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Accounting Problem, Balance sheet items

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anonymous39 | 04:18 Wed 21st Sep 2011 | Business & Finance
5 Answers
I am having trouble in figuring out the following problem from an accounting textbook (as some of you can guess, yes this IS a HW problem):

You have just started as a staff auditor for a small CPA firm. How would each of these items be reflected in the year-end balance sheet, including notes?:

a. During the year, the firm declared and paid $10,000 in dividends.
b. Your client has been named defendant in a legal suit involving a material amount. You have received from the client's counsel a statement indicating little likelihood of loss.
c. Because of cost control actions and general employee dissatisfaction, it is likely that the client will suffer a costly strike in the near future.
d. Twenty days after closing, the client suffered a major fire in one of its plants.
e. The cash account includes a substantial amount set aside for payment of pension obligations.
f. Marketable securities include a large quantity of shares of stock purchased for control purposes.
g. Land is listed on the balance sheet at its market value of $1,000,000. It cost $670,000 to purchase 12 years ago.
h. During the year, the government of Uganda expropriated a plant located in that country. There was substantial loss.

Am I supposed to indicate debts and credits for each one of these & amounts? For an example, part a:
Credit cash, debt retained earnings.
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Item E referring to the pension fund should be elsewhere in the balance sheet, showing as reserves for that purpose, not as part of the profit and loss account.

Are you in the US? Accounting rules and regs may be different here in the UK.
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I'm in the U.S just to let anyone know.
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Accounting Problem, Balance sheet items

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