Chapter 1: The Financial Statements - Homework

Classify the following items as an asset​ (A), a liability​ (L), or​ stockholders' equity​ (S) for Target Corporation​, a large​ retailer:

a. Land (A) b. Accrues expenses payable (L) c. Supplies (A) d. Equipment (A) e. Notes payable (L) f. Long-term debt (L) g. Retained earnings (S) h. Prepaid expenses (A) i. Accounts payable (L) j. Accounts receivable (A) k. Merchandise inventory (A) l. Common stock (S)

What forms of organization will enable the owners of Hudson Signs, Inc., to limit their risk of loss to the amounts they have invested in the​ business?

Corporation, limited partners of a Limited-liability partnership and Limited-liability company

What form of organization will give creditors the maximum protection in the event that Hudson Signs​, Inc., fails and cannot pay its​ debts?

Partnership

What form of business organization will give Alley Hudson, the president of Hudson Signs, Inc., the most freedom to manage the business as she​ wishes?

Proprietorship

Suppose you are analyzing the financial statements of Corley​, Inc. Identify each item with its appropriate financial​ statement, using the following​ abbreviations: Income statement​ (I), Statement of retained earnings​ (R), Balance sheet​ (B), and Statement of cash flows​ (C). Three items appear on two financial​ statements, and one item shows up on three statements.

a. Salary expense (I) b. Dividends (C&R) c. Accounts payable (B) d. Net income (C,I,R) e. Common Stock (B) f. Inventory (B) g. Interest Revenue (I) h. Cash (B&C) i. Retained earnings (B&R) j. Long-term debt (B) k. Increase or decrease in cash (C) l. Net cash provided by operating activities (C) m. Sales revenue (I) n. Net cash used for financing activities (C)

If ___ fails and cannot pay its liabilities, creditors ___ force the owners to pay the business's debts from the owners' personal assets. Therefore, the ___ an investor can expect to lose on an investment in these businesses is the amount invested.

any of these; cannot; most

If a ___ fails and cannot pay its liabilities, creditors ___ to pay the business's debts from their personal assets. This type of organization affords more protection for creditors than a ___

partnership; can force the partners; proprietorship because there are two or more owners to share this liability

A proprietorship offers the most freedom because

there is a single owner, so the owner has absolute control over the business