Reading 30: Financial Reporting Mechanics - LOS c ～ Q1-2 black

mayanfang1

Q1. The following amounts were drawn from the records of JME Company: total assets = $1,200; total liabilities = $750; contributed capital = $600. Based on this information alone, retained earnings must be equal to:

A)   −$150.

B)   $150.

C)   $450.

Q2. What is the fundamental balance sheet equation?

A)     Assets = Stockholders' Equity - Liabilities (A = E - L).

B)     Liabilities = Assets + Stockholders' Equity (L = A + E).

C)     Assets = Liabilities + Stockholders' Equity (A = L + E).

mayanfang1

答案和详解如下：

Q1. The following amounts were drawn from the records of JME Company: total assets = $1,200; total liabilities = $750; contributed capital = $600. Based on this information alone, retained earnings must be equal to:

A)   −$150.

B)   $150.

C)   $450.

Correct answer is A)

(1,200 − 750 − 600) = −150

Q2. What is the fundamental balance sheet equation?

A)     Assets = Stockholders' Equity - Liabilities (A = E - L).

B)     Liabilities = Assets + Stockholders' Equity (L = A + E).

C)     Assets = Liabilities + Stockholders' Equity (A = L + E).

Correct answer is C)         

The fundamental balance sheet equation is Assets = Liabilities + Stockholders’ Equity (A = L + E). This is the fundamental accounting relationship that sets the basis for recording all financial transactions.

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