Exercise E 1-2, page 34.
The following are users of financial statements:
E_ Customers I Securities and Exchange Commission
I _ Internal Revenue Service I Store Manager
I Labor Unions E_ Suppliers
I_ Marketing Manager_I_ Vice-president of finance
I_ Production Supervisor
(B) Instructions: Identify each of the following questions as being more likely asked by an internal user or an external user. _I_ Can we afford to give our employees a pay raise?
_I_ Did the company earn a satisfactory income?
_I_ Do we need to borrow in the near future?
_I_ How does the company’s profitability compare to other companies? _E_What does it cost to manufacture each unit produced?
_E Which product should be emphasized?
_I_ Will the company be able to pay its short-term debts?
Exercise E 1-6, page
Instructions: List the numbers of the transactions and describe the effect of each transaction on assets, liabilities, and stockholders ‘equity. For example, the first answer is (1) Increase in assets and increase in stockholders’ equity. Selected transactions for Evergreen Lawn Care Company are listed below. 1. Sold common stock for cash to start business. Increase in assets and stockholders’ equity. 2. Paid monthly rent.
3. Purchased equipment on account. Increase on assets and decrease on liabilities. 4. Billed customers for services performed.
5. Paid dividends. Decrease on assets and decrease on stockholders ‘equity. 6. Received cash from customers billed in (4). Increase on assets and decrease on liabilities. 7. Incurred advertising expense on account. Increase on assets and decrease on liabilities. 8. Purchased additional equipment for cash. Decrease on assets and 9. Received cash from customers when service performed. Increase on assets and increase on stockholders’ equity.
Exercise E 1-15, page 37.
Instructions: Presented below is financial information related to the 2008...