4.9: Discussion Questions

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Henry Dauderis and David Annand
Athabasca University via Lyryx Learning

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Refer to the Big Dog Carworks Corp. financial statements for the year ended December 31, 2018 and other information included in this chapter to answer the following questions.

Identify the economic resources of Big Dog Carworks Corp. in its financial statements.
What comprise the financial statements of BDCC?
Why does BDCC prepare financial statements?
From the balance sheet at December 31, 2018 extract the appropriate amounts to complete the following accounting equation: ASSETS = LIABILITIES + EQUITY
If ASSETS − LIABILITIES = NET ASSETS, how much is net assets at December 31, 2018? Is net assets synonymous with equity?
What types of assets are reported by Big Dog Carworks Corp.? What types of liabilities?
What kind of assumptions is made by Big Dog Carworks Corp. about asset capitalisation? Over what periods of time are assets being amortized?
What adjustments might management make to the financial information when preparing the annual financial statements? Consider the following categories:
1. Current asset accounts.
2. Non-current asset accounts.
3. Current liability accounts.
4. Non-current liability accounts.
Indicate several examples in each category. Use the BDCC balance sheet and notes 3 and 5 for ideas.
What are the advantages of using a classified balance sheet? Why are current accounts shown before non-current ones on BDCC's balance sheet?
How does Big Dog Carworks Corp. make it easier to compare information from one time period to another?
Who is the auditor of BDCC? What does the auditor's report tell you about BDCC's financial statements? Does it raise any concerns?
What does the auditor's report indicate about the application of generally accepted accounting principles in BDCC's financial statements?
What is BDCC management's responsibility with respect to the company's financial statements? Do the financial statements belong to management? the auditor? the board of directors? shareholders?