Financial Accounting, 9/e 2-21
E2–12.
Req. 1
Transaction
Brief Explanation
1
Issued common stock to shareholders for $45,000 cash. (Volz
Cleaning is a corporation because it issues stock. Par value is $2.00
per share $6,000 common stock amount divided by 3,000 shares
issued equals $2.00 per share).
Req. 2
Volz Cleaning, Inc.
Balance Sheet
At March 31
Assets
Liabilities
Current Assets
Notes payable
$27,000
Cash
$27,000
Total Liabilities
27,000
Investments
Note receivable
33,000
Computer equipment
39,000
Delivery truck
35,000
45,000
Total Assets
$72,000
$72,000
Purchased a delivery truck for $35,000; paid $8,000 cash and gave a
Loaned $2,000 cash; borrower signed a short-term note for this
amount.
Purchased short-term investments for $7,000 cash.
Sold short-term investments at cost for $3,000 cash.
Purchased computer equipment for $4,000 cash.
E2–13.
a.
70,000
5,000
65,000
b.
c.
18,000
d.
e.
15,000
Financial Accounting, 9/e 2-23
E2–14.
a.
1,508
1,508
b. No transaction has occurred because there has been no exchange or receipt of
cash, goods, or services.
f.
2,598
2,250
348
g.
2,616
2,616
c.
Cash (−A) ……………………………………………………………..
d.
Cash (+A) ………………………………………………………………….
5,899
Notes payable (+L) …………………………………………………
5,899
e.
Cash (+A) ………………………………………………………………….
Equipment (−A) ……………………………………………………..
E2–15.
Req. 1
Assets $ 10,500 = Liabilities $ 3,000 + Stockholders’ Equity $ 7,500
Req. 2
Cash
Short-Term Investments
Property & Equipment
Beg.
5,000
Beg.
2,500
Beg.
3,000
(a)
4,000
1,500
(b)
1,500
(c)
(b)
1,500
(c)
(d)
End.
End.
End.
Beg.
Beg.
(a)
End.
End.
Beg.
Beg.
Beg.
(d)
Req. 3
Assets $ 13,700 = Liabilities $ 7,000 + Stockholders’ Equity $ 6,700
Req. 4
Current
=
Current Assets
=
$11,200+$1,000
=
$12,200
=
5.55
Ratio
Current Liabilities
$2,200
$2,200
Financial Accounting, 9/e 2-25
E2–16.
Higgins Company
Balance Sheet
At December 31
Assets
Liabilities
Current Assets
Current Liabilities
Cash
$ 11,200
Short-term notes payable
$ 2,200
Short-term investments
1,000
Total Current Liabilities
2,200
E2–17.
Req. 1
Cash
Short-Term
Notes Receivable
Land
Beg.
0
Beg.
0
Beg.
0
(a)
40,000
4,000
(c)
(e)
4,000
(b)
16,000
4,000
(e)
1,000
(d)
35,000
4,000
12,000
Beg.
0
0
Beg.
0
Beg.
(c)
20,000
16,000
(b)
16,000
(c)
(d)
1,000
21,000
16,000
0
Beg.
10,000
(a)
10,000
0
Beg.
30,000
(a)
30,000
Long-term notes payable
Common stock
Property and equipment
Total Assets
E2–17. (continued)
Req. 2
Strauderman Delivery Company, Inc.
Trial Balance
December 31, 2016
Debit
Credit
Financial Accounting, 9/e 2-27
E2–17. (continued)
Req. 3
Strauderman Delivery Company, Inc.
Balance Sheet
At December 31, 2016
Assets
Liabilities
Current Assets
Current Liabilities
Cash
$35,000
Short-term notes payable
$16,000
Total Assets
$72,000
Total Liabilities &
Stockholders’ Equity
$72,000
Req. 4
Current Assets
÷
Current Liabilities
=
Current Ratio
2016
$39,000
÷
$16,000
=
2.44
Req. 5
The management of Strauderman Delivery Company has already been financing the
company’s development through additional short-term debt, from $16,000 in 2016 to
Short-term note receivable
Long-term notes payable
Land
Equipment
Additional paid-in capital
E2–18.
Transaction
Brief Explanation
(a)
Issued 100,000 shares of common stock (par value $0.02 per share) to
shareholders in exchange for $20,000 cash and $5,000 tools and
equipment.
Loaned $1,800 cash; borrower signed a note receivable for this amount.
