Which of the following items would appear on the Statement of Owners Equity?

Notes Payable                      Treasury Stock                    Advertising Expense                   Retained Earnings

Yes                                        Yes                                      Yes                                              Yes

No                                        Yes                                      Yes                                              Yes

No                                        Yes                                      No                                              Yes

No                                        No                                      No                                               No

C is the correct answer here to Which of the following items would appear on the Statement of owners equity.

Why Is This The Right Answer to Which of the Following Items Would Appear on the Statement of Owners Equity?

The primary reason for this is that the Statement of Owner’s equity is only going to show changes from items that affect owners equity. Advertising expense and the use of a notes payable is not really going to qualify much in this regard. Therefore the answer is C. The official answer is:

“All changes in items affecting equity on the Balance Sheet are reported in the Statement of Owner’s Equity. Both treasury stock and retained earnings are equity items.”

So C. is the answer because Treasury Stock and Retained Earnings are the only accounts on this list that are reported in Stockholders equity and are equity items.

This is from the Wiley version of the Financial Accounting and Reporting CPA Exam Study prep.

Here’s Another FAR Practice Problem to Chew On

A company changes from the double-declining balance method of depreciation for previously recorded assets to the straight-line method. According to ASC Topic 250, the effect of the change should be reported separately as a(n):

A. Unusual Item – This is probably not right at first glance.

B. Component of Income After Continuing Operations – I’m marking this one off as well.

C. Component of Income From Continuing operations on a prospective basis. – Marking as not sure.

D. Prior Period Adjustment – This would be my educated guess.

Update. The answer is C, Component of Income From Continuing Operations on a prospective basis. The reasoning behind this is that ASC topic 250 requires a change in the depreciation method used to be treated as a change in estimate and handled prospectively. Well I almost had it, that was going to be my second guess. Subscribe to our blog for more CPA and Series 7 exam prep questions!

Sources:

1. https://becker.com
2. https://wiley.com
3. https://chegg.com

Disclaimer: The opinions and documentation contained within this article and on this blog are the sole property of inflationhedging.com and are not to be copyrighted or reproduced in any manner, else legal action within the rights of the United States legal code could be use to obtain recompense. All articles and blog posts are the sole opinions of the writers of the blog, and are not necessarily in line with what exactly will work for you, you should consult a CPA, Tax Professional, or Financial Professional to determine what exact financial needs are in line with your interests. Also, from time to time, certain links on this website will be used to generate affiliate commissions, in order to support the health and growth of our website, health and business.