Week 3 Apply: Summative Assessment: Analyzing Financial Statements Questions Fully Solved.

Tamika Charles owns and operates her own business. She has recently hired a business advisor to help her both expand her business and improve her profitability. Tamika's business advisor has strongly urged her to set up a good accounting system. Until now, Tamika has only used a part-time bookkeeper to help her pay her bills. What key business benefit is Tamika most likely to get by setting up an improved accounting system? - Answer Better information for making improved decisions Which statement below describes managerial accounting reports but NOT financial accounting reports? - Answer They are used primarily by internal users. In the United States, the FASB establishes financial accounting rules. Why is it important to have one generally accepted set of financial accounting rules? - Answer Financial statement users can more easily compare financial reports from different companies. Diana Thompson has operated her own small business for several years. Her business is doing well, and she wants to expand. In order to do so, she will need a bank loan. In her preliminary meeting with the bank loan officer, she was asked the amount of her "owners' equity" in the business. Diana doesn't know this amount because she has never prepared any financial statements for her business. In order to address this "owners' equity" issue raised by the bank, what evidence should Diana prepare? - Answer Total assets minus liabilities Tangela Company has now missed three loan payments in a row. As you can imagine, Tangela's bank is quite upset. Legally, Tangela's bank can demand full repayment of the loan immediately. Tangela doesn't have the cash to repay the loan, so an immediate repayment demand would force Tangela into bankruptcy. Tangela and the bank are now in negotiations. The bank wants some type of guarantee that it will be able to collect its money if Tangela does slide into bankruptcy. Tangela offers to write a new agreement in which the bank will acquire legal title to all of Tangela's current assets in case of bankruptcy. The bank wants to know what Tangela's current asset balance is. Tangela Company's financial records include these accounts at the end of the year. Land Accounts Receivable Buildings Inventory Loans Payable Accounts Payable Retained Earnings Capital Stock (also called Paid-in Capital) Cash Which set of items composes - Answer Cash, accounts receivable, and inventory Tina Catchings has just started her study of accounting. She is finding that the hardest part of understanding accounting is learning what all of the terms mean. For example, Tina is interested