Question

1) Using check marks, identify the accounts appear. eck marks, identify the financial statement(s) on which each of the following items/ Item Income Statement Shareholders' Equity Asset Balance Sheet Liability Shareholder Equity Sales Revenue Unearned Revenue Notes Payable Retained Earnings Accounts Receivable Income Tax Expense Pre-paid Rent Land Cash Dividends 2) Circle the one correct answer for each of the following two statements: At the end of Celebrity Imports' first year of operations, assets are $750,000 and owners' equity is $680,000 a. The business' liabilities are $70,000. b. The owner must have invested $750,000 to start the business. c. The business' liabilities are $1,430,000. d. The business must be operating profitably. ion, contributed capital decreases by S1 b. A company pays back $1 million on a loan it had received earlier from a bank Assets are unchanged, liabilities and stockholders' equity both increased by Assets are unchanged, liabilities increase by $1 million, contributed capital de million. Assets decrease by $1 million, liabilities are unchanged, contributed cani million. Assets decrease by S1 million, liabilities decrease by S4 million, stockh unchanged. tributed capital decreases by SI million, stockholders' equity is

Answer 1

The answers are as follows,

1. Identification of different income statement and balance sheet items.
   1. Sales revenue - income statement,
   2. Unearned revenue - liability,
   3. Notes payable - liability,
   4. Retained earnings - shareholders equity,
   5. Accounts receivable - asset,
   6. Income tax expense - income statement,
   7. Prepaid rent - income statement,
   8. Land - asset,
   9. Cash - asset,
   10. Dividend - income statement,
2. The business liabilities are 70,000. The difference between assets and owners equity are the business liabilities which comes to 70,000. Imagine balance sheet, total on both sides should tally. This might help in solving these type of questions in future of your excercise.
3. As the company is paying back 1 million of loan, there is a cash outflow leading to decrease in cash. On the other hand loan will disappear on the liabilities side as the liability will also exhaust. Therefore the answer will be assets decrease by 1 million, liabilities decrease by 1 million, stockholders equity is unchanged.