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1. |
What shapes and limits an accountant’s measurement of wealth? |
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2. |
Are financial statements primarily intended for internal or external users? |
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3. |
What are the common classifications within a classified balance sheet? |
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4. |
What are current assets? |
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5. |
What are non-current assets? |
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6. |
What are current liabilities? |
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7. |
What are non-current liabilities? |
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8. |
What is the purpose and content of the notes to the financial statements? |
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9. |
What is the purpose and content of the auditor’s report? |
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10. |
What is the purpose and content of the report that describes management’s responsibility for financial statements? |
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To answer the following, refer to the Big Dog Carworks Corp. financial statements for the year ended December 31, 2018 and other information included in this chapter. |
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11. |
Identify the economic resources of Big Dog Carworks Corp. shown in its financial statements. |
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12. |
What comprise the financial statements of BDCC? |
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13. |
Why does BDCC prepare financial statements? |
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14. |
From the balance sheet at December 31, 2018 extract the appropriate amounts to complete the following accounting equation: |
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ASSETS = LIABILITIES + SHAREHOLDERS’ EQUITY |
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15. |
If ASSETS – LIABILITIES = NET ASSETS, how much is net assets at December 31, 2018? Is net assets synonymous with shareholders’ equity? |
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16. |
What types of assets are reported by Big Dog Carworks Corp.? What types of liabilities? |
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17. |
Accounting for financial transactions makes it possible to measure the progress of the entity. How do generally accepted accounting principles positively affect this measurement process? |
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18. |
From reading the financial statements including the notes to the financial statements, can you tell whether BDCC has made any cost-benefit judgements about certain disclosures? How do these take materiality into account? |
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19. |
Does Big Dog Carworks Corp. use the cash basis of accounting or the accrual basis? How can you tell? |
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20. |
What kind of assumptions is made by Big Dog Carworks Corp. about asset capitalization? Over what periods of time are assets being amortized? |
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21. |
Should the salary of BDCC’s president be recorded as an asset since his salary brings benefits to the company in future accounting periods? |
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22. |
What adjustments might management make to the financial information when preparing the annual financial statements? Consider the following categories: |
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a. Current asset accounts b. Non-current asset accounts c. Current liability accounts d. Non-current liability accounts. Indicate several examples in each category. Use the BDCC balance sheet and notes 3 and 5 for ideas. |
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23. |
What sequence of steps is likely followed in preparing BDCC’s annual financial statements? |
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24. |
What are the advantages of using a classified balance sheet? Why are current accounts shown before non-current ones on BDCC’s balance sheet? |
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25. |
How does Big Dog Carworks Corp. make it easier to compare information from one time period to another? |
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26. |
Who is the auditor of BDCC? What does the auditor’s report tell you about BDCC’s financial statements? Does it raise any concerns? |
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27. |
What does the auditor’s report indicate about the application of generally accepted accounting principles in BDCC’s financial statements? |
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28. |
What is BDCC management’s responsibility with respect to the company’s financial statements? Do the financial statements belong to management? the auditor? the board of directors? shareholders? |
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