Serial Problem, Business Solutions (Continued)
Part 2
General Ledger accounts
Cash Acct. No. 101
Date Explanation PR Debit Credit Balance
Oct. 1 45,000 45,000
2 3,300 41,700
5 2,220 39,480
8 1,420 38,060
15 4,800 42,860
38,264
Accounts Receivable Acct. No.106
Date Explanation PR Debit Credit Balance
Oct. 6 4,800 4,800
12 1,400 6,200
15 4,800 1,400
22 1,400 0
Computer Supplies Acct. No. 126
Date Explanation PR Debit Credit Balance
Serial Problem, Business Solutions (Continued)
Prepaid Insurance Acct. No. 128
Date Explanation PR Debit Credit Balance
Prepaid Rent Acct. No. 131
Date Explanation PR Debit Credit Balance
Office Equipment Acct. No. 163
Date Explanation PR Debit Credit Balance
Computer Equipment Acct. No. 167
Date Explanation PR Debit Credit Balance
Accounts Payable Acct. No. 201
Date Explanation PR Debit Credit Balance
S. Rey, Capital Acct. No. 301
Date Explanation PR Debit Credit Balance
S. Rey, Withdrawals Acct. No. 302
Date Explanation PR Debit Credit Balance
Serial Problem, Business Solutions (Concluded)
Computer Services Revenue Acct. No. 403
Date Explanation PR Debit Credit Balance
Oct. 6 4,800 4,800
12 1,400 6,200
25,659
Wages Expense Acct. No. 623
Date Explanation PR Debit Credit Balance
Advertising Expense Acct. No. 655
Date Explanation PR Debit Credit Balance
Mileage Expense Acct. No. 676
Date Explanation PR Debit Credit Balance
Miscellaneous Expenses Acct. No. 677
Date Explanation PR Debit Credit Balance
Repairs Expense—Computer Acct. No. 684
Date Explanation PR Debit Credit Balance
Serial Problem, Business Solutions (Continued)
Part 3
BUSINESS SOLUTIONS
Trial Balance
November 30
Debit Credit
Cash………………………………………………………. $38,264
Accounts receivable……………………………….. 12,618
Computer supplies………………………………….. 2,545
Reporting in Action — BTN 2-1
1. Apple reports ($ millions):
2. Apple reports ($ millions):
3. ($ millions):
4. Apple employed more financial leverage as of September 28, 2013, when
40.3% of its assets were financed by debt, relative to September 29,
5. Solution depends on the financial statements accessed.
Comparative Analysis — BTN 2-2
1. Apple ($ millions)
2. Google ($ millions)
3. Apple has the higher degree of financial leverage. Apple’s debt ratio is
markedly higher for the current year than that of Google (40.3% vs.
Ethics Challenge — BTN 2-3
This case involves a conflict between the need for efficiency and the need
for control. While it makes sense to take and process lunch orders quickly,
The assistant manager’s explanation about the head manager not arriving
until 3 o’clock suggests that the head manager doesn’t know about the
proposed shortcut. Thus, the new employee is faced with the dilemma of
It is possible that the assistant manager does not understand the potential
for fraud and abuse if this shortcut is used. If the relationship between you
If the assistant manager insists, you may want to work as instructed to get
an idea of whether the shortcut is being abused by the assistant manager
Communicating in Practice — BTN 2-4
MEMORANDUM
To: Lila Corentine
From:
Subject: Financial statements explanation
Date:
The four major financial statements and their purposes are:
Income statement describes a company’s revenues and expenses along
with the resulting net income or loss over a period of time. It helps
explain how equity changes during a period due to earnings activities.
Balance sheet describes a company’s financial position (assets,
liabilities, and equity) at a point in time.
These financial statements are linked to each other across time.
Specifically, a balance sheet reports an organization’s financial position at
a point in time. The income statement, statement of owner’s equity, and
statement of cash flows report on performance over a period of time. These
three statements link balance sheets from the beginning to the end of a
reporting period. That is, they explain how the financial position of an
organization changes from one point to another.
Taking It to the Net — BTN 2-5
1. The prior three years’ net income or (loss) for Amazon are ($ millions):
2. The three years net cash provided by operations follows ($ millions):
3. In 2013, Amazon had net income of $274 million and operating cash
The reason its cash balance only increased by $574 million in 2013 was
because of cash outflows of $4,276 million for its investing activities and
Teamwork in Action — BTN 2-6
<Instructor note: There is no specific solution to this activity.>
The following sample solution gives a summary outline of what a minimum report
needs to include. Assume a team member selects assets:
Category: Assets
a. Increases (decreases) in assets are debits (credits) to asset accounts.
Debit means left side, credit means right side. The normal side of an
account refers to the side where increases are recorded. For assets, this
is the debit, or left, side.
b. Owner investment of $10,000 cash in business.
c. Assets = Liabilities + Owner, Capital – Withdrawals + Revenues – Expenses
Owner investments have no effect on the income statement, but they do
d. Paid rent expense with $2,000 cash.
e. Assets = Liabilities + Owner, Capital – Withdrawals + Revenues – Expenses
An expense paid in cash will decrease net income on the income statement
and decrease operating cash flows on the statement of cash flows.
Entrepreneurial Decision — BTN 2-7
There are several issues that this entrepreneurial owner should consider.
Those considerations include the following three issues (among others):
If she chooses to contribute her own funds for the expansion, she will be
If she chooses to borrow, she will have interest and loan payments to
If she can pay the interest and loan payments, it can be to her advantage
Entrepreneurial Decision — BTN 2-8
1.
MARTIN MUSIC SERVICES
Balance Sheet
December 31, 2015
Assets Liabilities
Cash…………………………….. $ 3,600 Accounts payable……………… $ 2,200
Accounts receivable …….. 9,600 Unearned lesson fees ……….. 15,600
2.
Debt ratio = Total liabilities / Total assets = $17,800 / $80,700 = 22.1%
3. The prospects of a bank loan are likely to be good. (i) The debt ratio
Overall, given the information and the assumption that current
performance will continue into the future, the prospects of a bank loan
are good.
Note: The loan does carry some risk—fueling this risk are (i) poor
Hitting the Road — BTN 2-9
Findings will vary. It is advisable that the instructor obtain a few classified
sections from newspapers that were published over the period of the
assignment. If student reports lack responses for question 2, it is
informative and motivating to bring these (accounting-related job
opportunities) sections to class when discussing or returning student
reports as many students are not accounting majors.
Global Decision — BTN 2-10
1. An analysis of return on assets suggests that Apple (19.3%) yields
2. An analysis of the debt ratio suggests that Apple (at 40.3%) presents
the greatest risk, followed by Samsung (29.9%) and then Google
3. In this case, there is no clear answer based on these two ratios alone.
Apple has a relatively higher return on assets but also the highest debt
ratio. Google has the lowest return (slightly lower return on assets