For each of the following events affecting the stockholders’ equity of Carney, indicate whether the event would: increase retained earnings (IRE), decrease retained earnings (DRE), increase common stock (ICS), or decrease common stock (DCS)._____1. Declared a cash dividend._____2. Issued new shares of common stock._____3. Reported net loss of $40,000_____4. Reported net income of $20,000.Ans: N/A, LO: 3, Bloom: C, Difficulty: Easy, Min: 5, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC:Problem Solving, IMA: ReportingSolution 207(5 min.)1. DRE2. ICS3. DRE4. IREBE. 208These selected condensed data are taken from a recent balance sheet of Sanson Company (in millions of dollars).Cash$ 7.2Accounts receivable14.4Inventory18.0Other current assets11.1Total current liabilities$ 24.8Additional information: Current liabilities at the beginning of the year were $35.6 million. What are (a) the working capital, and (b) the current ratio?Ans: N/A, LO: 4, Bloom: AP, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC:Problem Solving, IMA: Business EconomicsSolution 208 (5 min.)a. $25.9($50.7 – $24.8)b. 2.04: 1($50.7 $24.8)FOR INSTRUCTOR USE ONLY2-47
Test Bank for Accounting: Tools for Business Decision Making, Fifth EditionBE. 209Insert the qualitative characteristics listed below that are associated with relevance and faithfulrepresentation.Confirmatory valueMaterialityFree from errorCompleteNeutralPredictive valueRELEVANCEFAITHFUL REPRESENTATION1._________________________1._________________________2._________________________2._________________________3._________________________3._________________________Ans: N/A, LO: 7, Bloom: K, Difficulty: Easy, Min: 5, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,IMA: Reportinga.Confirmatory valueb.Neutralc.Predictive valued.Relevante.Faithful representationf.Timelyg.VerifiableSolution 209(5 min.)RELEVANCEFAITHFUL REPRESENTATION1.Confirmatory value1.Free from error2.Predictive value2.Complete3.Materiality3.NeutralBE. 210The following terms relate to the fundamental qualities of useful information. Match the key letterof the correct term with the descriptive statement below._____1.Accounting information that is not biased toward one position or another._____ 2. Providing information before it loses its capacity to influence decisions._____ 3. Providing information that is proven to be free from error._____ 4. Providing information that would make a difference in a business decision._____ 5. Provide information that accurately depicts what really happened._____ 6. Confirms or corrects prior decisions.Ans: N/A, LO: 7, Bloom: K, Difficulty: Easy, Min: 5, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None,IMA: ReportingFOR INSTRUCTOR USE ONLY2-48
A Further Look at Financial StatementsSolution 210(5 min.)1. b2. f3. g4. d5. e6. aBE. 211For each of the independent situations described below, list the fundamental or enhancing ofquality or useful information that has been violated, if any. List only one term for each case.
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