1.22 Assets, Liabilities & Stockholders Equity

Question 0

Accounts payable (i) vs receivable (ii) A/L/SE?

Answer 0

(i) Liability
- any money owed to supplier(s)

(ii) Asset
Ex. Selling $100 merchandise w/ promise to pay w/in 16 days.

Question 1

Assets are & recognized when?

Answer 1

Resources expected provide future economic benefit (generate/reduce cash inflows/outflows)

1) Acquired past transaction/exchange
2) Value its future benefit measured reasonably precise

Question 2

Liabilities (2) & recognized when?

Answer 2

1) Claims Assets by creditors (non-owners)
2) Obligation make future payment
i. cash ii. goods iii. services

A) Obligations based benefits/services received currently/past
B) Amount & Timing payment reasonably certain

Question 3

Stockholders’ Equity

Answer 3

Residual claim assets after settle claims creditors (owners)

Also: net worth, net assets, net book value

Question 4

2 Sources Stockholders’ Equity?

Answer 4

1) Contributed Capital: selling shares
2) Retained earnings: from business operations

Stockholders Equity = Contributed Capital + Retained Earnings

Question 5

Contributed Capital (3)?

Answer 5

(1) Common Stock- par value
(2) Additional paid-in capital- excess over par value
(3) Treasury Stock- stock repurchased by company from investors

Question 6

Retained Earnings accumulation of net income =?

Answer 6

revenues- expenses - dividends

Question 7

Dividends

Answer 7

Distribution RE shareholders
Not EXPENSE: discretionary decision by board to return funds to shh.
Independent of company performance, expense & rates (?) during particular period.

• recorded as reduction in retained earnings on the declaration date: creates a LIABILITY until payment date (in this particular case liability w/ owners).