1.21 Statement of Financial Position (Balance Sheet)

Question 1

Name 2 sources of Equity Financing or Capital

Answer 1

• Stockholders’ Equity
  
  • Paid-In Capital

Question 2

Can the Statement of Financial position help you in assessing profitability?

Answer 2

No. Ddetermining profitability and assessing past performance can not be done via the balance sheet. It is a point in time and not a period of time.

Question 3

Name three categories for Long-term or noncurrent assets

Answer 3

• PPE - Property, Plant, Equipment
  ○ Tangible physical assets
  
  • Intangible Assets
    ○ Patent
  • Certain Investments

Question 4

When can unearned revenue be earned?

Answer 4

• Unearned Revenue
  ○ We owe the delivery or performance
  ○ Received money in advance

Question 5

What value is used for Paid-In captial?

Answer 5

Par Value

Question 6

What is included capital structure?

Answer 6

The capital structure consists of the amounts contributed by creditors (liabilities) and investors (stockholders’ equity).

Assets = Liabilities + Stockholders’ Equity

Question 7

What is the Fund Theory?

Answer 7

1. The basic equation can be derived to form the proprietary theory:
   Assets – Liabilities = Stockholders’ Equity
   1. According to this theory, equity in an enterprise is what remains after the economic obligations of the enterprise are deducted from its economic resources.

Question 8

Is this a long-term or short-term liability?
“Deferred revenue”

Answer 8

Long Term

Question 9

How is an intraperiod Tax Allocation displayed on the Income Statement?

Answer 9

Intraperiod tax allocation is an accounting method that allocates a company’s total income tax expense for a particular period to different parts of the income statement. The objective of intraperiod tax allocation is to associate tax effects with the specific items that directly affect them.
□ Continuing Operations
® Income Tax Expense
□ Discontinued Operations
® Income Tax Expense
□ Extraordinary items
® Income Tax Expense
□ Other Comprehensive Income
® Income Tax Expense

Question 10

Is Treasury Stock on the balance sheet a contra account or a primary account in the owners’ equity section?

Answer 10

Contra Account
Common Stock
Treasury Stock (contra)

Question 11

What value does PP&E, net represent on the balance sheet?

Answer 11

Historical Purchase Value - Depreciation and does not reflect current market value.

Question 12

Name 4 limitation to the balance sheet usefulness.

*Time
*Value

Answer 12

*Single Point in time
*Long-term assets are recorded at historical value - depreciation
*Represents estimates and management judgment
* Items that can not be estimated and recorded on the books but can have a financial impact