Chapter 1, Problem 4ATC

ATC 1-5 Writing Assignment Elements of financial statements defined

Sam and his sister Blair both attend the state university. As a reward for their successful completion of the past year (Sam had a 3.2 GPA in business, and Blair had a 3.7 GPA in art), their father gave each of them 100 shares of The Walt Disney Company stock. They have just received their first annual report. Blair does not understand what the information means and has asked Sam to explain it to her. Sam is currently taking an accounting course, and she knows he will understand the financial statements.

Required

Assume you are Sam. Write Blair a memo explaining the following financial statement items to her. In your explanation, describe each of the two financial statements and explain the financial information each contains. Also, define each of the elements listed for each financial statement and explain what it means.

Balance Sheets

Assets

Liabilities

Stockholder’s equity

Income Statements

Revenue

Expense

Net Income