Chapter 02 – Investing and Financing Decisions and the Accounting System
Solutions Chapter 2 – Set B Exercises – Libby 8e
E2–1B.
Req. 1
Received
Given
(a)
Cash (A)
Contributed capital (SE)
(b)
Equipment (A) [or Delivery truck]
Cash (A)
(c)
No exchange transaction
—
(d)
Equipment (A) [or Computer equipment]
Note payable (L)
(e)
Building (A) [or Construction in progress]
Cash (A)
(f)
Intangibles (A) [or Copyright]
Cash (A)
(g)
Retained earnings (SE) [Received a reduction
in the amount available for payment to
stockholders]
Cash (A)
(h)
Land (A)
Cash (A)
(i)
Intangibles (A) [or Patents]
Cash (A) and Note payable (L)
(j)
No exchange transaction
—
(k)
Investments (A)
Cash (A)
(l)
Cash (A)
Short-term note payable (L)
(m)
Note payable (L) [Received a reduction in its
promise to pay]
Cash (A)
Req. 2
The truck in (b) would be recorded as an asset of $19,000. The land in (h) would be
recorded as an asset of $150,000. These are applications of the historical cost
principle.
Req. 3
Since transaction (j) occurs between the owner and others, there is no effect on the
business because of the separate-entity assumption.
f.
Cash (+A) ………………………………………………………………….
Short-term investments (−A) ……………………………………
E2–6B
a.
Buildings (+A) …………………………………………………………….
242.0
Equipment (+A) …………………………………………………………
27.3
Cash (−A) ……………………………………………………………..
24.3
Long-term note payable (+L) …………………………………..
245.0
b.
Retained earnings (−SE) ……………………………………………..
95.2
Dividends payable (+L) …………………………………………..
95.2
c.
Short-term investments (+A) …………………………………………
2,709.2
Cash (−A) ……………………………………………………………..
2,709.2
d. No journal entry required.
e.
Cash (+A) …………………………………………………………………
135.4
Contributed capital (+SE) ……………………………..
135.4
1,900
Beg.
1,300
Beg.
10,000
(a)
1,900
End.
11,300
End.
8,300
Beg.
2,000
Beg.
(d)
400
8,300
End.
1,600
End.
Current
10.92
Ratio
E2–10B
Req. 1
Assets $ 13,500 = Liabilities $ 3,200 + Stockholders’ Equity $ 10,300
Req. 2
Cash
Short-Term Investments
Property & Equipment
Beg.
6,500
Beg.
2,300
Beg.
4,700
(a)
10,000
1,300
(b)
2,350
(c)
(b)
1,300
(c)
2,350
400
(d)
End.
19,750
End.
1,000
End.
2,350
