Kingpin804

What is the fundamental balance sheet equation?

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

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

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

---

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.

Kingpin804

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) $450.

C) −$150.

---

(1,200 − 750 − 600) = −150

Kingpin804

Allowance for bad debts and investment in affiliates are most likely to be shown as what types of accounts?

Allowance for bad debts

Investment in affiliates

A) Contra-asset Asset

B) Contra-asset Liabilities

C) Liabilities Asset

---

Allowance for bad debts is a contra-asset account to accounts receivable. Investments in affiliates are considered assets.

Kingpin804

Accumulated depreciation and treasury stock are most likely to be shown as what types of accounts?

Accumulated depreciation

Treasury stock

A) Contra-asset Equity

B) Contra-asset Contra-equity

C) Liability Equity

---

Accumulated depreciation is a contra-asset account to the asset account property, plant & equipment. Treasury stock is a contra-equity account to common stock or additional paid-in capital.