ACCTG 2600 Lecture Notes - Lecture 7: Financial Accounting Standards Board, Critical Role, International Accounting Standards Board
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27 Feb 2017
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7:29 am: business entities, business entity: organization operated to earn a profit, sole proprietorships: organization with a single owner, partnerships: business owned by two or more individuals. Often used by accounting firms and law firms: corporations: entity organized under the laws of a particular state. Ownership is established by acquiring shares of stock: the accounting equation, assets = liabilities + owners" equity. Left side: valuable economic resources that will provide future benefit to the company. Right side: indicates who provided, or has a claim to, the assets. Liabilities & stockholders" equity: liabilities: creditors claims to the assets. Stock: created when a company issues stock to an investor. Retained earnings: earnings accumulated or retained by the company: the nature of business activity. All business activities can be categorized as operating, investing, or financing activities. Financing activities: raising money from owners" contributions as well as obtaining loans from outsiders.
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Spencer Software Company has assets of $850,000 and liabilities of $460,000. |
a. | Prepare the owners' equity section of the company's balance sheet under each of the following independent assumptions: | |
1. | The business is organized as a sole proprietorship, owned by Johanna Spencer. | |
2. | The business is organized as a partnership, owned by Johanna Spencer and Mikki Yato. Spencerâs equity amounts to $240,000. | |
3. | The business is a corporation with 27 stockholders, each of whom originally invested $10,000 in exchange for shares of the companyâs capital stock. The remainder of the stockholdersâ equity has resulted from profitable operation of the business. |