Chapter 1 Check for Understanding Flashcards
All of the following are revune items found on an income statement EXCEPT
a- sales of fixed assets
b- installment sales
c- interest income
D- REINVESTED DIVIDENDS
WHY: income statement includes as revunue items - product sales, sales of fixed assets, installment sales (the current portion earned for that period), & interest and dividend income recieved from investments. Reinvested dividends are NOT on an income statement
The footnotes to a company’s financial statements give details on all of the following EXCEPT the
a- corporation’s significant accounting policies
B- BACKGROUND OF EACH MEMBER OF THE BOARD OF DIRECTORS
c- estimated pension obligations of the corporation
d-estimated legal obligations of the corporation
WHY: footnotes detail the company’s accounting policies. ex- when revenue is “booked”, how inventories are valued. And gives additional supporting details that adds “color” to the numbers on an income statement & balance sheet. Might show: “capitialized leases” as a simple number in liabilites, but footnotes will give the year-by-year upcoming lease payment obligations.
Which of the following are provided to the shareholders in the annual reports of registered corporations?
I - income statement
II - balance sheet
III - statement of changes in stockholders’ equity
IV - sources and uses of cash statement
ALL OF THE ABOVE
WHY: Corporate annual reports include: income statement, balance sheet statement of changes to retained earnings (shows earnings added for the year & dividends paid from retained earnings that year), & statement of sources and uses of cash (shows cash received that year from income earned; stock & bond earnings; & disposals of equpment ; & cash paid that yr for equipment purchases. pay down of debt, divivendsetc.)
