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).
Purchased a delivery truck for $35,000; paid $8,000 cash and gave a
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.
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
Notes receivable
33,000
Computer equipment
39,000
Delivery truck
35,000
45,000
Total Assets
$72,000
$72,000
E2–13.
a.
70,000
5,000
65,000
b.
c.
18,000
d.
e.
E2–14.
(in millions of Euros)
a.
2,106
2,106
b. No transaction has occurred because there has been no exchange or receipt of
cash, goods, or services.
8,952
8,952
8,410
2,587
3,592
E2–15.
Req. 1
Req. 2
a.
Cash (+A)
4,000
Notes payable (+L)
4,000
b.
Cash (+A)
1,500
1,500
Dividends payable (+L)
Req. 3
Cash
Short-Term
Investments
Property and Equipment
Beg.
5,000
Beg.
2,500
Beg.
3,000
(a)
4,000
1,500
(b)
1,500
(c)
(b)
1,500
(c)
1,500
(e)
End.
End.
1,000
End.
1,500
2,200
Beg.
Beg.
Beg.
4,000
(a)
(e)
(d)
2,200
End.
4,800
End.
End.
Beg.
4,000
Beg.
3,000
Beg.
(d)
E2–15. (continued)
Req. 4
Higgins Company
Trial Balance
For the Year Ended December 31
Debit
Credit
Cash
11,200
Short-term investments
1,000
Property and equipment
1,500
Notes payable (current)
Notes payable (noncurrent)
Dividends payable
Common stock
Additional paid-in capital
Retained earnings
Req. 5
Higgins Company
Balance Sheet
At December 31
Assets
Current Assets:
Cash
Short-term investments
Total current assets
Property and equipment
Total assets
$13,700
Liabilities and Stockholders’ Equity
Current Liabilities:
Notes payable
$ 2,200
Total current liabilities
Notes payable
Total liabilities
Common stock
Additional paid-in capital
Retained earnings
Total liabilities and stockholders’ equity
$13,700
E2–15. (continued)
Req. 6
This ratio indicates that, for every $1 of current liabilities, Higgins maintains
approximately $5.55 of current assets. Higgins’ ratio is higher than the industry average
of 1.50, indicating that Higgins maintains a lower level of short-term debt compared to
E2–16.
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
16,000
0
Beg.
10,000
(a)
10,000
0
Beg.
30,000
(a)
30,000
Req. 2
Bailey Delivery Company, Inc.
Trial Balance
December 31, 2018
Debit
Credit
Cash
$35,000
Short-term notes receivable
4,000
Land
Equipment
Short-term notes payable
Long-term notes payable
Common stock
Additional paid-in capital
E2–16. (continued)
Req. 3
Bailey Delivery Company, Inc.
Balance Sheet
At December 31, 2018
Assets
Liabilities
Current Assets
Current Liabilities
Long-term notes payable
Total Assets
$72,000
Total Liabilities &
Stockholders’ Equity
$72,000
Req. 4
Current Assets
÷
Current Liabilities
=
Current Ratio
2018
$39,000
÷
$16,000
=
2.44
Req. 5
The management of Bailey Delivery Company has already been financing the
company’s development through additional short-term debt, from $16,000 in 2018 to
E2–17.
Transaction
Brief Explanation
(a)
Purchased a building for $40,000; paid $10,000 cash and signed 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 of tools and
E2–18.
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
Req. 2
Equipment
Notes Receivable
Notes Payable
1/1
500
1/1
150
100
1/1
12/31
100
12/31
170
160
12/31
Beginning
balance
+
“+”
−
“−”
=
Ending
balance
Equipment
$500
+
250
−
?
=
$100
Notes payable
100
+
−
?
=
160
E2–19.
Activity
Type of
Activity
Effect on
Cash
(a) Capital expenditures (for property, plant, and equipment)
I
−
(b) Repurchases of common stock from investors
F
−
(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
−
E2–20.
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
−
+
E2–21.
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.
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)
Intangible Assets
Debit
(5)
Income Taxes Payable
CL
Credit
(6)
Long-Term Debt
Credit
(7)
Property, Plant, and Equipment
Debit
(8)
Retained Earnings
SE
Credit
(9)
Notes and Accounts Receivable (short-term)
Investments (long-term)
Cash and Cash Equivalents
CA
Debit
Accounts Payable and Accrued Liabilities
Credit
Crude Oil, Products and Merchandise
Additional Paid-in Capital
SE
Credit
P2–2.