Purchased a building for $40,000; paid $10,000 cash and signed a
Sold tools and equipment for $900 cash (their original cost).
E2–19.
Req. 1
Increases with…
Decreases with…
Equipment
Purchases of equipment
Sales of equipment
Notes receivable
Additional loans to others
Collection of loans
Notes payable
Additional borrowings
Payments of debt
Financial Accounting, 9/e 2-29
E2–20.
Activity
Type of
Activity
Effect on
Cash
(a) Capital expenditures (for property, plant, and equipment)
I
−
(b) Repurchases of common stock from investors
F
−
E2–21.
Activity
Type of
Activity
Effect on
Cash
(a) Additional borrowing from banks
F
+
(b) Purchase of investments
I
−
(c) Sale of assets and investments (assume sold at cost)
+
(d) Issuance of stock
F
+
(e) Purchases of property, plant, and equipment
−
+
E2–22.
1. Current assets
In the asset section of a classified balance sheet.
2. Debt principal repaid
In the financing activities section of the statement of
cash flows.
3. Significant accounting policies
Usually the first note after the financial statements.
5. Dividends paid
In the financing activities section of the statement of
cash flows.
6. Short-term obligations
In the current liabilities section of a classified
balance sheet.
(c) Sale of short-term investments
+
(d) Issuance of common stock
F
+
(e) Purchases of short-term investments
I
−
(f) Dividends paid on common stock.
F
−
PROBLEMS
P2–1.
Balance
Sheet
Classification
Debit or
Credit
Balance
(1)
Notes and Loans Payable (short-term)
CL
Credit
(2)
Materials and Supplies
CA
Debit
(3)
Common Stock
SE
Credit
(4)
Patents (an intangible asset)
NCA
Debit
(5)
Income Taxes Payable
CL
Credit
(6)
Credit
(7)
Marketable Securities (short-term)
CA
Debit
(8)
Property, Plant, and Equipment
NCA
Debit
(9)
Retained Earnings
SE
Credit
(10)
Notes and Accounts Receivable (short-term)
(11)
Investments (long-term)
(12)
Cash and Cash Equivalents
CA
Debit
(13)
Accounts Payable
Credit
(14)
Crude Oil Products and Merchandise
(15)
Additional Paid-in Capital
SE
Credit
P2–2.
Req. 1
East Hill Home Healthcare Services was organized as a corporation. Only a
corporation issues shares of capital stock to its owners in exchange for their investment,
as in transaction (a).
Req. 4
(a) Total assets = $111,500 + $18,000 + $5,000 + $510,500 + $160,000 + $65,000
= $870,000
(b) Total liabilities = $100,000 + $180,000
= $280,000
Req. 5
Current
=
Current Assets
=
$111,500+$18,000+$5,000
=
$134,500
=
1.35
Ratio
Current Liabilities
$100,000
100,000
P2–2. (continued)
Req. 2
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
Short-Term
Investments
Notes
Receivable
Land
Buildings
Equipment
ST Notes LT Notes
Payable Payable
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Beg.
50,000
500,000
100,000
50,000
=
100,000 100,000
20,000
80,000
400,000
(a)
+90,000
=
+9,000
+81,000
(b)
+14,000
+60,000
=
+80,000
(c)
=
(d)
=
(e)
=
+5,000
=
Financial Accounting, 9/e 2-33
P2–3.
Req. 1 and 2
Cash
Investments (short-term)
Accounts Receivable
Beg.
22,000
Beg.
3,000
Beg.
3,000
(e)
11,000
10,000
(a)
(a)
10,000
(f)
9,000
5,000
(b)
Equipment
Factory Building
Intangibles
Beg.
50,000
Beg.
90,000
Beg.
5,000
(c)
18,000
1,000
(i)
(h)
24,000
(g)
3,000
End.
67,000
End.
114,000
End.
8,000
Accounts Payable
Accrued Liabilities Payable
Notes Payable (short-term)
15,000
Beg.
4,000
Beg.
7,000
Beg.
13,000
(c)
9,000
(f)
15,000
4,000
29,000
47,000
Beg.
10,000
Beg.
80,000
Beg.
16,000
(h)
1,000
(e)
10,000
(e)
63,000
11,000
90,000
31,000
Beg.
31,000
(i)
1,000
5,000
(c)
13,000
3,000
3,000
(g)
8,000
(h)
Notes Receivable (long-term)
Beg.
