Chapter 2, Problem 2.1E

Accounting equation The total assets and total liabilities (in millions) of McDonalds Corporation (MCD) and Star-bucks Corporation (SBUX) follow:

Which of the following are the three basic elements of the balance sheet of a corporation? Group of answer choices A.. Revenues, Expenses and Retained Earnings. B. Assets, Liabilities and Stockholders' Equity. C. Assets, Liabilities and Common Stock. D. Assets, Liabilities and Retained Earnings.

Assume the following relationships for the Brown Corporation:                        Sales / Assets                                           1.5Return on assets (ROA)                            3%Return on equity (ROE)                            5% Calculate the firm’s profit margin and debt-to-assets ratio, assuming the company uses debt and common equity.

Under What headings will you show the following items in the Balance sheetof a company:1) Securities Premium account2) Preliminary Expenses3) Bills Receivable4) Goodwill5) Authorised share Capital

Which financial statement conveys a company’s ability to generate profits in the current period? a. Income statement.b. Statement of cash flows.c. Balance sheet.d. Statement of stockholders’ equity.

To determine the amount of debt a corporation has, the user should examine: O A. Income statement B. Statement of Retained Earnings C. Statement of Cash Flows D. Balance Sheet

For each item below, indicate to which category of elements of financial statements it belongs. a.    Retained earnings. b.    Sales. c.    Additional paid-in capital. d.    Inventory. e.    Depreciation. f.    Loss on sale of equipment. g.    Interest payable. h.    Dividends. i.    Gain on sale of investment. j.    Issuance of common stock.

Sheridan Company provides you with the following condensed balance sheet information: Current assets Equity investments Equipment (net) Intangibles Total assets Current and long-term liabilities Stockholders' equity Common stock ($5 par) Paid-in capital in excess of par Retained earnings Total liabilities and stockholders' equity (1) (2) (3) (4) Liabilities and Stockholders' Equity (5) Assets Total assets For each of the following transactions, indicate the dollar impact (if any) on the following five items: (1) total assets, (2) common stock, (3) paid-in capital in excess of par, (4) retained earnings, and (5) stockholders' equity. (Each situation is independent.) a. Sheridan declares and pays a $0.50 per share cash dividend. Common stock Paid-in capital in excess of par Retained earnings $20,200 Total stockholders' equity 120,300 154,200 decrease no effect no effect decrease decrease < $41,300 < 59,400 248,300 55,000 $404,000 $109,300 294,700 $404,000 $ LA tA LA LA

Using the accounting equation, determine the company’s stockholders’ equity. Compare this amount to the amount of stockholders’ equity reported on the company’s balance sheet. What is the difference between the information reported on the income statement and the information reported on the balance sheet?