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Serial Problem, Business Solutions (Continued)
Prepaid Insurance Acct. No. 128
Date
Explanation
PR
Debit
Credit
Balance
Oct. 5 2,220 2,220
Prepaid Rent Acct. No. 131
Date
Explanation
PR
Debit
Credit
Balance
Date
Explanation
PR
Debit
Credit
Balance
Date
Explanation
PR
Debit
Credit
Balance
Date
Explanation
PR
Debit
Credit
Balance
Oct. 3 1,420 1,420
8 1,420 0
Common Stock Acct. No. 307
Date
Explanation
PR
Debit
Credit
Balance
Oct. 1 73,000 73,000
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
Wages Expense Acct. No. 623
Date
Explanation
PR
Debit
Credit
Balance
Date
Explanation
PR
Debit
Credit
Balance
Date
Explanation
PR
Debit
Credit
Balance
Date
Explanation
PR
Debit
Credit
Balance
Nov. 22 250 250
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 .................................................................. $38,264
Accounts receivable ....................................... 12,618
Computer supplies .......................................... 2,545
Prepaid insurance ........................................... 2,220
Prepaid rent ..................................................... 3,300
1. Apple reports ($ 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
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,
this efficiency is being accomplished by a shortcut that greatly weakens
control over cash receipts. Cash could be received and lost or stolen
because there would be no initial record of how much was received.
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.
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
flows of $5,475 million; and, in that same year, total net cash increased
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.
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
risking her own money, but she will not have the expense of interest
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
3. The prospects of a bank loan are likely to be good. (i) The debt ratio
indicates that 78% of the company’s funding is from equity. Also, there
are no debt obligations requiring periodic payments. This implies low
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
Global Decision — BTN 2-10
1. An analysis of return on assets suggests that Apple (19.3%) yields the
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 (21.3%)
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
