Connect Access Card For Financial Accounting
Connect Access Card For Financial Accounting
10th Edition
ISBN: 9781260481297
Author: Robert Libby, Patricia Libby, Frank Hodge Ch
Publisher: McGraw-Hill Education
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Chapter 2, Problem 15E

1.

To determine

Discuss the accounting equation effect based on the given T-accounts.

1.

Expert Solution
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Explanation of Solution

Accounting equation: Accounting equation is an accounting tool expressed in the form of equation, by creating a relationship between the resources or assets of a company, and claims on the resources by the creditors and the owners. Accounting equation is expressed as shown below:

Assets = Liabilities + Stockholder's Equity

Accounting equation effect for given accounts is as follows:

Connect Access Card For Financial Accounting, Chapter 2, Problem 15E

Figure (1)

Therefore, the total assets are equal to the liabilities and stockholder’s equity.

2.

To determine

Prepare journal entries to record the transactions from (a) through (e).

2.

Expert Solution
Check Mark

Explanation of Solution

Prepare journal entries to record the transactions as shown below:

No.Account titles and ExplanationDebitCredit
a.Cash (+A)$4,000 
         Notes payable (+L) $4,000
    
b.Cash (+A)$1,500 
         Investments (-A) $1,500
    
c.Cash (+A)$1,500 
         Property and Equipment (-A) $1,500
    
d.Retained earnings (-SE)$800 
         Dividends payable (+L)        $800
    
e.Dividends payable (-L)$800 
         Cash (-A) $800

Table (1)

3.

To determine

Prepare T-accounts and also report the given transactions for the current year.

3.

Expert Solution
Check Mark

Explanation of Solution

T-account: T-account refers to an individual account, where the increases or decreases in the value of specific asset, liability, stockholder’s equity, revenue, and expenditure items are recorded.

T-accounts for the given accounts are as follows:

Cash
Beg.5,000
(a)4,000
(b)1,500
(c)1,500800(d)
End.11,200
Short-Term Investments
Beg.2,500
 1,500(b)
 
  
End.1,000
Property & Equipment
Beg.3,000
 1,500(c)
 
 
End.1,500 
Short-Term Notes Payable
 2,200Beg.
 
 2,200End.
Long-Term Notes Payable
 800Beg.
 4,000(a)
 4,800End.
Common Stock
 500Beg.
  
 500
Additional Paid-in Capital
 4,000Beg.
  
 4,000
Retained Earnings
 3,000Beg.
(d)800 
 2,200

4.

To determine

Prepare trial balance account.

4.

Expert Solution
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Explanation of Solution

Trail balance is given below:

Company H
Trial Balance
For the Year Ended December 31
ParticularsDebitCredit
Cash$11,200 
Short-term investments$1,000 
Property and equipment$1,500 
Notes payable (current) $2,200
Notes payable (noncurrent) $4,800
Dividends payable $0
Common stock $500
Additional paid-in capital $4,000
Retained earnings $2,200
     Totals$13,700$13,700

Table (2)

5.

To determine

Prepare a classified balance sheet.

5.

Expert Solution
Check Mark

Explanation of Solution

Prepare a classified balance sheet.

Company H
Balance Sheet
At December 31
Assets 
Current Assets: 
     Cash$11,200
     Short-term investments1,000
          Total current assets12,200
Property and equipment1,500
Total assets$13,700
  
Liabilities and Stockholders’ Equity 
Current Liabilities: 
     Notes payable$2,200
         Total current liabilities2,200
Notes payable4,800
          Total liabilities7,000
Stockholders’ Equity 
     Common stock500
     Additional paid-in capital4,000
     Retained earnings2,200
          Total stockholders’ equity6,700
Total liabilities and stockholders’ equity$13,700

Table (3)

6.

To determine

Calculate the current ratio at December 31 and also suggest about Company H.

6.

Expert Solution
Check Mark

Explanation of Solution

Current Ratio: A part of liquidity ratios, current ratio reflects the ability to oblige the short term debts of a company. It is calculated based on the current assets and current liabilities; a company has in an accounting period. A current ratio is a useful tool for analysis of financials of a company.

