Question $2($a$)$

$(5$ marks$)$

Listed below are nine technical accounting terms introduced to you during the course:

a$.$ Assets

b$.$ Balance Sheet

c$.$ Cost principle

d$.$ Accounting equation

e$.$ Liabilities

f$.$ Owner's equity

g$.$ Inflation

h$.$ Going concern assumption

i$.$ Liquidity

Each of the following statements may $($or may not$)$ describe one of these technical terms. In the space provided below each statement, indicate the accounting term described, or answer "None" if the statement does not correctly describe any of the terms. Do not use a term more than once.

A$.$ Having the financial ability to pay debts as they become due.

B$.$ An assumption that a business will operate in the foreseeable future.

c$.$ Economic resources owned by businesses that are expected to benefit future operations.

D$.$ The debts or obligations of a business organization

E$.$ Assets $=$ Liabilities $+$ Owners' Equity

F$.$ The principle which states that assets are valued in the balance sheet at their historical cost.

G$.$ A residual amount equal to assets minus liabilities

Question

$2$

$($b$).$

$(5$ marks$)$

Spencer Software company has assets of $$1,020,000$ and liabilities of $$552,000$ Prepare the owner's equity section of the company's balance sheet based on following assumptions:

The business is organized as a sole proprietorship, owned by Johanna Spencer.

The business is organized as a partnership, owned by Johanna Spencer and Mikki Yato. Spencer's equity amounts to $$288,000.$

The business is a corporation with $27$ stockholders, each of whom originally invested $$12,000$ in exchange for shares of the company's capital stock. The remainder of the stockholders' equity has resulted from profitable operation of the business.