28 Jan c. Statement of cash flows

Homework 1

Debra Lee

Financial Statement Analysis – 1

Everest University Online

Instructor: Deborah Wilson

Problems 1-1 and 1-3 on page 24

Q 1-1

Discuss the role of each of the following in the formulation of accounting principles:a.American Institute of Certified Public Accountants

b.Financial Accounting Standards Board

c.Securities and Exchange Commission

Q 1-3

The president of your firm, Lesky and Lesky, has little background in accounting. Today, he walked into your office and said, “A year ago we bought a piece of land for $100,000. This year, inflation has driven prices up by 6%, and an appraiser just told us we could easily resell the land for $115,000. Yet our balance sheet still shows it at $100,000. It should be valued at $115,000. That’s what it’s worth. Or, at a minimum, at $106,000.” Respond to this statement with specific reference to the accounting principles applicable in this situation.

Problem 2-8 on page 79

1. Indicate if the account is a permanent (P) or temporary (T) account.

2. Indicate the normal balance in terms of debit (Dr.) or credit (Cr.).

Cash(P)(Dr.)

Accounts Receivable(P)(Dr.)

Equipment(P)(Dr.)

Accounts Payable(P) (Cr.)

Common Stock(P)(Cr.)

Sales(T)(Cr.)

Purchases(T)(Dr.)

Rent Expense(T)(Dr.)

Utility Expense(T)(Dr.)

Selling Expense(T)(Dr.)

Problem 2-10, page 80

P 2-10 A company prepares financial statements in order to summarize financial information. Below are a list of financial statements and a list of descriptions.

Financial Statements

a. Balance sheet

b. Income statement

c. Statement of cash flows

d. Statement of stockholders’ equity

Descriptions

1. Details the sources and uses of cash during a specified period of time.

2. Summary of revenues and expenses and gains and losses for a specific period of time.

3. Shows the financial condition of an accounting entity as of a specific date.

4. Presents reconciliation of the beginning and ending balances of the stockholders’ equity accounts.