Homework 1

Matthew McNea_HW1

I. Exercise 1-1 Types of Business Activities, p. 33 

1) F

2) I

3) I

4) F

5) O

6) O

7) I

II. Exercise 1-12 Accounting Principles and Assumptions, p. 36 

1) Going Concern

2) Cost Principle

3) Economic Entity

4) Monetary Unit

5) Time Period

III. Exercise 1-15 Users of Accounting Information and the Financial Statements, p. 37

1) BS

2) BS

3) BS

4) RE

5) SCF

6) BS

IV. Problem 1-5 Income Statement, Statement of Retained Earnings, and Balance Sheet, p. 39 

1) See attached Income Statement

2) See attached Statement of Retained Earnings

3) See attached Balance Sheet

4) If I had $1,000 to invest in Maple Park and I only had the above statements for information I would invest. Maple Park is operating with a profit and has quite a few Assets on hand. To make a better informed decision I would like to see more information from previous years to determine the stability of this company.

V. Decision Case 1-7 Responsibility for Financial Statements and the Role of the Auditor, p. 50 

1) The company’s accountants are responsible for the preparation of the financial statements that are included in a company’s annual report.

2) External Auditors, or Public Accounting Firms, perform audits on a company’s financial statements.

3) It is important that the auditors responsible for performing audits on financial statements be independent from those who prepared them because it reduces the possibility of unethical behavior. If the auditors were not independent they could be more easily persuaded, or coerced, into providing false reports. It is important that investors and others have confidence that information provided is complete, free from error, neutral and relevant.