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
Question
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Chapter 2, Problem 3AP

1.

To determine

Open the T-accounts for each of the balance sheet accounts, and enter the beginning balance for the current year.

1.

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 each of the balance sheet accounts are as follows:

Cash and Cash Equivalents
Beg.57,701
Inventories
Beg.149,483 
Accounts Receivable
Beg.12,293
Prepaid Expenses and Other Current Assets
Beg.23,621
Property, Plant, and Equipment
Beg.270,198
Intangibles
Beg.45,128
Other Assets
Beg.2,468
Long-Term Investments
Beg.7,330

Accounts Payable

 16,961Beg.
Accrued Expenses Payable
 43,793Beg.
Long-Term  Debt
 14,339Beg.
Other Long-Term Liabilities
 29,273Beg.
Common Stock
 490Beg.
Additional  Paid-in Capital
 377,740Beg.
Retained  Earnings
 657,845Beg.
Unearned Revenue
  62,960Beg.
Dividend Payable
  0Beg.
   
Treasury Stock
Beg.635,179  

2.

To determine

Prepare the T-account for the given balance sheet accounts, and to determine the ending balance of each account.

2.

Expert Solution
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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 each of the balance sheet accounts are as follows:

Cash and Cash Equivalents
Beg.57,701
(a)1,0203,400(b)
(d)4,0202,980(e)
(g)3101,830(f)
 
   
54,841 
Accounts Receivable
Beg.12,293
    
12,293
Inventories
Beg.149,483 
149,483 
Prepaid Expenses and Other Current Assets
Beg.23,621
   
23,621 
Property, Plant, and Equipment
Beg.270,198
(f)11,2304,020(d)
277,408 
Intangibles
Beg.45,128
(b)3,400 
48,528 
Other Assets
Beg.2,468
  310(g)
2,158 
Long term Investmetns
Beg.7,330
 (e) 2,980
10,310 

Accounts Payable

 16,961Beg.
   
 16,961
Accrued Expenses Payable
 43,793Beg.
   
 43,793
Dividends Payable
. 0Beg
  300(h)
 300
Long-Term  Debt
 14,339Beg.
  9,400(f)
 23,739
Other Long-Term Liabilities
 29,273Beg.
    
 29,273
Common Stock
 490Beg.
  16(a)
506
Additional  Paid-in Capital
 377,740Beg.
 1,004(a)
378,744
Retained  Earnings
 657,845Beg.
(h)300 
657,545
Treasury Stock
Beg.635,179
   
635,179 
Dividend Payable
0Beg.
 300 (h) 
300 

3.

To determine

Explain the response for event (c).

3.

Expert Solution
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Explanation of Solution

Business transaction:

Business transaction is a record of any economic activity, resulting in the change in the value of the assets, the liabilities, and the stockholder’s equities, of a business. Business transaction is also referred to as financial transaction.

In this case, ordered wood and other raw material is not creating any impact on assets, liabilities and stockholder’s equity of the business, because it is not a business transaction.

4.

To determine

Prepare the trial balance of Company E at September 30.

4.

Expert Solution
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Explanation of Solution

Trial balance:

Trial balance is the summary of accounts, and their debit and credit balances at a given time. It is usually prepared at end of the accounting period.  Debit balances are listed in left column and credit balances are listed in right column.  The totals of debit and credit column should be equal.  Trial balance is useful in the preparation of the financial statements.

Trial balance of Company E is as follows:

Incorporation E
Trial Balance
At September 30
(in thousands of dollars)
 DebitCredit
Cash and cash equivalents54,841 
Accounts receivable12,293 
Inventories149,483 
Prepaid expenses and other current assets23,621 
Property, plant and equipment277,408 
Intangible assets48,528 
Long-term investments10,310 
Other assets2,158 
Accounts payable 16,961
Unearned revenue 62,960
Accrued expenses payable 43,793
Dividends payable 300
Long-term debt (current portion, $2,731) 23,739
Other long-term liabilities 29,273
Common stock 506
Additional paid-in capital 378,744
Treasury stock635,179 
Retained earnings 657,545
     Totals1,213,8211,213,821

Table (1)

Therefore, the total of debit, and credit columns of trial balance is $1,213,821 and agree.

5.

To determine

Prepare a classified balance sheet of Company E at September 30.

5.

Expert Solution
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Explanation of Solution

Classified balance sheet:

This is the financial statement of a company which shows the grouping of similar assets and liabilities under subheadings.

Classified balance sheet of Company E on September 30 is as follows:

Incorporation E
Balance Sheet
At September 30
(in thousands of dollars)
Assets 
Current assets 
Cash and cash equivalents$54,841
Accounts receivable12,293
Inventories149,483
Prepaid expenses and other current assets23,621
     Total current assets240,238
Property, plant, and equipment277,408
Intangible assets48,528
Long-term investments10,310
Other assets2,158
Total Assets$578,642
Liabilities 
Current liabilities 
Accounts payable$16,961
Unearned revenue62,960
Accrued expenses payable43,793
Dividends payable300
Current portion of long-term debt2,731
     Total current liabilities126,745
Long-term debt21,008
Other long-term liabilities29,273
                Total Liabilities177,026
Stockholders’ Equity 
Common stock ($0.01 par value)506
Additional paid-in capital378,744
Treasury stock-635,179
Retained earnings657,545
                Total Stockholders’ Equity401,616
Total Liabilities and Stockholders’ Equity$578,642

Table (2)

Therefore, the total assets of Company E are $578,642, and the total liabilities and stockholders’ equity is $578,642.

6.

To determine

Calculate the current ratio of Company E and evaluate the ratio.

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 E as follows:

Current ratio=Current assetsCurrent liabilities=$240,238$126,745=1.895

Therefore, the current ration of Company E is 1.895

Current ratio of Company E has sufficient liquidity, because for every one dollar of current liabilities, Company E has more than one dollar of current assets.

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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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