Chapter 3, Problem 1DIE

4. The life of a business is divided into specific time periods, usually a year, to measure results of operations for each such time period and to portray financial conditions at the end of each period. What has been the effect of this practice on accounting? What is its relation to the accrual basis of accounting? What influence has it had on accounting entries and practices?

1. How often should income statements be prepared? 2. Which is more important a. Statement of financial position (balance sheet) or b. Statement of results of operation (income statement)? 3. Explain the following: a. Balance sheet for a specific date (for example, December 31, 20X1) b. Income statement is for a period of time (for example: For the Year Ended December 31, 20X1) 4. What are the advantages of multistep income statement over a single-step income statement? 5. Relate accounts in the income statement with those in the balance sheet. Discuss how the income statement accounts affect balance sheet accounts.

The monetary unit assumption of accounting means that A.only items that can be expressed in money are recorded in accounting records. B.every economic entity can be separately identified and recorded. C.financial statements include all important information needed by investors. D.a balance sheet must be prepared at the end of each year.

Identify the accounting principle or assumption that best reflects each situation. Situation 1. Accounting information is based on actual cost. 2. Transactions and events are shown in monetary units. 3. The life of a company can be divided into time periods, and useful reports can be prepared for th periods. 4. Each business is accounted for separately from its owner or owners. 5. A company records the expenses incurred to generate the revenues reported. 6. A company reports details behind financial statements that would impact users' decisions.

a. What do the accounting policies say in the annual report (footnotes) regarding the cost of revenue? What are the drivers to the cost of revenue and the trends? b. Are there any trends in sales and marketing expenses or research and development? Are these amounts reasonable for the type of business? c. Compare general and administrative expenses to similar companies. Are they reasonable? d. What is the ratio of net interest income (expense) to income from operations? Is this a safe ratio for the company? Why or why not?

That companies can present useful information in shorter time periods such as years, quarters, or months is known as which of the following? A. separate entity concept B. monetary measurement concept C. going concern assumption D. time period assumption

The step-by-step process to record business activities and events to keep financial records up to date is ________. A. day-to-day cycle B. accounting cycle C. general ledger D. journal

This problem is designed to enable you to apply the knowledge you have acquired in the preceding chapters. In accounting, the ultimate test is being able to handle data in real life situations. This problem will give you valuable experience. CHART OF ACCOUNTS You are to record transactions in a two-column general journal. Assume that the fiscal period is one month. You will then be able to complete all of the steps in the accounting cycle. When you are analyzing the transactions, think them through by visualizing the T accounts or by writing them down on scratch paper. For unfamiliar types of transactions, specific instructions for recording them are included. However, reason them out for yourself as well. Check off each transaction as it is recorded. Required 1. Journalize the transactions. (Start on page 1 of the general journal if using Excel or Working Papers.) 2. Post the transactions to the ledger accounts. (Skip this step if using CLGL.) 3. Prepare a trial balance. (If using a work sheet, use the first two columns.) 4. Data for the adjustments are as follows: a. Insurance expired during the month, 1,000. b. Depreciation of pool structure for the month, 715. c. Depreciation of fan system for the month, 260. d. Depreciation of sailboats for the month, 900. e. Wages accrued at June 30, 810. Your instructor may want you to use a work sheet for these adjustments. 5. Journalize adjusting entries. 6. Post adjusting entries to the ledger accounts. (Skip this step if using CLGL.) 7. Prepare an adjusted trial balance 8. Prepare the income statement 9. Prepare the statement of owners equity. 10. Prepare the balance sheet. 11. Journalize closing entries. 12. Post closing entries to the ledger accounts. (Skip this step if using CLGL.) 13. Prepare a post-dosing trial balance. Check Figure Trial balance total, 281,858; net income, 7,143; post-dosing trial balance total, 263,341

Which of the following breaks down company financial information into specific time spans, and can cover a month, quarter, half-year, or full year? A. accounting period B. yearly period C. monthly period D. fiscal period