Chapter 1, Problem 1.5AP

(a)

To determine

Accounting Equation: Accounting equation refers to the equation which is based on the double entry system of accounting. This implies that if there is a change in the assets of the entity, there will be a corresponding effect on the liabilities or stockholder’s equity of the entity also. The accounting equation is as follows:

$\text{Assets}=\text{Liabilities}+\text{Stockholder's}\text{Equity}$

Income Statement: Income Statement is prepared by all the companies by enumerating all the expenses and revenues in the statement to calculate the resulting difference of Net Profit or Net Loss.

Retained Earnings Statement: Retained Earnings Statement is the statement showing the balance of retained earnings left at the end of the period after including the net profit for the period and distributing the dividend to the stockholders.

Classified Balance Sheet: A classified Balance Sheet represents the financial information under different heads of classification in order to make it easy for the users of financial statements to understand the financial position of the company.

Classification Heads

• Current Assets
• Long-Term Investments
• Property Plant and Equipment
• Intangible Assets
• Current Liabilities
• Long-Term Liabilities
• Stockholder’s Equity

Memo: A memo is a note informing about a particular issue to another person sent within the same organization.

(a) Missing amounts of Company D, L, M and R.

(b)

To determine

Retained earnings of L Company

(c)

To determine

To Determine: Sequence of preparing financial statements in a memorandum.