A Balance Sheet Is Designed to Show

question 10

Multiple Choice

A balance sheet is designed to show:

• A) How much a business is worth.
• B) The profitability of the business during the current year.
• C) The assets, liabilities, and equity of a business as of a particular date.
• D) The cost of replacing the assets and of paying off the liabilities at December 31.

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Definitions:

Cost Method

An accounting method used to value an investment at its original purchase cost, adjusted for dividends, stock splits, and stock dividends.

Intercompany Interest Revenues

Income earned by one entity within a corporate group for lending funds to another entity within the same group, typically eliminated during the consolidation process for financial reporting.

Interest Expense

The cost incurred by an entity for borrowed funds, including loans, bonds, or lines of credit.

Bond Premium

Bond Premium is the difference by which the price paid for a bond exceeds its face value, typically occurring when the bond's interest rate is higher than the current market rate.