20,000
Beg.
1,000
(b)
5,000
12,000
20,000
6,000
P2–3. (continued)
Req. 3
No effect was recorded for (d). The agreement in (d) involves no exchange or receipt of
cash, goods, or services and thus is not a transaction.
Req. 4
Cougar Plastics Company
Trial Balance
At December 31
Debit
Credit
Cash
$ 12,000
Investments (short-term)
13,000
Accounts receivable
Inventory
20,000
Notes receivable (long-term)
Equipment
67,000
Factory building
Intangibles
Accounts payable
$ 15,000
Accrued liabilities payable
Notes payable (short-term)
29,000
Notes payable (long-term)
63,000
Common stock
11,000
Additional paid-in capital
90,000
Retained earnings
31,000
Financial Accounting, 9/e 2-35
P2–3. (continued)
Req. 5
Cougar Plastics Company
Balance Sheet
At December 31
Assets
Liabilities
Current Assets
Current Liabilities
Cash
$ 12,000
Accounts payable
$ 15,000
Req. 6
Current
=
Current Assets
=
$48,000
=
1.00
Ratio
Current Liabilities
$48,000
Investments
Accrued liabilities payable
Accounts receivable
Notes payable
Long-term notes payable
63,000
Notes receivable
Equipment
Factory building
Common stock
11,000
Intangibles
Additional paid-in capital
90,000
Retained earnings
31,000
P2–4.
Transaction
Type of Activity
Effect on Cash
(a)
I
–
(b)
I
–
(c)
I
–
(d)
(e)
(g)
I
–
(h)
I
–
I
P2–5.
Req. 1
a.
18,266
18,266
b.
4,200
16,800
21,000
c.
d.
1,469
e.
18,810
11,126
Financial Accounting, 9/e 2-37
P2–5. (continued)
Req. 2
Long-Term
Investments
Property, Plant, and
Equipment
Other
Noncurrent Assets
Beg.
130,162
Beg.
20,624
Beg.
12,522
(b)
4,200
(c)
10,981
134,362
31,605
12,522
Accounts
Payable
Accrued
Expenses
Unearned
Revenue
30,196
Beg.
18,453
Beg.
8,491
Beg.
30,196
18,453
8,491
Payable
6,308
Beg.
1,410
(c)
(f)
7,718
11,126
Beg.
Beg.
(a)
Common Stock
Beg
23,312
Beg.
Beg.
(d)
1,468
(d)
(f)
11,126
24,780
Investments
Beg.
13,844
Beg.
11,233
Beg.
17,460
(a)
18,266
21,000
(b)
(b)
(e)
(d)
9,571
(c)
9,223
17,460
(e)
21,818
Beg.
Beg.
23,883
P2–5. (continued)
Req. 3
Apple, Inc.
Balance Sheet
At September 26, 2015
(in millions)
ASSETS
Current Assets:
Cash
$ 21,818
Short-term investments
9,223
Accounts receivable
17,460
Inventories
2,111
Total assets
$252,984
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable
$30,196
Accrued expenses
18,453
Unearned revenue
8,491
Dividends payable
11,126
Short-term notes payable
7,718
27,857
Common stock
Additional paid-in capital
Retained earnings
Financial Accounting, 9/e 2-39
P2–5. (continued)
Req. 4
Current
=
Current Assets
=
$74,495
=
0.980
Ratio
Current Liabilities
$75,984
P2–6.
Activity
Type of
Activity
Effect on
Cash
(a) Borrowed from banks
F
+ 18,266
(b) Purchased investments
I
− 21,000
(f) Declared dividends (does not affect cash flows)
ALTERNATE PROBLEMS
AP2–1.
Balance
Sheet
Classification
Debit or
Credit
Balance
(1)
Prepaid Expenses
CA
Debit
(2)
Inventories
CA
Debit
(3)
Accounts Receivable
CA
Debit
(4)
Long-Term Debt
NCL
Credit
(5)
Cash and Equivalents
CA
Debit
(6)
Goodwill (an intangible asset)
(7)
Accounts Payable
CL
Credit
(8)
Income Taxes Payable
CL
Credit
(9)
Property, Plant, and Equipment
NCA
Debit
(10)
Retained Earnings
SE
Credit
(11)
Additional Paid-in Capital
SE
(12)
Short-Term Borrowings
CL
Credit
(13)
Accrued Liabilities
(14)
Common Stock
SE
Credit