Chapter 1, Problem 1.5BP

(a)

To determine

Basic Accounting Equation

The mathematical equation that shows the relationship among the different categories of a balance sheet, such as assets, liabilities, and stockholders’ equity of a company is referred to as the “basic accounting equation.” All transactions affect the accounting equation that is displayed below. The accounting equation should always remain in balance at the time of recording a business transaction:

$\boxed{\text{Asset = Liabilities + Stockholders' equity}}$

The missing amounts in the basic accounting equation.

(b)

To determine

Retained Earnings:

The retained earnings statement: This is a financial statement that shows the amount of the net income retained by a company at a particular point of time for reinvestment and pays its debts and obligations. It shows the amount of retained earnings that is not paid as dividends to the shareholders.

To prepare: The retained earnings statements of L Company.

(c)

To determine

To prepare: The memorandum to explain the sequence for preparing financial statements and the interrelationship of the retained earnings statement.