1. If the effect of an adjustment is to increase the balance of an asset account, which of the following statements describes the effect of the adjustment on the other account?
a. Increases the balance of a revenue account.
b. Increases the balance of a liability account.
c. Increases the balance of an expense account.
2. Does every adjustment have an effect on determining the amount of net income for a period? Explain.
3. (a) Explain the purpose of the two accounts: Depreciation Expense and Accumulated Depreciation. (b) Is it custom- ary for the balances of the two accounts to be equal? (c) In what financial statements, if any, will each account ap- pear?
4. Describe the nature of the assets that compose the following sections of a balance sheet: (a) current assets, (b) property, plant, and equipment.
5. (a) What are common-sized financial statements? (b) Why are common-sized financial statements useful in interpreting and analyzing financial statements?