会计专业英语章节练习题及答案46

Chapter1DiscussionquestionsHowdoesthejobofabookkeeperdifferfromthatofanaccountant?Bookkeepingisamechanicalprocessthatrecordstheroutineeconomicactivitiesofabusiness.Accountingincludesbookkeepingbutgoesbeyonditinscope.Whatkindofinformationcanbedefinedasrelevantinformation?Relevantaccountinginformationiscapableofmakingadifferenceinthedecisionsmadebyusers.Accountinginformationiscapableofmakingadifferenceindecisionsifithaspredictivevalue,confirmatoryvalue,orboth.Inotherwords,itmustbeusefulinhelpingusersassessthefutureperformanceofthefirmaswellasprovidefeedbackaboutpriordecisions.WhatshouldberequiredtodoaccordingtoAccountingPeriodAssumption?Inthemodernworld,nobusinesscanaffordtoremainsecretivebecausevariouspartiessuchascreditors,employees,taxationauthorities,investors,publicandgovernment,areinterestedtoknowabouttheaffairsofthebusiness.Affairsofthebusinesscanbestudiedmainlybyconsultingfinalaccountsandthebalancesheetoftheparticularbusiness.Finalaccountsandthebalancesheetareendproductsofbookkeeping.Becauseoftheimportanceofthesestatements,itbecamenecessaryfortheaccountantstodevelopsomeassumptions,principlesandconventionswhichmayberegardedasfundamentalsofaccounting.Suchfundamentalshavingwideacceptancegivereliabilityandcreditabilitytothefinancialstatementspreparedbytheaccountants.Anassumptionisastatementthatispresumedtobetruewithoutconcreteevidencetosupportit.Inbusinessworld,perhapsthemostcommonuseofassumptionsisintheaccountingfunction,whichusesassumptionstofacilitatefinancialmeasurement,forecastingandreporting.Thus,accountingassumptionsmaybedefinedas:basicpostulatesorassumptionswhichserveasthebasisofactualrecording.Indevelopinggenerallyacceptedaccountingprinciples(GAAP),certainbasicassumptionsaremade.Theseassumptionsprovideafoundationfortheaccountingprocess.Fourmainassumptionsarebusinessentityassumption,goingconcernassumption,monetaryunitassumption,andaccountingperiodassumption.Howdoaccountantsusetheconceptofmateriality?Materialityprinciplerelatestotheextenttowhichinformationcanbeomitted,misstatedorgroupedwithotherinformationwithoutmisleadingthefinancialinformationuserswhentheyaremakingtheireconomicdecisions.Thusthepricespaidforinsignificantitems,suchasforeachpieceofstationary,maynotbeshownseparatelyinthefinancialreportsbecausetheyareinsignificant,orimmaterial,intheoverallcontextofthedecisionbeingmadebytheuser.Itisimportant,however,whenassessingmateriality,fortheaccountanttobeawareoftheparticulardecisionbeingmadebytheuser.Thesameinformationmaybematerialforonedecisionandimmaterialforanother.Thus,considerablejudgmentisneededbytheaccountantinordertoassesswhichinformationismaterialandwhichisimmaterialfortheparticulardecisionathand.Discusstheprincipleofaccountingequation.Accountingelementsarebasicclassificationofaccountingpractices.Theyareessentialunitstopresentthefinancialpositionandoperationresultsofanentity.Wewereintroducedtothebalancedsheet.Therelationshipbetweenassetsandtheclaimsagainsttheassetscanbesummarizedinthefollowingequation:Assets=Liability+Owner’sEquityAbusinesstransactionisanexchangeofgoodsorservicesthataffectsthisequation.Itisessentialtounderstandtheeffectsoftransactionontheaccountingequationinordertounderstandtheaccountingfunction.Accordingtotheincomestatement,welearnedtherelationshipbetweenrevenueandexpenses:NetIncome(NetLoss)=Revenues-ExpensesNextnetincomeornetlosswillbeclosedtoowner’sequity.Andwecanhavethefollowingpresentationofaccountingequation.Assets=Liability+[Owner’sEquity+(Revenues-Expenses)]Howdoesthedebitandcreditruleapplytodouble-entryaccounting?AssetsLiabilityEquityRevenuesExpensesIncreasesDebitsCreditsCreditsCreditsDebitsDecreaseCreditsDebitsDebitsDebitsCreditsNormalbalanceDebitsCreditsCreditsCreditsDebitsExercisesTheprimaryobjectiveoffinancialreportingis:topresentinformationinanethicalmannertoprovideinformationtothefederalgovernmenttoprovideinformationusefulforinvestmentandlendingdecisionstoprovideinformationusefultomanagersinmakingdailydecisionsAnswer:C2.Anexampleofanassetis:A.AbankloanB.Worker’swageC.AcomputerD.ProfitAnswer:C3.Youownalawnservicebusiness.Youpay$500forgasolineandstoreitinaholdingtank.Whatisthegasoline?A.AnexpenseB.AliabilityC.AnassetD.Owner’sequityAnswer:C4.Ifassetsincrease$80,000duringtheperiodandowners’equitydecreases$16,000duringtheperiod,liabilitiesmusthave?A.Increased$64,000B.Increased$96,000C.Decreased$64,000D.Decreased$96,000Answer:D5.Theideathatabusinessbeaccountedforseparatelyandindependentlyfromitsownerorownersisknownas?A.ObjectivityprincipleB.BusinessentityprincipleC.Going-concernprincipleD.RevenuerecognitionprincipleAnswer:B6.ThefollowingselectedtransactionswerecompletedbyCastellDeliveryServiceduringNovember:(1) Receivedcashfromownerasadditionalinvestment,$20,000.(2) Paidadvertisingexpense,$520.(3) Purchasedsuppliesofgasandoilforcash$780.(4) Receivedcashfromcashcustomers,$1,500(5) Chargedcustomersfordeliveryservicesonaccount,$2,100.(6) Paidcreditorsonaccount,$470.(7) PaidrentforNovember,$1,000(8) Receivedcashfromcustomersonaccount,$1,810.(9) Paidcashtoownerforpersonaluse,$900.(10)Determinedbytakinganinventorythat$650ofsuppliesofgasandoilhadbeenusedduringthemonth.Indicatetheeffectofeachtransactionontheaccountingequationbylistingthenumberidentifyingthetransactions,(1)through(10),inaverticalcolumn,andinsertingattherightofeachnumbertheappropriateletterfromthefollowinglist:a) Increaseinoneasset,decreaseinanotherasset.b) Increaseinanasset,increaseinaliability.c) Increaseinanasset,increaseincapital.d) Decreaseinanasset,decreaseinaliability.e) Decreaseinanasset,decreaseincapitalAnswer:a:(3)(8)b:c:(1)(4)(5)d:(6)e:(2)(7)(9)(10)

Chapter2DiscussionquestionsListanddescribethestepsintheaccountingcycle.Accountingcyclecanbedividedintothefollowingsteps：Journalizetransactions.Analyzingtransactionandenteralltransactionsinthejournal,thuscreatingachronologicalrecordofevents；Posttoledgeraccounts.Postdebitsandcreditsfromthejournaltotheproperledgeraccounts,thuscreatingarecordclassifiedbyaccounts；Prepareatrialbalance.Provetheequalityofdebitsandcreditsintheledger；Makeend-of-periodadjustments.Draftadjustingentriesinthegeneraljournal,andpostto1edgeraccounts；Prepareanadjustedtrialbalance.Proveagaintheequalityofdebitsandcreditsintheledger.Weshouldpayattentiontothatthesearetheamountsusedinthepreparationoffinancialstatements；Preparefinancialstatementsandappropriatedisclosures.Anincomestatementshowstheresultsofoperationfortheperiod.Astatementofowner’sequityshowschangesinowner’sequityduringtheperiod.Abalancesheetshowsthefinancialpositionofthebusinessattheendoftheperiod；Journalizeandposttheclosingentries.Theclosingentriescleartherevenue,expense,anddrawingaccounts,makingthemreadyforrecordingtheeventsofthenextaccountingperiod.Theseentriesalsobringthebalanceintheowner’scapitalaccountup-to-date；Prepareanafter-closingtrialbalance.Thisstepensuresthatthe1edgerremainsinbalanceafterpostingoftheclosingentries.Whatareajournalanditsrelationshiptotheledger?Inawesternaccountingsystem,theinformationabouteachbusinesstransactionisinitiallyrecordedinanaccountingrecordcalledaJournal.Afterward,thedataistransferredorpostedtotheledger,thebookofsubsequentorsecondaryentry.Thevarioustransactionsareevidencedbysalestickets,purchaseinvoices,checkstubs,andsoon.Sincethejournalistheaccountingrecordinwhichtransactionsarefirstrecorded,itissometimescalledthebookoforiginalentry.Itisalsocalledthedaybookbecausethejournalisachronological(day-by-day)recordofallbusinesstransactions.Explaintheprocessofjournalizing.Example2-1.Specifythetypesofadjustmentsthatneedtobemadeattheendofeachaccountingperiod.Adjustingentriescanbedividedintodeferralsandaccruals.Eachadjustmentaffectsboththebalancesheetandincomestatement.Theadjustmentscanbefurtherdividedintofivecategories:prepaidexpenses,depreciation,unearnedrevenues,accruedexpenses,andaccruedrevenues.Whatpurposedoestheadjustedtrialbalanceserve?Afteradjustedentriesaremade,wecangoaheadwithadjustedtrialbalance.Bypreparingandusingadjustedtrialbalance,wecanprovethattheledgerisstillinbalanceafterallthenecessaryadjustingentrieshavebeenjournalizedandposted.Onceanadjustedtrialbalancehasbeenprepared,theprocessofrecordingchangesinfinancialpositionforthisaccountingperiodiscomplete.Whatarethemajorstepsinpreparingclosingentries?(1) Closethevariousrevenueaccountsbytransferringtheirbalancesintotheincomesummaryaccount.(2) Closethevariousexpenseaccountsbytransferringtheirbalancesintotheincomesummaryaccount.(3) Closetheincomesummaryaccountbytransferringitsbalanceintotheowner’scapitalaccount.(4) Closetheaccountofowner’swithdrawalsbytransferringitsbalanceintotheowner’scapitalaccount.ExercisesWhydoaccountantsrecordtransactionsinthejournal?ToensurethatalltransactionsarepostedtotheledgerToensurethattotaldebitsequaltotalcreditsTohaveachronologicalrecordofalltransactionsTohelppreparethefinancialstatementsAnswer:CPostingistheprocessoftransferringinformationfromthe:JournaltothetrialbalanceLedgertothetrialbalanceLedgertothefinancialstatementsJournaltotheledgerAnswer:DWhichoftheseaccountshasanormaldebitbalance?RentexpenseWithdrawalsServicerevenueBothAandBhaveanormaldebitbalanceAnswer:DAnadjustingentrycouldcontainallofthefollowingexcerpt:AdebittounearnedrevenueAcredittocashAdebittointerestreceivableAcredittosalarypayableAnswer:BFailuretorecordanadjustingentryforanaccruedexpense,willresultinthefollowing:LiabilitiesNetIncomeNoeffectUnderstateUnderstateOverstateOverstateUnderstateUnderstateNoeffectAnswer:B

