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Week 5 Assignment

Application Problems

Completing them will help you understand the concepts in this lesson.

· Exercise 6-7A on page 338

· Exercises 6-10A and 6-11A on page 339

Quiz

1. Describe the difference between temporary and permanent accounts, and state which ones are closed. Describe the purpose of the closing process.

2. Explain the significance of the return on equity ratio. Who (what category or type of financial statement users) would normally be most interested in this ratio?

3. Rolla Company was founded in 2010. It acquired $30,000 cash by issuing stock to investors and an additional $20,000 cash by borrowing from creditors. During 2010 it received $15,000 cash revenues and paid $22,000 in cash expenses. The company then went out of business.What amount of cash will Rolla's stockholders receive?

4. Rolla Company was founded in 2010. It acquired $30,000 cash by issuing stock to investors and an additional $20,000 cash by borrowing from creditors. During 2010 it received $15,000 cash revenues and paid $22,000 in cash expenses. The company then went out of business.What amount of cash will Rolla's creditors receive?

5. Rolla Company was founded in 2010. It acquired $30,000 cash by issuing stock to investors and an additional $20,000 cash by borrowing from creditors. During 2010 it received $15,000 cash revenues and paid $22,000 in cash expenses. The company then went out of business.What amount of cash should Rolla Company have had on hand immediately before going out of business?

6. Petty cash funds are maintained on an imprest basis. Explain the advantage of using the imprest basis in accounting for petty cash.

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