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Balance Sheet Questions

What is a balance sheet?

The financial statement of a company that lists its assets and liabilities is called a balance sheet. The shareholder’s equity at any given point in time is also listed on it. Balance sheets often cause some confusion, read below where Experts have answered these questions.

Is the net income that is reported on the balance sheet the same as the net income that is reported on an income statement of a company?

The net income that is reported on the balance sheet of a company should be the same as the net income reported on the income statement as it is normally derived from the income statement itself.

What can one do if the net income on the balance sheet is different from that of the income statement?

If the net income on the balance sheet is different from that of the income statement, the individual may have to check if the trial balance levels and ending balances are all correct. He/she may also have to check if the ending ledger balances are correctly reported on the profit and loss accounts and make sure that no entries are omitted.

Where should one report service revenue on the balance sheet?

The service revenue is not reported on the balance sheet. It is normally reported on the income statement under the revenues section. However, if the revenue is received before the service is performed, then it may be reported on the balance sheet as a current liability. In such a situation, the revenue may have to be earned within a year of reporting it. Such revenue may be called deferred service revenue.

Is it required for all the liabilities and assets to match on a balance sheet?

It is required for all the assets of a firm to match all its liabilities on a balance sheet. If there are any profits in the firm, then they will be reported under the retained earnings section of the sheet.

Can a balance sheet be used to calculate the rate of return on an investment?

A balance sheet may not be very helpful if an individual wants to calculate the rate of return on an investment. This is because the balance sheet will only list the company’s assets and liabilities. If an individual wants to calculate the rate of return, he/she may use the income statement.

What is the difference between an unclassified and classified balance sheet?

All of an individual’s assets, liabilities and equity are grouped together on an unclassified balance sheet. All the assets will be grouped under the asset grouping, the liabilities under the liabilities grouping and the equity accounts under the equity grouping. A classified balance sheet is where the assets and liabilities will be further broken into current and noncurrent groups. The equity will be divided into capital, additional paid in capital and retained earnings.

Can an individual report accounts like accounts payable and payroll liabilities to balance out everything that is mentioned on a monthly balance sheet?

An individual may report accounts like accounts payable and payroll liabilities to balance out everything that is mentioned on a monthly balance sheet.

What is the difference between a balance sheet and a profit and loss statement?

A balance sheet reports the company’s assets, liabilities and equity at any given point of time whereas the profit and loss statement will report the profit made by the company. This will include any revenue and expenses of the company over a period of time.

A balance sheet is very important to report a company’s financial assets and liabilities. It is also crucial for tax purposes. Hence you should be able to understand how a balance sheet is created and what needs to be reported in it. You can ask an Expert if you have any doubts about the creation of a balance sheet or any of its other aspects.
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Recent Balance Sheet Questions

  • I am doing a final return for a partnership. Does the balance

    I am doing a final return for a partnership. Does the balance sheet need to be zero for assets and liability? everything has either been sold or given away. There was a loan balance and the partners equally distributed the balance each paying off the loan. Do the partners get a loss on personal income tax for this? There is also depreciation which has 6000 left for depreciation, and there is goodwill which has 17,000 left for depreciation these are both listed on the balance sheet .
  • 3. Stocks X and Y sell at the same price. Stock X has a required

    3. Stocks X and Y sell at the same price. Stock X has a required return of 12% while Y's required return is 10%. Stock X’s dividend is expected to grow at a constant rate of 6% a year, while Stock Y’s dividend is expected to grow at a constant rate of 4%. If the market is in equilibrium so that expected returns equal required returns, which of the following statements is CORRECT?

    One year from now, Stock X’s price is expected to be higher than Stock Y’s price.

    Stock X has a higher dividend yield than Stock Y.

    Stock X has the higher expected year-end dividend.

    Stock Y has a higher capital gains yield.

    Stock Y has a higher dividend yield than Stock X.

    4. Stock A has a beta of 1.1 and Stock B's beta is 0.9. The market risk premium is 6%, and the risk-free rate is 6.3%. Both stocks have a constant dividend growth rate of 7%. If the market is in equilibrium, which of the following statements is CORRECT?

    Stock B must have the higher required return.

    Stock B’s dividend yield equals its expected dividend growth rate.

    Stock A must have a higher stock price than Stock B.

    Stock A must have a higher dividend yield than Stock B.

    Stock B could have the higher expected return


    10. ABC inc, an investor-owned healthcare enterprise, is considering a leasing arrangement to finance some proton equipment that it needs to provide proton therapy for the next 3 years. Given expected technological advances, the equipment will be obsolete and worthless after 3 years. The firm will depreciate the cost of the proton equipment on a straight-line basis over their 3-year life. It can borrow $4,800,000, the purchase price, at 10% and buy the equipment, or it can make 3 equal end-of-year lease payments of $2,100,000 each and lease them. The loan obtained from the bank is a 3-year simple interest loan, with interest paid at the end of the year. ABC's tax rate is 40%. Annual maintenance costs associated with ownership are estimated at $240,000, but this cost would be borne by the lessor if it leases. What is the net advantage to leasing (NAL)?

    $44,388

    None of the above

    $117,320

    $106,191

    -$44,388



    18. To help finance a major expansion, Smith Holdings sold a non-callable bond with 15 years to maturity. This bond has a 10.25% annual coupon, it sells at a price of $1,025, and it has a par value of $1,000. If LNCR’s tax rate is 40%, what after-tax component cost of debt should be used in the CCC calculation?

    a. 5.11%

    b. 5.95%

    c. 5.37%

    d. 6.25%

    5.66%


    19. Jones corp. recently paid a $3.29 dividend, the dividend is expected to grow at a constant rate of 6.50% a year, and the common stock currently sells for $62.50 a share. The before-tax cost of debt is 7.50%, and the tax rate is 40%. The target capital structure consists of 40% debt and 60% common equity. What is the company’s CCC if all equity is from retained earnings?

    a. 9.80%

    b. 9.06%

    c. 8.70%

    d. 8.35%

    e. 9.42%


    20 ABC Corp’s balance sheet shows a total of $50 million long-term debt with a coupon rate of 8.00% and a yield to maturity of 7.00%. This debt currently has a market value of $55 million. The balance sheet also shows that that the company has 20 million shares of common stock, and the book value of the common equity (common stock plus retained earnings) is $65 million. The current stock price is $8.25 per share; stockholders' required return is 10.00%; and the firm's tax rate is 40%. Based on market value weights, and assuming the firm is currently at its target capital structure, what CCC should ABC Corp use to evaluate capital budgeting projects?

    a. 8.55%

    b. 7.56%

    c. 7.26%

    d. 8.21%

    e. 7.88%


    21. Odyssey Healthcare (ODSY) hired you as a consultant to help estimate its cost of capital. You have been provided with the following data. (1): yield on the firm’s bonds = 7.00% and the risk premium over its own debt cost = 4.00%. (2) rRF = 5.00%, RPM = 6.00%, and b = 1.25. (3) D1 = $1.20; P0 = $35.00 and g = 8.00% (constant). You were asked to estimate the cost of equity based on the three most commonly used methods and then to indicate the difference between the highest and lowest of these estimates. What is that difference?

    1.13%

    2.34%

    1.88%

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    My question is this: We are a S-Corp, during 2013 we established
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