Solutions Chapter 5 – Set B Exercises – Libby 7e
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
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
NONCURRENT LIABILITIES
Long-term debt
Other long-term liabilities
58,070
Total noncurrent liabilities
STOCKHOLDERS’ EQUITY
Common stock, 28,947,222 shares outstanding
46,268
Additional paid-in capital
49,138
Retained earnings
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$529,146
Inventories
43,112
Prepaid expenses
12,933
Other current assets
12,778
Total current assets
Property, plant and equipment, net
Goodwill
90,110
Other intangible assets, net
33,966
E5–1B. (continued)
Req. 2.
In each case, the term “net” means that the account is reported after the balance in the
E5–2B.
E5–3B.
Req. 1.
Beginning RE + Net income – Dividends = Ending RE
Req. 2.
E5–4B.
KRAMER CORPORATION
Income Statement
For the Year Ended December 31, 2012
Computations in Order
Sales revenue ………………………….. Given $78,000
Cost of goods sold…………………….. (a) $78,000 – $24,500 53,500
Gross profit ………………………………. Given 24,500
E5–5B.
Colins Industries
Income Statement
For the Year Ended December 31, 2011
Computations in Order
Sales revenue ………………………….. Given $138,000
Cost of goods sold…………………….. (a) $138,000 – $63,000 (given) 75,000
Gross profit ………………………………. Given 63,000
*Given
E5–6B.
Transaction
Current
Assets
Gross Profit
Current
Liabilities
a.
+$488.7
+$488.7
NE
a. Accounts receivable (+CA) …………………………………. 812.2
Sales revenue (+R) ……………………………………. 812.2
Cost of goods sold (+E) ……………………………………….. 323.5
Inventory (–CA) ……………………………………….. 323.5
Note that Gross Profit increases (by $488.7) since it is defined as Sales
(increased by $812.2) less Cost of Goods Sold (increased by only $323.5).
E5–7B.
Req. 1.
Current
Year
Prior
Year
Req. 2.
Security analysts would be more likely to increase their estimates of share value on the
E5–8B.
Req. 1.
Current
Year
Prior
Year
Net Income (given)
$223,022 = 0.073
$329,478 = 0.114
Req. 2.
ROA Analysis
Current
Year
Prior
Year
Net Income
Net Sales
$223,022 = 0.084
$2,659,997
$329,478 = 0.120
$2,738,771
Return on Assets
E5–9B.
HERNANDEZ CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 2011
From Operating Activities
Net income ……………………………………………………….. $32,000
Increase in accounts receivable …………………………... (7,000)
From Financing Activities
Borrowed cash on three-year note ………………………… 40,000
E5-10B.
Transaction
Current
Assets
Gross Profit
Current
Liabilities
Cash Flow from
Operating Activities
a.
NE
NE
NE
+ 37.2
b.
– 3.8
NE
– 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.