Historical cost

1. Write a paper describing in detail how the income statement, statement of owners’ equity, and balance sheet are related.

2. Historical cost is a basic concept of accounting. Describe the concept of historical cost, and evaluate each of the items found on a typical balance sheet to determine if it is reported at historical cost.

1. Rent expense as shown on the income statement is $120,000, while cash paid for rent is shown on the statement of cash flows at $135,000. Did prepaid rent increase or decrease during the period? By what amount?

2. Explain why managers have cash flow information that they do not wish to disclose to external users.

1. Accounts payable for services decreased $67,000 during the year. The statement of cash flows indicates that cash paid for services was $568,000. What was the amount of the related expense shown on the income statement?

2. If the Subscriptions Received in Advance account decreases during the period, which is greater, cash received in advance from customers or subscription revenue? Why?


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