Calculate the current ratio of Company H:

Current ratio=Current assetsCurrent liabilities= $12,200$2,200=5.55

Therefore, the current ration of Company H during the current year is 5.55.

In this case, Company H’s current ratio is more than the industrial average. It indicates Company H has better position to repay the current liabilities.

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Chapter 2 Solutions

Connect Access Card For Financial Accounting

Ch. 2 - 11. What is a journal entry? Ch. 2 - 12. What is a T-account? What is its purpose? Ch. 2 - 13. How is the current ratio computed and...Ch. 2 - Prob. 14QCh. 2 - 1. If a publicly traded company is trying to...Ch. 2 - Prob. 2MCQCh. 2 - 3. Total liabilities on a balance sheet at the end...Ch. 2 - 4. The dual effects concept can best be described...Ch. 2 - 5. The T-account is a tool commonly used for...Ch. 2 - Prob. 6MCQCh. 2 - 7. The Cash T-account has a beginning balance of...Ch. 2 - 8. Which of the following statements are true...Ch. 2 - Prob. 9MCQCh. 2 - Prob. 10MCQCh. 2 - Prob. 1MECh. 2 - Matching Definitions with Terms Match each...Ch. 2 - M2-3 Identifying Events as Accounting...Ch. 2 - Classifying Accounts on a Balance Sheet The...Ch. 2 - Determining Financial Statement Effects of Several...Ch. 2 - Prob. 6MECh. 2 - Prob. 7MECh. 2 - Recording Simple Transactions For each transaction...Ch. 2 - Completing T-Accounts For each transaction in M2-5...Ch. 2 - Preparing a Trial Balance Complete M2-9 and then...Ch. 2 - Prob. 11MECh. 2 - Prob. 12MECh. 2 - Prob. 13MECh. 2 - Matching Definitions with Terms Match each...Ch. 2 - Identifying Account Titles The following are...Ch. 2 - Classifying Accounts and Their Usual Balances As...Ch. 2 - Determining Financial Statement Effects of Several...Ch. 2 - Nike, Inc., with headquarters in Beaverton,...Ch. 2 - Refer to E2-4. Required: For each of the events...Ch. 2 - Prob. 7ECh. 2 - Recording Investing and Financing...Ch. 2 - Analyzing the Effects of Transactions in...Ch. 2 - Prob. 10ECh. 2 - Inferring Investing and Financing Transactions and...Ch. 2 - Inferring Investing and Financing Transactions and...Ch. 2 - Jameson Corporation was organized on May 1. The...Ch. 2 - Prob. 14ECh. 2 - Prob. 15ECh. 2 - Prob. 16ECh. 2 - Waldman Furniture Repair Service, a company with...Ch. 2 - Inferring Typical Investing and Financing...Ch. 2 - Prob. 19ECh. 2 - Prob. 20ECh. 2 - Prob. 21ECh. 2 - Prob. 1PCh. 2 - Prob. 2PCh. 2 - Prob. 3PCh. 2 - Required: Using events (a) through (i) in P2-3,...Ch. 2 - Prob. 5PCh. 2 - Refer to P2-5. Required: For each of the...Ch. 2 - Identifying Accounts on a Classified Balance Sheet...Ch. 2 - Russeck Incorporated is a small manufacturing...Ch. 2 - Prob. 3APCh. 2 - Required: Using the events (a) through (h) in...Ch. 2 - Prob. 1CONCh. 2 - Refer to the financial statements of American...Ch. 2 - Prob. 2CPCh. 2 - Refer to the financial statements of American...Ch. 2 - Prob. 4CPCh. 2 - Prob. 5CPCh. 2 - Prob. 6CPCh. 2 - Your best friend from home writes you a letter...Ch. 2 - Prob. 8CP
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Financial ratio analysis; Author: The Finance Storyteller;https://www.youtube.com/watch?v=MTq7HuvoGck;License: Standard Youtube License