Which of the following is considered a characteristic of equity?
Answer(s): D
Equity refers to the claims of the owners of a business. Equity investors expose themselves to greater risk than the holders of liability claims because owner's claims are junior to liability instruments. Equity claims against income and assets are last in line; thus, they are residual.
The following information was obtained from the financial statements of Firm A:Current assets = $4,500Current liabilities = $3,000Long-range assets = $150,000Long-term liabilities = $42,000Contributed capital = $31,000Then, the retained earnings of the firm equal ________.
Answer(s): C
Total assets = Total liabilities + Total EquityTotal Equity = Retained earnings + contributed capital.Total assets = $4,500+$150,000 = $154,500.Total liabilities = $42,000+$3,000 = $45,000, hence,Total equity = $154,500-$45,000 = $109,500Retained earnings = $109,500-$31,000 = $78,500
The following financial data on CashCow, Inc. have been taken from its financial statements for 1996:
Items b and d are the investing cash flows. Note that item j is a non-cash event.
Intraperiod income tax allocation arises because
Answer(s): B
To provide a fair presentation of the results of operations, accounting rules require that income tax expense for the period be allocated among income from continuing operations, discontinued operations, extraordinary items, and items charged or credited to shareholders' equity.
Which of the following would not be considered an intangible asset?
Intangibles represent rights, privileges, and benefits of possession. Two common characteristics are high uncertainty regarding future benefits and lack of physical existence. All of the above are examples thatmeet this definition except mineral rights which are not an intangible but a natural resource that has physical properties.
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