Using Financial Accounting Information
Using Financial Accounting Information
10th Edition
ISBN: 9781337276337
Author: Porter, Gary A.
Publisher: Cengage Learning,
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Chapter 1, Problem 1.10AAMCP
To determine

Introduction:Income statement is a detailed statement which records all the revenues and expenditures to arrive at the net income of the company. The balance sheet is the statement of financial position which records all the assets and liabilities of a firm.

To describe:The assumptions violated by M and handling of each event. Also, prepare the corrected balance sheet and income statement.

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Madeline is the sole proprietor of Maddie's Fine Art and wants to know whether she will have enough funds in her bank account to pay her bills over the next three months. She has $1,000 in her bank account after recently selling a painting, owes $500 to a vendor for paint and canvas, and expects an additional $500 in invoices in the next three months for other supplies. As her accountant, the best feedback you can give Madeline is: Assuming no additional sales over the next three months, Maddie's Fine Art has a current ratio of 1.0 and therefore has the necessary liquidity to pay its vendors. Madeline will need to sell at least one more painting for $500 to cover the invoices due within the next three months as Maddie's Fine art has a current ratio of 0.5. Madeline should consult with a bankruptcy attorney because Maddie's Fine Art has a current ratio of 0.75 and may not be able to pay any or all of its invoices within the next three months. O In addition to paying her current…
In early December, Alice and Bob decided to open the Sample Cafe with $15,000 of their own money and $20,000 borrowed from a friend. They have spent $12,000 on equipment and furniture, and purchased $3,000 worth of inventory. Having put down a $2,500 deposit for a location on Main St., they will pay the first month's rent when they open their doors on January 1st. HINT: Consider the change in each asset account, given the transactions above. Total Assets has been included as a second hint. Create a balance sheet showing the financial position of the Sample Cafe as of December 31st Use the data above. Remember, Assets must equal Total Liabilities + Equity

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Using Financial Accounting Information

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