1. Which financial statement would you utilize to determine whether a company wi

Question

1. Which financial statement would you utilize to determine whether a company will be able to pay liabilities which are due in 30 days?
A. Income statement
B. Balance sheet
C. Statement of retained earnings
D. Statement of cash flows

2. Which of the following is an objective of the external audit of a company's financial statements?
A. To provide a forecast of the company's future earnings.
B. To assure no fraud has been committed by the company's management.
C. To provide credibility and assurance that the financial statement information conforms with generally accepted accounting principles in all material respects.
D. To detect all accounting errors made by the accounting system and employees.

3. Huron has provided the following year-end balances:

Explanation / Answer

Hi,

Please find the answers as follows:

1) Balance Sheet.

2) To provide credibility and assurance that the financial statement information conforms with generally accepted accounting principles in all material respects.

3) Current Assets = 25000 (Cash) + 9300 (Accounts Receivable) + 37000 (Inventory) + 3600 (Prepaid Expenses) =74900

4) American Institute of Certified Public Accountants

5) Depreciation Expense = (Cost - Salvage Value)/Life of the Asset = (40000 + 2000 - 6000)/9 = 4000

6) Depletion Expense = Cost of the Oil Well*Units Extracted/Total Units that can be extracted = 50000*30000/100000 = 15000

7)

Part A:

Compensation Expense Dr. 35000

Liability for Income Taxes Witheld - Employees Cr. 7350

FICA Taxes Payable (35000*7.65%) Cr. 2678

Union Dues Payable Cr. 175

Cash Cr. 24797

Part B:

Compensation Expense Dr. 2678

FICA Taxes Payable Cr. 2678

Thanks.

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