Week 7 Project

You must complete answer all questions – be a very careful reader

5 Questions: 5 essays;

Q1

Will the income statement include the profits or losses from the purchase and sale of treasury stock? Yes or No? Include an example of a journal entry to purchase treasury stock.

Q2

Explain the effect on Cash Received and Interest Expense Recognized when

A. Bonds are issued at Face Value

B. Bonds are issued at a discount

C. Bonds are issued at a premium

(Hint: your answer for each independent situation [A, B, and C] should include the phrases “Credit to Bonds Payable” and “Contract Interest Rate”)

Q3

The text describes two different methods for accounting for investments in common stock. Describe each of the methods and the situations in which each method would be employed. Why are the investments accounted for differently?

Q4

Explain the relationship between the balance sheet, the income statement, and the statement of cash flows using the indirect method. That is, how do you prepare a statement of cash flows using the indirect method? Don’t use numbers but explain the mathematical calculations and line items.

Q5

What do we learn by using the vertical analysis process for a company when analyzing the income statement and the balance sheet? That is, how would you explain to someone what you learn about a company by completing a vertical analysis of their SEC 10K income statement and balance sheet?