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(p. 467) Use the fundamental accounting equation to solve the following: Assets minus liabilities equals: A. net income.
Owners' equity is the residual claim of the owners on the assets of the business. After the creditors have made their claims against the assets of the firm, the remaining assets belong to the owners. In other words, owners' equity is the amount of the business that belongs to the owners minus any liabilities owed by the business.The fundamental accounting equation states that Assets = Liabilities + Owners' equity. A restatement of this equation is: Liabilities = Assets -Owners' equity. Therefore, the liabilities = $235,000 - $84,000 = $151,000.Long-term liabilities are obligations that come due in a time period greater than one year.Profits are often kept in (retained) the firm to grow the business. The accountant will post these profits to the retained earnings account and to a subsequent asset account, order to keep the accounts balanced.The financial statement that shows the "bottom line" (profit after expenses and taxes) is the income statement.B. gross margin.C.owners' equity.D. cash reserves.AACSB: Reflective ThinkingBlooms: ComprehensionLearning Goal: 17-4Level of Learning 2: Understanding of concepts and principlesNickels - Chapter 17 #321Topic: The Fundamental Accounting Equation322. (p. 464) On December 31, 2001, Virginia Laboratories had assets of $235,000 and owners equity of $84,000. We can conclude that on December 31, 2001, Virginia Laboratories balance sheet showed: A.Total liabilities of $151,000.B. Suffered a net loss of $151,000.C. Experienced a cash inflow of $319,000.D. Paid a dividend of $3.00 per share.AACSB: Reflective ThinkingBlooms: ApplicationLearning Goal: 17-4Level of Learning 2: Understanding of concepts and principlesNickels - Chapter 17 #322Topic: The Fundamental Accounting Equation323. (p. 466) Scott Drilling Contractors recently issued a corporate bond on which it expects to pay interest for the next twenty years. Scott would record this as a __________ on its balance sheet. A. declining balance assetB. retained earningC.long-term liabilityD. long-term expenseAACSB: Reflective ThinkingBlooms: ComprehensionLearning Goal: 17-4Level of Learning 2: Understanding of concepts and principlesNickels - Chapter 17 #323Topic: Liabilities and Owners Equity Accounts324. (p. 465) Blast-off Airlines is a recent start-up commuter airline that flies between eight regional cities on the east coast. Although it has attracted numerous investors who see value in the company's service, it does not pay dividends. Last year, the firm claimed profits of $4,800,000, which will be used to purchase an additional commuter plane. The Balance Sheet accounts that will show this affect are: A.Retained earnings and fixed asset accountsB. Long-term liabilities and fixed asset accountsC. Retained earnings and accounts receivable accountsD. Accounts payable and accounts receivable accountsAACSB: Reflective ThinkingBlooms: ApplicationLearning Goal: 17-4Level of Learning 2: Understanding of concepts and principlesNickels - Chapter 17 #324Topic: Liabilities and Owners Equity Accounts325.