Accounting equation : Accounting equation is an accounting tool expressed in the form of equation, by creating a relationship between the resources or assets of a company, and claims on the resources by the creditors and the owners. Accounting equation is expressed as shown below: Assets = Liabilities + Shareholders Equity Business transaction: Business transaction is a record of any economic activity, resulting in the change in the value of the assets, the liabilities, and the Shareholder’s equities, of a business. Business transaction is also referred to as financial transaction. To Indicate: The effect of each given transaction of Company PSM on the accounting equation.
Accounting equation : Accounting equation is an accounting tool expressed in the form of equation, by creating a relationship between the resources or assets of a company, and claims on the resources by the creditors and the owners. Accounting equation is expressed as shown below: Assets = Liabilities + Shareholders Equity Business transaction: Business transaction is a record of any economic activity, resulting in the change in the value of the assets, the liabilities, and the Shareholder’s equities, of a business. Business transaction is also referred to as financial transaction. To Indicate: The effect of each given transaction of Company PSM on the accounting equation.
Solution Summary: The author explains the accounting equation, which creates a relationship between the resources of the company, and creditors and the owners.
Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.
Chapter 1, Problem 1COP
1.
To determine
Accounting equation: Accounting equation is an accounting tool expressed in the form of equation, by creating a relationship between the resources or assets of a company, and claims on the resources by the creditors and the owners. Accounting equation is expressed as shown below:
Assets = Liabilities + Shareholders Equity
Business transaction: Business transaction is a record of any economic activity, resulting in the change in the value of the assets, the liabilities, and the Shareholder’s equities, of a business. Business transaction is also referred to as financial transaction.
To Indicate: The effect of each given transaction of Company PSM on the accounting equation.
2.
To determine
To Prepare: The income statement for Company PSM for the month ended June 30, 2019.
3.
To determine
To Prepare: A statement of owner’s equity for Company PSM for the month ended June 30, 2019.
4.
To determine
To Prepare: A balance sheet for Company PSM for the month ended June 30, 2019.
Which of the following is NOT considered a fixed asset? A. Machinery B. Accounts Receivable C. Building D. Land
Stark Corp is in the process of acquiring another business. In light of the acquisition, shareholders are currently re-evaluating the appropriateness of the firm's capital structure (the types of and relative levels of debt and equity). The two proposals being contemplated are detailed below:
Proposal 1
Proposal 2
Estimated earnings before interest and taxes (EBIT)
$ 450,000
$ 450,000
Long term debt
1,000,000
2,000,000
Market value of equity
1,000,000
500,000
Interest rate on long term debt
10%
10%
Tax rate
25%
25%
Required
Calculate the estimated return on equity (ROE) under the two proposals. (ROE = net income after taxes / market value of equity; net income after taxes = (EBIT - interest on long-term debt) × (1 - tax rate)).