Suppose you decide (as did Steve Jobs and Mark Zuckerberg) to start a company. Your product is a software platform that integrates a wide range of media devices, including laptop computers, desktop computers, digital video recorders, and cell phones. Your initial client base is the student body at your university. Once you have established your company and set up procedures for operating it, you plan to expand to other colleges in the area and eventually to go nationwide. At some point, hopefully sooner rather than later, you plan to go public with an IPO and then to buy a yacht and take off for the South Pacific to indulge in your passion for underwater photography. With these plans in mind, you need to answer for yourself, and potential investors, the following questions: What is an agency relationship? When you first begin operations, assuming you are the only employee and only your money is invested in the business, would any agency conflicts exist? Explain your answer.Suppose your company raises funds from outside lenders. What type of agency costs might occur? How might lenders mitigate the agency costs?What is corporate governance? List five corporate governance provisions that are internal to a firm and are under its control.Briefly describe the use of stock options in a compensation plan. What are some potential problems with stock options as a form of compensation?Briefly explain how regulatory agencies and legal systems affect corporate governance.

OVERVIEWComplete a 4-part assessment that requires you to categorize balance sheet accounts, prepare a balance sheet, prepare an income statement, and analyze items in a financial statement.Because the balance sheet reflects all journal entries affecting the business since inception, knowledge of the placement of each account is essential to preparing a financial statement. Likewise preparation of the balance sheet, or statement of financial position, is an essential skill and requires the accountant to take information from the accounting system and summarize it in a single location. Generally accepted accounting principles (GAAP) require organizations to prepare both an income statement and a balance sheet. Before the balance sheet can be prepared, the organization's net income must be determined. Finally, balance sheets do not always balance once they are prepared, and income statements do not always contain correct account data. This can cause havoc across the accounting department and requires the accountant to locate the missing or incorrect data.CONTEXTAssessment 1 addressed internal and external users of accounting information. The characteristic that sets them apart is the type of data that they require. When an organization reports its financial results to the world, the external users look to see if the organization made any money during its most recent year and whether the assets the organization owns minus the debts it owes result in any profits that can be put back into the organization to make more money for the organization, or reward the shareholders for their investment in the organization.QUESTIONS TO CONSIDERTo deepen your understanding, you are encouraged to consider the questions below and discuss them with a fellow learner, a work associate, an interested friend, or a member of the business community.What are six terms that you consider to be associated with balance sheet liabilities and equity (liabilities and leftovers)?Consider why these items should be included as a liability or equity in a business organization.RESOURCESREQUIRED RESOURCESThe following resources are required to complete the assessment.Capella ResourcesClick the links provided to view the following resources:Assessment 2, Part 1 Template.Assessment 2, Part 2 Template.Assessment 2, Part 3 Template.Assessment 2, Part 4 Template.ASSESSMENT INSTRUCTIONSThis assessment includes four parts. Use the templates provided for each part to complete the assessment. All the templates are linked in the Resources under the Required Resources heading. Submit all four templates for this assessment.PART 1: CATEGORIZING BALANCE SHEET ACCOUNTAccounts are either temporary or permanent, with the temporary ones assigned to revenues and expenses, leaving the permanent ones to reside on the balance sheet. Because the balance sheet reflects all journal entries affecting the business since inception, knowledge of the placement of each account is essential to preparing the statement. Because you have been studying the parts of the balance sheet, this is an opportunity to apply your knowledge to an important piece of the accounting cycle.Determine the correct balance sheet category for each of the following accounts. Use the Assessment 2, Part 1 Template to complete this part of the assessment.Accounts payable.Equipment.Prepaid rent.Short-term investments.Accounts receivable.Land.Common stock.Cash.Accumulated depreciation.Goodwill.Bonds payable.Retained earnings.Preferred stock.Mortgage payable.Salaries payable.Allowance for uncollectibles.Inventories.Patent.Income tax payable.Security deposits.PART 2: BALANCE SHEET PREPARATIONReporting the results of an organization's business transactions requires the preparation of financial statements that will be shared with both internal and external users of financial data. For this reason, preparation of the balance sheet, or statement of financial position, is an essential skill and requires the accountant to take information from the accounting system and summarize it in a single location. This assessment demonstrates your skill in the preparation of this financial statement.Use the following account information to prepare the 2011 balance sheet for Blaze Industries. Be sure to use the proper balance sheet format. If you need to research this format, you may wish to start with the suggested materials in the Resources. Use the Assessment 2, Part 2 Template to complete this part of the assessment.Wages payable: $880.00.Supplies: $80.00.Common stock: $10,000.00.Equipment: $217,200.00.Interest payable: $3,600.00.Retained earnings: $27,520.00.Accounts receivable: $400.00.Long-term bonds payable: $150,000.00.Cash: $3,050.00.Advances from customers: $460.00.Prepaid insurance: $830.00.Accumulated depreciation: $29,100.00.PART 3: INCOME STATEMENT PREPARATIONGenerally accepted accounting principles (GAAP) require organizations to prepare both an income statement and a balance sheet. Before the balance sheet can be prepared, the organization's net income must be determined. This requires the accountant to pull together data from numerous system accounts and other sources of information. In this part of the assessment, demonstrate your skill in putting together the necessary account data and preparing an income statement in good form.Use the Assessment 2, Part 3 Template to complete Part 3 of the assessment. On the first page of the template is financial data for Southwest Business School. On the second page is a blank income statement. Use the information provided on the first page to prepare the income statement on the second page.PART 4: ANALYZING ITEMS IN THE FINANCIAL STATEMENTBalance sheets do not always balance once they are prepared, and income statements do not always contain correct account data. This can cause havoc across the accounting department and requires the accountant to locate the missing or incorrect data. Financial statement preparation will be an important skill during this process, as you will discover when you determine the missing amounts in the statement in this part of the assessment.Use the Assessment 2, Part 4 template to complete Part 4 of the assessment. In each of the two sets of organization financial statement information provided in the template, two items have been omitted. Analyze the financial statements to determine the missing amounts and fill them in on the template to complete the financial statement information. Be sure to show your work in the space provided under the table in the template.Introducing Financial Statements Scoring GuideCRITERIADISTINGUISHEDDetermine the correct balance sheet category for accounts.Determines the correct balance sheet category for accounts, demonstrating insight and understanding of its purpose.Prepare a balance sheet for a company using appropriate financial data.Prepares a balance sheet for a company using the correct financial data and computations.Prepare a summarized income statement for a company using appropriate financial data.Prepares a summarized income statement for a company using the appropriate financial data and computations.Analyze specific financial information from a company's financial statements.Interprets specific financial information from a company's financial statements, demonstrating insight and understanding of its purpose.