1. How can a company have a positive amount of net income and yet have a decrease in its cash account?
2. How can the accounts receivable account decrease when the amount of sales increases?
3. The owners of a small firm purchase several securities as an investment from money they made in their business. Why is the investment in the securities not shown on the balance sheet of their business firm?
4. A check for $2,000 is issued for payment of an insurance policy. The insurance expense recorded is $400. Was there an error in recording the check?
5. A store building is appraised for $1,000,000. However, the building is stated in the balance sheet at $150,000. Was there an error?
6. There is a 8-year note payable on the balance sheet for $50,000. The annual payment to pay off the note is $8,051. The total to be paid for 8 years is $64,408 (=$8,051 x 8). Is the amount of the note on the balance sheet incorrect?
7. The dollar amount of capital stock is $400,000. Total stockholders' equity is $340,000. The company had $25,000 income in the current year. What may be the reason for stockholders' equity to be smaller in amount than the capital stock?