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Chapter 1: Q5RQ. (page 32)
What is the role of the Financial Accounting Standards Board (FASB)?
The primary role of FASB is to monitor the creation and governance of accounting standards.
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Consider the following accounting terms and definitions, and match each term to the definition:
1. Accounting equation
2. Asset
3. Balance sheet
4. Expense
5. Income statement
6. Liability
7. Net income
8. Net loss
9. Revenue
10. Statement of cash flows
11. Statement of retained
earnings
a. An economic resource that is expected to be of benefit
in the future
b. Debts that are owed to creditors
c. Excess of total expenses over total revenues
d. Excess of total revenues over total expenses
e. The basic tool of accounting, stated as
Assets = Liabilities + Equity
f. Decreases in equity that occur in the course of selling
goods or services
g. Increases in equity that occur in the course of selling
goods or services
h. Reports on a business’s cash receipts and cash payments
during a period
i. Reports on an entity’s assets, liabilities, and stockholders’
equity as of a specific date
j. Reports on an entity’s revenues, expenses, and net
income or loss for the period
k. Reports how the company’s retained earnings balance
changed from the beginning to the end of the period
What is the accounting equation? Briefly explain each of the three parts.
What are the steps used when analyzing a business transaction?
Presented here are the accounts of Pembroke Bookkeeping Company for the year ended December 31, 2018: Land \( 10,000 Common Stock \) 29,000 Notes Payable 31,000 Accounts Payable 7,000 Property Tax Expense 3,100 Accounts Receivable 1,200 Dividends 28,000 Advertising Expense 12,000 Rent Expense 7,000 Building 147,400 Salaries Expense 64,000 Cash 2,800 Salaries Payable 800 Equipment 15,000 Service Revenue 192,000 Insurance Expense 1,700 Office Supplies 12,000 Interest Expense 6,600 Retained Earnings, Dec. 31, 2017 51,000 Requirements 1. Prepare Pembroke Bookkeeping Company’s income statement. 2. Prepare the statement of retained earnings. 3. Prepare the balance sheet
Annette Pachelo recently opened her own law office on March 1, which she operates as a corporation. The name of the new entity is Annette Pachelo, Attorney. Pachelo experienced the following events during the organizing phase of the new business and its first month of operation, March 2018. Some of the events were personal and did not affect the law practice. Others were business transactions and should be accounted for by the business. Mar. 1 Sold personal investment in Amazon stock, which she had owned for several years, receiving \(35,000 cash. 2 Deposited the \)35,000 cash from the sale of the Amazon stock in her personal bank account. 3 Deposited \(73,000 cash in a new business bank account titled Annette Pachelo, Attorney. The business issued common stock to Pachelo. 5 Paid \)700 cash for ink cartridges for the printer. 7 Purchased computer for the law office, agreeing to pay the account, \(5,000, within three months. 9 Received \)2,800 cash from customers for services rendered. 15 Received bill from The Lawyer for magazine subscription, \(400. (Use Miscellaneous Expense account.) 23 Finished court hearings on behalf of a client and submitted a bill for legal services, \)10,000, on account. 28 Paid bill from The Lawyer. 30 Paid utilities, \(1,200. 31 Received \)3,300 cash from clients billed on March 23. 31 Cash dividends of $5,500 were paid to stockholders. Requirements 2. Prepare the following financial statements: c. Balance sheet. d. Statement of cash flows
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