FADM Ch3 Assignemnt
Financial Accounting for decision making
Chapter 3 Homework
3-2. Are the following balance sheet items (A) assets, (L) liabilities, or (E) stockholders’ equity?
A:
Assests
Liabilities
Stockholder’s equity:
c: Investments in stock d: Cash e: Land f: Inventory h: Marketable securities i: Patents m: Taxes payable p: Prepaid expenses q: Goodwill r: Tools s: Buildings a: Cash dividends payable b: Mortgage notes payable g: Unearned rent n: Account payable. o: Organizational costs j: Capital stock k: Retained earnings. l: Accounts receivable
3-4: Usually current assets are listed in specific order, starting with cash. What is the objective of this order of listing?
A: The objective of this order of listing is the ability with which they can be converted to cash.
3-11: A bond carries a stated rate of interest of 6% and par of $1,000. It matures in 20 years. It is sold at 83 (83% of $1,000, or $830).
a. Under normal conditions, why would the bond sell at less than par?
b. How would the discount be disclosed on the statements?
A: a) Bonds are sold at less par value if the stated rate of interest is less than the market value or rate. Moreover, it may also sell low if there is a great deal of risk involved.
b) The discount is shown as reduction of liability, if sold at less than the par. The bonds payable arises and decreases bonds payable on the balance sheet.
Bonds payable $1000
Less bond discount $ 170 $830
3-18: What is treasury stock? Why is it deducted from stockholders’ equity?
Treasury stock represents the company’s stock that has been sold, repurchased and does not retire. Since treasury stock lowers the stock outstanding, it is subtracted from Stockholders’ Equity so that the stockholders’ net equity is for outstanding shares only. Treasury stock is, in essence, a reduction in paid-in capital.
3-36: Which depreciation method will result in the most depreciation over the life of an asset?
Irrespective of the
Chapter 3 Homework
3-2. Are the following balance sheet items (A) assets, (L) liabilities, or (E) stockholders’ equity?
A:
Assests
Liabilities
Stockholder’s equity:
c: Investments in stock d: Cash e: Land f: Inventory h: Marketable securities i: Patents m: Taxes payable p: Prepaid expenses q: Goodwill r: Tools s: Buildings a: Cash dividends payable b: Mortgage notes payable g: Unearned rent n: Account payable. o: Organizational costs j: Capital stock k: Retained earnings. l: Accounts receivable
3-4: Usually current assets are listed in specific order, starting with cash. What is the objective of this order of listing?
A: The objective of this order of listing is the ability with which they can be converted to cash.
3-11: A bond carries a stated rate of interest of 6% and par of $1,000. It matures in 20 years. It is sold at 83 (83% of $1,000, or $830).
a. Under normal conditions, why would the bond sell at less than par?
b. How would the discount be disclosed on the statements?
A: a) Bonds are sold at less par value if the stated rate of interest is less than the market value or rate. Moreover, it may also sell low if there is a great deal of risk involved.
b) The discount is shown as reduction of liability, if sold at less than the par. The bonds payable arises and decreases bonds payable on the balance sheet.
Bonds payable $1000
Less bond discount $ 170 $830
3-18: What is treasury stock? Why is it deducted from stockholders’ equity?
Treasury stock represents the company’s stock that has been sold, repurchased and does not retire. Since treasury stock lowers the stock outstanding, it is subtracted from Stockholders’ Equity so that the stockholders’ net equity is for outstanding shares only. Treasury stock is, in essence, a reduction in paid-in capital.
3-36: Which depreciation method will result in the most depreciation over the life of an asset?
Irrespective of the