Indicate the best answer for each question in the space provided. = 1 b The financial statements of a business entity: a Include the balance sheet, income statement, and income tax return. Provide information about the profitability and financial position of the company. Are the first step in the accounting process. Are prepared for a fee by the Financial Accounting Standards Board. c d 2 a b A balance sheet is designed to show the financial position of an entity: At a single point in time Over a period of time such as a year or quarter. At December 31 of the current year. At January 1 of the coming year. d 3 8 b Accounts payable and notes payable are: Always less than the amount of cash a business owns. Creditors. Written promises to pay a certain amount, plus interest, at a definite future date. Liabilities. c d 4 The balance sheet of Debbie Designs includes the following items: Accounts Receivable Cash Capital Stock Accounts Payable Equipment Supplies Notes Payable Notes Receivable This list includes: & Four assets and three liabilities. b Five assets and three liabilities. c Five assets and two liabilities. d Six assets and two liabilities. 5 An accounting entity may best be described as: An individual. A particular economic unit A publicly owned corporation. d Any corporation, regardless of size. a b Presented below is the balance sheet for Harland Family Dentistry on January 1 of the current year. HARLAND FAMILY DENTISTRY Balance Sheet January 1, 20_ Assets Liabilities & Stockholders' Equity Cash Accounts receivable Land Building Equipment $ 37.125 $ 37,125 $ 16,500 Liabilities: 25,575 Accounts payable 156,750 Total liabilities. 185,625 Owners' equity: 28,875 Capital stock Total liabilities and 5413.325 owners' equity..... = 376,200 Total assets. 413.325 During the first few days of January, the following transactions occurred: Jan 1 3 The business borrowed $49,500 from the bank, giving a note payable due in 90 days. Additional capital stock was issued in exchange for $22,275 cash. Equipment was purchased for $31,350 on credit. The business collected $13,200 of its accounts receivable and paid off $18.975 of its accounts payable. 3 5 Indicate your answer to each of the following questions in the space provided. 1 On January 6, total assets of the business amount to: a $413,325 b $497,475 $478,500 $47 5.20 0. 2 On January 6, owners' equity amounts to: 4 $376,200. $22,275. c $398,475. d $47 5.20 0. On January 6, the liability for accounts payable is a $68,475. $31,350. c$24.750. d S49, 500. On January 6, accounts receivable amount toc # $12,375. $31.350. c $24.750. d $49. 500. 5 On January 6, the amount of cash owned by the business is: a $63,525 $69,300. c 82,500 S10 1,47 5 NAME CHAPTER 2 10-MINUTE QUIZC SECTION Presented below is the balance sheet for Manhattan Family Dentistry on January 1 of the current year. 11 MANHATTAN FAMILY DENTISTRY Balance Sheet January 1, 20__ Assets Liabilities & Stockholders' Equity Cash Accounts receivable Land Building Equipment $ 45,000 $ 45,000 $ 20,000 Liabilities 31.000 Accounts payable 190,000 Total liabilities 225.000 Owners' equity: 35,000 Capital stock Total liabilities and S501.000 owners' equity 456,000 Total assets SSOL.000 During the first few days of January, the following transactions occurred: Jan 2 Equipment was purchased for $38,000 on credit. The business collected S16,000 of its accounts receivable and paid off $23,000 of its accounts payable. The business borrowed $60,000 from the bank, giving a note payable due in 90 days. 2 3 3 Additional capital stock was issued in exchange for $27,000 cash. Complete the following balance sheet for Manhattan Family Dentistry on January 4 of the current year. MANHATTAN FAMILY DENTISTRY Balance Sheet January 4, 20__ Assets Liabilities & Owners' Equity Cash ................ $ Accounts receivable ........ Land Building Equipment ... $ $ Liabilities: Notes payable Accounts payable........ Total liabilities... Owners' equity: Capital stock. Total liabilities and owners' equity Total assets Complete the January 31, 20_, balance sheet of Liberty Legal Services using the following information. (1) Stockholders' equity at January 1, 20_, included capital stock of $120,000. (2) The land and building were purchased by the business for a total price of $180,000 on January 25, 20_, from a company forced out of business. On January 31, an appraiser valued the property at $240,000. (3) Additional capital stock was issued in exchange for $30,000 cash. (4) Retained earnings at January 31, 20_amounted to $29,400. Assets Cash..... LIBERTY LEGAL SERVICES Balance Sheet January 31, 20__ Liabilities & Owners' Equity S Liabilities: 20,000 Notes payable 80,000 Accounts payable... 25,600 Total liabilities. $ 15,000 Owners'equity: Capital Stock............. S Retained earnings.... Total liabilities and owners' equity.... S355.000 Accounts receivable..... Land..................... $ Building Equipment Total assets