Select Financial Statement Accounts

Question 1

What three classes of financial instruments must be presented in the balance sheet as liabilities?

Answer 1

1.Mandatorily redeemable financial instruments
2.Obligations to repurchase the issuer’s equity shares by transferring assets
3.Certain obligations to issue a variable number of shares

They may not be presented between the liabilities section and the equity section.

Question 2

Treasury stock transactions?

Answer 2

A corporation does not recognize gain or loss on treasury stock transactions. Additional paid-in capital and retained earnings are affected by treasury stock transactions.

Question 3

The debt-to-equity ratio

Answer 3

Its the relationship between total liabilities and total equity. Thus, here we divide total liabilities by total equity.

Question 4

What type of bonds mature in installments?

Answer 4

serial bonds mature in installments.

Question 5

Cost of goods sold

Answer 5

Cost of goods sold = Sales × (1 − Gross margin ratio)

Cost of goods sold = Beginning inventory + Purchases − Ending inventory

Question 6

What happens at grant date?

Answer 6

At the grant date, one must compute a value for the shares used as compensation, which will be earned and taken as an expense over the service period.