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ACCT 212 Midterm Week 4
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ACCT 212 Midterm Week 4
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ACCT 212 Midterm Week 4, ACCT 212 Midterm Week 4
Question 1
pts
(TCO 1) The Accounting Equation is used to develop the organization's financial reports. (1)
Describe what liabilities value would be if Assets are $50,000 and Owners' Equity is $25,000 by
showing the Accounting Equation (10 points) and (2) provide an example of two liability
accounts. (10 points)
Your Answer:
1. The accounting equation is Assets=Liabilities + Owners'Equity
$50, 000=L+$25,000
In order to find the liability value you will subtract the owners equity value from the Assets
value.
Liabilities=$50,000-$25,000
Liabilities=$25,000
2. Examples of liability accounts are Accounts payable such as when a company purchases
inventory or supplies on credit
Accrued Expenses such as utility payments are another example.
Textbook pages 11-12. Liabilities = $50,000 - $25,000 = $25,000. Notes Payable and Bonds
are examples.
Question 2
pts
(TCO 1) The financial statements present a company to the public in financial terms. (1) Which
financial statement should be prepared first and why (10 points), and (2) explain what
information this financial statement provides. (10 points)
Your Answer:
1. The income statement of operations is the first to be prepared as itcompares the revenues and
expenses for the specified period. The income statement reports revenues and gains as well
as expenses and losses. We find the net income by subtracting the expenses from revenue. Net
income is the most important item in a financial statement.
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