3,4,5,6

Review Questions 1. Why do total assets equal the sum of total liabilities and equity? Explain. 2. What are the time dimensions of the income state- ment, the balance sheet, and the statement of cash flows? Hint: Are they videos or still pictures? Explain. 3. Define depreciation expense as it appears on an in- come statement. How does depreciation affect cash flow? 4. What are retained earnings? Why are they important? 5. Explain how net income and common stock dividends paid, as shown on the current income statement, affect the balance sheet item retained earnings. 6. What is accumulated depreciation? 7. What are the three major sections of the statement of cash flows? 8. How do financial managers compute the amount of taxes owed given the taxable income of a corporation? 9. Identify whether the following items belong on the in- come statement or the balance sheet. a. Interest Expense b. Preferred Stock Dividends Paid c. Plant and Equipment d. Sales e. Notes Payable 1. Common Stock 85 Chapter 4 Review of Accounting