1. | Question : | (TCO A) Listed below are several information, characteristics, and accounting principles and assumptions. Match the letter of each with the appropriate phrase that states its application. | | | Student Answer: | | : Historical cost principle | | 1 : Earnings process completed and realized or realizable | | | | : Going concern principle | | 2 : Cost of providing financial information versus the benefits derived from its use | | | | : Matching principle | | 3 : Accruals and deferrals in adjusting and closing process | | | | : Monetary unit | | 4 : Business enterprise assumed to have a long life | | | | : Revenue recognition principle | | 5 : Stable dollar assumption | | | | : Full
Assume a 30% tax rate and that 80,000 shares of common stock were outstanding during the year. Show EPS computations as well. | | | Student Answer: | | | | | | Comments: | No Answer | | | 4. | Question : | (TCO D) The following balance sheet was prepared by the bookkeeper for Purple Company as of December 31, 2011 Purple Company Balance Sheet as of December 31, 2011 Cash | $ 80,000 | Accounts payable | $ 75,000 | Accounts receivable (net) | 52,200 | Long-term liabilities | 100,000 | Inventories | 57,000 | Stockholders' equity | 218,500 | Investments | 76,300 | | | Equipment (net) | 96,000 | | | Patents | | | | | $393,500 | | $393,500 |
The following additional information is provided:
(1) Cash includes the cash surrender value of a life insurance policy $12,000, and a bank overdraft of $2,500 has been deducted.
(2) The net accounts receivable balance includes:
(a) accounts receivable debit balances $60,000;
(b) accounts receivable 0;
(c) allowance for doubtful accounts $3,800.
(3) Inventories do not include goods costing $3,000 shipped out on consignment. Receivables of