Chapter3DiscussionquestionsWhytradingsecuritiesareusuallyregardedascurrentassets?Tradingsecuritiesconsistofsurpluscashinvestedingovernmentorcorporatedebtobligations,orinshares(equitysecurities)thatcanbereadilysold(marketable)andateheldasasourceofmatureorbesoldwithinthenextyearoroperatingperiodtobeclassifiedascurrentassets,althoughitisprobablethattheywill.Tradingsecuritiesateconsideredcurrentassetsiftheyaremarketable,andmanagement’sintentofholdingthemforalongerperiod,theyshouldbeclassifiedaslong-terminvestmentinsecurities.Inmakingtheannualadjustingentryforuncollectibleaccounts,acompanymayutilizeabalancesheetapproachtomaketheestimateoritmayuseanincomestatementapproach.Explainthesetwoalternativeapproaches.Abalancesheetisafinancialstatementlistingacompany’sassets,liabilitiesandowners’orshareholders’equityonaspecificdate.Abalancesheetapproachtoanauditisalimitedauditthatonlyexaminestheaccountsonacompany'sbalancesheet.Theincomestatement,alsoknownastheprofitandloss,orP&L,statement,runsdowntherevenuesandexpensesofacompanyoveraspecifiedtimeperiod,showingthecompany'snetprofitfortheperiod.Allpubliclytradedcompaniesarerequiredtoproduceanincomestatementatleastannually,butmanyfirmschoosetoproducequarterlyincomestatementsaswell.Whichinventoryvaluationmethodshouldacompanyuseifitwantstominimizeincometaxes?Whenpricesarerising,LIFOresultsinlowerreportedincomeandthusmayprovidearelatedtaxbenefit.Whenpricesaredecreasing,FIFOresultsinlowerreportedincomeandthusmayprovidearelatedtaxbenefit.Whataretheadvantagesbyusingtheretailmethodtoestimateinventories?Theretailinventorymethodiswidelyusedbydepartmentstoresandothertypesofretailbusinessthatarelikelytokeepperiodicinventoryrecords.Suchfirmstypicallymarkeachitemofmerchandisewiththeretailpriceandrecordpurchasedatbothcostandretailprice.Afirmcanestimateitsendinginventoryatretailpricemerelybysubtractingthenetsalesforthemonthfromtheretailpriceofgoodsavailableforsale.Theendinginventoryatretailisthenconvertedtomostonthebasisoftheratioofcosttosellingretailpriceforthecurrentperiod.Oneofthemajoradvantagesoftheretailmethodisthatitprovidesinventoryfiguresforuseinpreparinginterimstatements.ExercisesIngeneralterms,financialassetsappearinthebalancesheetat:A．FacevalueB．CurrentvalueC．MarketvalueD．EstimatedfuturesalesvalueAnswer:B2.OnJanuary1,CLCompanyhada$3100creditbalanceintheAllowanceforDoubtfulAccounts.Duringtheyear,salestotaled$78000and&6900ofaccountsreceivablewerewrittenoffasuncollectible.ADecember31agingofaccountsreceivableindicatedtheamountprobablyuncollectibletobe$5300.(Norecoveriesofaccountspreviouslywrittenoffweremadeduringtheyear.)CLCompany’sfinancialstatementsforthecurrentyearshouldinclude:A．Uncollectibleaccountsexpenseof$9100B．Uncollectibleaccountsexpenseof$5300C．AllowanceforDoubtfulAccountswithacreditbalanceof$1500D．AllowanceforDoubtfulAccountswithacreditbalanceof$8400Answer:A3.WhydocompaniesprefertheLIFOinventorymethodduringaperiodofrisingprices?A．HigherreportedincomeB．LowerincometaxesC．LowerreportedincomeD．HigherendinginventoryAnswer:B4.Whichofthefollowingstatementsistrue?A.Separationofdutiesisnotanimportantelementofinternalcontrolforinventories.B.Theperpetualsystemisusedprimarilyforlow-unit-costinventory.C.Anannualphysicalcountofinventoryisneededregardlessofthetypeofinventorysystemused.D.Alltheabovearetrue.Answer:C5.Ifafirmpurchases$100000ofbondsofZCompanyat101plusaccruedinterestof$2000andpaysbroker’scommissionsof$50,theamountdebitedtoInvestmentinZCompanyBondsmaybe:A.