Req. 1
East Hill Home Healthcare Services was organized as a corporation. Only a
Req. 2 (On next page)
Req. 3
Req. 4
(a) Total assets = $111,500 + $18,000 + $5,000 + $510,500 + $160,000 + $65,000
= $870,000
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
=
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)
(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
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 (current)
15,000
Beg.
4,000
Beg.
7,000
Beg.
13,000
(c)
9,000
(f)
15,000
4,000
29,000
Beg.
10,000
Beg.
80,000
Beg.
(h)
1,000
(e)
10,000
(e)
11,000
90,000
31,000
Beg.
31,000
P2–3. (continued)
Req. 3
No effect was recorded for (d). The agreement in (d) involves no exchange or receipt of
Req. 4
Jaguar Plastics Company
Trial Balance
At December 31
Debit
Credit
Cash
12,000
Investments (short-term)
13,000
Accounts receivable
3,000
Inventory
20,000
Notes receivable (long-term)
6,000
Equipment
67,000
Factory building
Intangibles
8,000
Accounts payable
15,000
Accrued liabilities payable
4,000
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
P2–3. (continued)
Req. 5
Jaguar Plastics Company
Balance Sheet
At December 31
Assets
Liabilities
Current Assets
Current Liabilities
Cash
$ 12,000
Accounts payable
$ 15,000
Investments
Accrued liabilities payable
Accounts receivable
Notes payable
Long-term notes payable
63,000
Notes receivable
Equipment
Factory building
Common stock
11,000
Intangibles
90,000
31,000
Total Assets
$243,000
Total Liabilities &
Stockholders’ Equity
$243,000
Req. 6
Current
Ratio
P2–4.
Transaction
Type of Activity
Effect on Cash
(a)
I
–
(b)
I
–
(c)
I
–
(d)
(e)
(g)
I
–
(h)
I
–
I
P2–5. (dollars in millions)
Req. 1
a.
18,266
18,266
b.
c.
d.
e.
11,126
P2–5. (continued)
Req. 2
Cash
Short-Term
Investments
Accounts Receivable
Beg.
20,289
Beg.
53,892
Beg.
17,874
(a)
18,266
21,000
(b)
(b)
16,800
18,810
(e)
(d)
1,469
9,571
(c)
51,882
17,874
(e)
18,810
28,263
Beg.
Beg.
31,735
31,735
Investments
Beg.
Beg.
33,783
Beg.
18,177
(b)
(c)
10,981
44,764
18,177
Accounts
Payable
Accrued
Expenses
Unearned
Revenue
49,049
Beg.
25,744
Beg.
7,548
Beg.
49,049
25,744
7,548
Payable
18,473
Beg.
1,410
(c)
11,126
(f)
19,883
11,126
Noncurrent Liabilities
Beg.
Beg.
(a)
Common Stock
Earnings
Beg
35,866
Beg.
98,180
Beg.
(d)
1,468
(d)
(f)
11,126
37,334
87,054
P2–5. (continued)
Req. 3
Apple, Inc.
Trial Balance
For the Year Ended September 29, 2018
(in millions)
Debit
Credit
Cash
28,263
Short-term Investments
51,882
Accounts receivable
17,874
Inventories
4,855
Other current assets
31,735
Long-term investments
Property, plant, and equipment
44,764
Other noncurrent assets
18,177
Accounts payable
49,049
Accrued expenses
25,744
Unearned revenue
7,548
Short-term notes payable
19,883
Dividends payable
11,126
Long-term debt
Other noncurrent liabilities
43,251
Common stock
Additional paid-in capital
37,334
Retained earnings
87,054
P2–5. (continued)
Req. 4
Apple, Inc.
Balance Sheet
At September 29, 2018
(in millions)
ASSETS
Current Assets:
Cash
$ 28,263
Short-term investments
51,882
Accounts receivable
17,874
Inventories
4,855
Other current assets
31,735
198,914
44,764
18,177
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable
$49,049
Accrued expenses
25,744
Unearned revenue
7,548
Dividends payable
11,126
Short-term notes payable
19,883
43,251
Common stock
Additional paid-in capital
37,334
Retained earnings
124,390