free from error 3 information

_____ 2. Information that is free from error.
_____ 3. Information presented in a clear and concise fashion.
_____ 4. Information that makes a difference in a decision.
_____ 5. Information accurately depicts what really happened.
Ans: N/A, LO: 3, Bloom: C, Difficulty: Easy, Min: 5, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA:
Reporting
Solution 200 (5 min.)
1. d 2. c 3. b 4. e. 5. f

Test Bank for Financial Accounting: Tools for Business Decision Making, Eighth Edition
FOR INSTRUCTOR USE ONLY
2-52
Be. 201
Presented below are the basic assumptions and principles underlying financial statements.
a. Historical cost principle d. Going concern assumption
b. Economic entity assumption e. Monetary unit assumption
c. Full disclosure principle f. Periodicity assumption
Identify the basic assumption or principle that is described below.
____ 1. The economic life of a business can be divided into artificial time periods.
____ 2. The business will continue in operation long enough to carry out its existing
objectives.
____ 3. Assets should be recorded at their cost.
____ 4. Economic events can be identified with a particular unit of accountability.
____ 5. Circumstances and events that make a difference to financial statement users should
be disclosed.
____ 6. Only transaction data that can be expressed in terms of money should be included in
the accounting records.
Ans: N/A, LO: 3, Bloom: K, Difficulty: Easy, Min: 5, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA:
Reporting
Solution 201 (5 min.)
1. f 4. b
2. d 5. c
3. a 6. e

A Further Look at Financial Statements
FOR INSTRUCTOR USE ONLY
2-53
EXERCISES
Ex. 202
The following information is available for Mullen Company for the year ended December 31,
2017:
Accounts payable 4,700
Stock investments (long-term) 8,400
Accumulated depreciation, equipment 4,000
Retained earnings 16,000
Common stock 4,800
Intangible assets 2,500
Notes payable (due in 5 years) 6,000
Accounts receivable 1,500
Cash 2,600
Debt investments (short-term) 3,000
Land 10,000
Equipment 7,500
Instructions
Use the above information to prepare a classified balance sheet for the year ended December
31, 2017.
Ans: N/A, LO: 1, Bloom: AP, Difficulty: Medium, Min: 20, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC:
Problem Solving, IMA: Reporting
Solution 202 (20 min.)
MULLEN COMPANY
Balance Sheet
December 31, 2017
Assets
Current assets
Cash ........................................................................ $ 2,600
Debt investments .................................................... 3,000
Accounts receivable ............................................... 1,500
Total current assets(Cash + Debt inv. + Acc. rec.) .............. $7,100
Investments
Stock investments ................................................... 8,400
Property, plant, and equipment
Land .................................................................... 10,000
Equipment ............................................................... $7,500
Less Accumulated depreciation-equipment ............. 4,000 3,500 13,500
Intangible assets ............................................................... 2,500
Total assets …… . ............................................................... $31,500
(Tot. cur. assets + Stock inv. + Land + Equip. – Acc. dep. + Int. assets)

Test Bank for Financial Accounting: Tools for Business Decision Making, Eighth Edition
FOR INSTRUCTOR USE ONLY
2-54
Solution 202 (Cont.)
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable ................................................... $ 4,700
Long-term liabilities
Notes payable .......................................................... 6,000
Total liabilities ..................................................................... $10,700
Stockholders’ equity
Common stock ......................................................... 4,800
Retained earnings .................................................... 16,000
Total stockholders’ equity .................................................... 20,800
Total liabilities and stockholders’ equity ............................... $31,500
(Acc. pay. + Not. pay. + Com. stock + Ret. earn.)
Ex. 203