$100000B.$101050C.$103000D.noneoftheaboveAnswer:C 6.ABCCompanyneedstodeterminetheapproximateamountofinventoryattheendofeachmonthwithouttakingaphysicalinventoryofmerchandise.Fromthefollowinginformation,youarerequiredtodeterminethecostoftheJuly31inventorybyusingtheretailinventorymethod.CostRetailsellingpriceBeginninginventory,July1$264,800$400,000NetpurchaseduringJuly170,400240,000GoodsavailableforsaleduringJuly435,300640,000NetsaleduringJuly275,200Answer:ThecostoftheJuly31inventoryisdeterminedasfollows:EndinginventoryofJuly31atretailsellingprice=$640,000-$375,000=$364,800Ratioofcosttosellingretailprice=$435,200/$640,000=68%EndinginventoryofJuly31atcost=$364,000×68%=$248,064

Chapter4:DiscussionQuestions:1.Differences:(1)Currentliabilitiesareamountspayablewithinoneyearfromthedateofthebalancesheetorwithinthenormaloperatingcycle,wherethisislongerthanayear.(2)Non-currentliabilitiesarethoseobligationsnotdueforsettlementwithinoneyear.2.Commons:(1)itmustinvolveafuturesacrificeofcash,goods,ofservices;(2)itmustbeanobligationoftheenterprise;(3)thetransactionoreventgivingrisetotheenterprise’sobligationmustalreadyhaveoccurred;(4)itisamountpayablewithinoneyearfromthedateofthebalancesheetorwithinthenormaloperatingcycle.3.Omitted4.TheFinancialAccountingStandardsBoard(FASB)providestheseguidelinestoaccountforcontingentlosses(orexpenses)andtheirrelatedliabilities:(1)Recordanactualliabilityifitisprobablethattheloss(orexpenses)willoccurandtheamountcanbereasonablyestimated.(2)Reportthecontingencyinafinancialstatementnoteifitisreasonablypossiblethataloss(orexpense)willoccur.Lawsuitsinprogressareaprimeexample.(3)Thereisnoneedtoreportacontingentlossthatisremote-unlikelytooccur.Insteadwaituntilanactualtransactionclearsupthesituation.Contingentliabilitiesmaybereportedinashortpresentation,aftertotalliabilitiesonthebalancesheet,butwithnoamountsgiven.5.Abondisafixedobligationtopaythatisissuedbyacorporationorgovernmententitytoinvestors.Bondsareusedtoraisecashforoperationalorinfrastructureprojects.Bondsusuallyincludeaperiodiccouponpayment,andarepaidoffasofaspecificmaturitydate.Bondsareanumberofadditionalfeaturesthatabondmayhave,suchasbeingconvertibleintothestockoftheissuer,orcallablepriortoitsmaturitydate.6.OmittedExercise:1-7：BACDBAB8.答案：January5：Fixedassets—officefurniture15,000固定资产Accountpayable15,000应付账款July1：Accountpayable—Ycompany15,000应付账款Cr：Notespayable15,000应付票据Interest:$15,000×5%=$750July31/August31/Sept.30:Interestexpense750Interestpayable750October1:Notespayable15,000Interestpayable2,250Bankdeposit17,2509March1stCash5,000Unearnedrevenue5,000March31stUnearnedrevenue3,000Servicerevenue3,00010.（a）Cash2125000PremiumonBondsPayable125000BondPayable2000000(b)InterestExpense140000Cash140000(c)PremiumonBondsPayable12500InterestExpense1250011.ThejournalentrytorecordissuedbondDr.Cash482,000DiscountonBondsPayable18,000Cr.BondsPayable500,000Thejournalentrytopaymentofbondinterestandamortizationofbonddiscountonthefirstinterestdate(July1,200X)Dr.BondInterestExpense31,800DiscountonBondsPayable1,800($18,000/10)Cr.Cash30,000($500,000x12%x6/12)Thejournalentrytothematuritydatecompanyredemptionthebonds.Dr.BondsPayable500,000BondInterestPayable30,000Cr.Cash530,000

