Chapter 05 – Communicating and Interpreting Accounting Information
1
Solutions Chapter 5 – Set B Exercises – Libby 8e
E5–1B.
Req. 1.
Kingston, Inc.
Consolidated Balance Sheet
December 31, Current Year
(in millions)
Assets
CURRENT ASSETS
Cash and cash equivalents
$ 807
Accounts receivable, net
84,406
Inventories
43,112
Prepaid expenses
12,933
Other current assets
12,778
Total current assets
154,036
Property, plant and equipment, net
236,085
Goodwill
90,110
Other intangible assets, net
33,966
Other assets
14,949
TOTAL ASSETS
$529,146
Liabilities and Stockholders’ Equity
CURRENT LIABILITIES
Accounts payable
$ 35,939
Accrued compensation
26,312
Other payables and accrued liabilities
32,318
Short-term debt
10,000
Total current liabilities
104,569
NONCURRENT LIABILITIES
Long-term debt
101,000
Other long-term liabilities
58,070
Total noncurrent liabilities
159,070
STOCKHOLDERS’ EQUITY
Common stock, 28,947,222 shares outstanding
46,268
Additional paid-in capital
49,138
Retained earnings
170,101
2
Total stockholders’ equity
265,507
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$529,146
E5–1B. (continued)
Req. 2.
E5–2B.
E5–3B.
Req. 1.
Beginning RE + Net income – Dividends = Ending RE
Dividends = Beginning RE + Net income – Ending RE
E5–4B.
KRAMER CORPORATION
Income Statement
For the Year Ended December 31, 2015
Chapter 05 – Communicating and Interpreting Accounting Information
3
E5–5B.
Colins Industries
Income Statement
For the Year Ended December 31, 2015
Computations in Order
E5–6B.
Chapter 05 – Communicating and Interpreting Accounting Information
Transaction
Current
Assets
Current
Liabilities
a.
+$488.7
NE
b.
+$429.0
+$429.0
c.
–$44.5
NE
E5–7B.
Req. 1.
Current
Year
Prior
Year
Net Income (given)
Average Total Assets
(given)
$38,796 = 0.098
$394,143
$34,735 = 0.089
$390,728
The increase in ROA from 0.089 in the prior year to 0.098 in the current year means
that the firm earned $0.009 more for each $1 of investment.
Req. 2.
© 2014 by McGraw-Hill Global Education Holdings, LLC. This is proprietary material solely for authorized instructor use. Not authorized for sale
or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole
or part.
5
E5–8B.
Req. 1.
Current
Year
Prior
Year
Net Income (given)
Average Total Assets
(given)
$223,022 = 0.073
$3,051,594
$329,478 = 0.114
$2,883,833
E5–9B.
HERNANDEZ CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 2014
From Operating Activities
© 2014 by McGraw-Hill Global Education Holdings, LLC. This is proprietary material solely for authorized instructor use. Not authorized for sale
or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole
or part.
6
E5-10B.
Transaction
Current
Assets
Current
Liabilities
Cash Flow from
Operating Activities
a.
NE
NE
+ 37.2
b.
– 3.8
– 3.8
NE
The effects of the transactions can be seen by making the related journal entries and
using CA and CL to denote current asset and current liability, respectively.
a. Cash (+CA) ………………………………………………………… 37.2
Accounts receivable (–CA) …………………………. 37.2
b. Notes payable (–CL) ……………………………………………. 3.8
Cash (–CA) ………………………………………………. 3.8
Note that repayment of debt is a financing activity.