Chapter5DiscussionquestionsWhyarelargecorporationoftensaidtobepubliclyowned?Ownershipofacorporationisevidencedbytransferablesharesofstock.Thesaleofcorporateownershipinunitsofoneormoresharespermitsbothlargeandsmallinvestorstoparticipateinownershipofthebusinessforthisreason.Largecorporationsareoftensaidtobepubliclyowned.2.Explainthemeaningofthetermdoubletaxationasitappliestocorporateprofits.Theincomeofacorporationissubjecttoincometaxeswhichmustbepaidbythecorporation.Ifacorporationdistributesitsearningstostockholders,thestockholdersmustpaypersonalincometaxesontheamountstheyreceive.Thispracticeoffirsttaxingcorporateincometothecorporationandthentaxingdistributionsoftheincometothestockholdersissometimescalleddoubletaxation.3.Distinguishbetweenpaid-incapitalandretainedearningsofcorporation.Paid-incapitalisanequityaccountrepresentingtheamountofassetsinvestedinthecompanybyitsshareholders.Retainedearningsisaspecialtypeofreserveaccountwhichreflectstheamountofprofits(aftertax)earnedbythecompanyandretainedinthebusiness.Andretainedearningsrepresentsacompany'saccumulatednetincomethathasnotbeendistributedtostockholdersasdividends.4.Whatisthepurposeofastocksplit?Acorporationmaysplititsstockbyincreasingthenumberofoutstandingsharesofcommonstockandreducingtheparorstatedvaluepershareinproportion.Aswithalargestockdividend,thepurposeofastocksplitistoreducesubstantiallythemarketpriceofthecommonstock,withtheintentofmakingthestockmoreaffordabletoinvestors.5.Whatdoesbookvaluepershareofcommonstockrepresent?Doesitrepresenttheamountcommonstockholderswouldreceiveintheeventofliquidationofthecorporation?Bookvaluepershareisequaltothenetassetsrepresentedbyoneshareofstock.Thetermnetassetsmeantotalassetsminustotalliabilities;inotherwords,netassetsareequaltototalstockholders’equity.6.Whatistreasurystock?Whydocorporationspurchasetheirownshares?Istreasurystockanasset?Howshoulditbereportedinthebalancesheet?Whentreasurystockispurchased,thecorporationiseliminatingpartofitsstockholders’equitybyapaymenttooneormorestockholders.Thepurchaseoftreasurystockshouldberegardedasareductionofstockholders’equity,notastheacquisitionofanasset.Forthisreason,theTreasuryStockaccountshouldappearinthebalancesheetasadeductioninthestockholders’equitysection.7.Howisbookvaluepershareofcommonstockcomputedwhenacompanyhasbothpreferredandcommonstockoutstanding?Ifacompanyhasbothpreferredandcommonstockoutstanding,thecomputationofbookvaluepershareofcommonstockrequirestwosteps.First,theredemptionvalueorcallpriceoftheentirepreferredstockissueandanydividendsinarrearsaredeductedfromtotalstockholders’equity.Second,theremainingamountofstockholders’equityisdividedbythenumberofcommonsharesoutstandingtodeterminebookvaluepercommonshare.ExercisesWhenabusinessisorganizedasacorporation,whichofthefollowingistrue?Stockholdersareliableforthedebtsofthebusinessonlyinproportiontotheirpercentageownershipofcapitalstock.Stockholdersdonothavetopaypersonalincometaxesondividendsreceived,becausethecorporationissubjecttoincometaxesonitsearnings.Fluctuationsinthemarketvalueofoutstandingsharesofcapitalstockdonotaffecttheamountofstockholders’equityshowninthebalancesheet.Eachstockholderhastherighttoblindthecorporationtocontractsandtomakeothermanagerialdecision.Answer:CGPCompanywasorganizedwithauthorizationtoissue100,000sharesof$1parvaluecommonstock.FortythousandshareswereissuedtoTomMorgan,thecompany’sfounder,atapriceof$5pershare.Noothershareshaveyetbeenissued.Whichofthefollowingstatementsistrue?Morganowns40%ofthestockholders’equityofthecorporation.Thecorporationshouldrecognizea$160,000gainontheissuanceoftheseshares.Ifthebalancesheetincludesretainedearningsof$50,000,totalpaid-incapitalamountsto$250,000.Inthebalancesheet,theAdditionalPaid-inCapitalwillhavea$160,000balance,regardlessoftheprofitsearnedorlossesincurredsincethecorporationwasorganized.Answer:DWhichofthefollowingisnotacharacteristicofthecommonstockofalarge,publiclyownedcorporation?Thesharesmaybetransferredfromoneinvestortoanotherwithoutdisruptingthecontinuityofbusinessoperations.Votingrightsintheelectionoftheboardofdirection.Acumulativerighttoreceivedividends.Afterissuance,themarketvalueofthestockisunrelatedtoitsparvalue.Answer:CThefollowinginformationistakenfromthebalancesheetandrelateddisclosuresofBlueOysterCorporation:Totalpaid-incapital$5,400,000Outstandingshares:Commonstock,$5parvalue100,000shares6%preferredstock,$100parvalue,callableat$108pershare10,000sharesPreferreddividendsinarrears2yearsTotalstockholders’equity$4,700,000Whichofthefollowingstatementsistrue?Thepreferreddividendsinarrearsamountto$120,000andshouldappearasaliabilityinthecorporatebalancesheet.Thecompanyhaspaidnodividendonitscommonstockduringthepasttwoyears.Thestockholders’equitysectionofthebalancesheetshouldindicateadeficitof$700,000.Thebookvaluepershareofcommonstockis$35.Answer:BOnDecember10,2016,TotemCorporationreacquired2,000sharesofitsown$5parstockatapriceof$60pershare.In2017,500ofthetreasurysharesarereissuedatapriceof$70pershare.Whichofthefollowingstatementiscorrect?ThetreasurystockpurchasedisrecordedatcostandisshowninTotem’sDecember31,2016,balancesheetasanasset.ThetwotreasurystocktransactionsresultinanoverallreductioninTotem’sstockholders’equityof$85,000.Totemrecognizesagainof$10pershareonthereissuanceofthe500treasurysharesin2017.Totem’sstockholders’equitywasincreasedby$110,000whenthentreasurystockwasacquired.Answer:B

Chapter6DiscussionquestionsWhatdoesrevenuemeaninthecontextofaccounting?Revenueistheamountofmoneythatacompanyactuallyreceivesduringaspecificperiod,includingdiscountsanddeductionsforreturnedmerchandise.Itisthe"topline"or"grossincome"figurefromwhichcostsaresubtractedtodeterminenetincome.Whatdoesexpensemeaninthecontextofaccounting?Anexpenseisthereductioninvalueofanassetasitisusedtogeneraterevenue.Iftheunderlyingassetistobeusedoveralongperiodoftime,theexpensetakestheformofdepreciation,andischargedratablyovertheusefullifeoftheasset.Iftheexpenseisforanimmediatelyconsumeditem,suchasasalary,thenitisusuallychargedtoexpenseasincurred.Ifanexpenditureisforaminoramountthatmaynotbeconsumedforalongperiodoftime,itisusuallychargedtoexpenseatonce,toeliminatetheaccountingstafftimethatwouldotherwiseberequiredtotrackitasanasset.Whatismatchingprinciple?Afundamentalconceptofaccrualbasisaccountingthatoffsetsrevenueaga