worksheet chap 1_accounting

7/25/2019 Worksheet Chap 1_Accounting

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E1-5

Assets = Liabilities + Stockholders' Equity

160,000.00$ = 70,000.00$ + 90,000.00$

95,000.00$ = 77,000.00$ + 18,000.00$

675,000.00$ = 227,000.00$ + 448,000.00$

E1-12

No. Description Classification

1 Amounts due from customers Asset

2 Amounts owned suppliers Liability

3 Cash on hand Asset

4 Cash paid to stockholders Divident

5 Cash sales Revenue

6 Equipment Asset

7 Note payable owned to the bank Liability

8 Rent paid for the month Expense

9 Sales commissions paid to salespersons Expense10 Wages paid to employees Expense

E1-13

Retained earnings statement

Retained earnings, June 1, 20Y7: 615,000.00$

Increase: 230,000.00$

Decrease: (45,000.00)$

Retained earnings, June 30, 20Y7: 800,000.00$

E1-14Income statement for the month end February 28, 20Y5

Fees earned 925,000.00$

Operating expenses

Wage expense (400,000.00)$

Rent expense (92,000.00)$

Supplies expense (13,000.00)$

Miscellaneous expense (25,000.00)$

Total operating expenses (530,000.00)$

Net income 395,000.00$

Chapter 1


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E1-16.a

Balance sheet as of October 31, 20Y8 November 30, 20Y8

Assets

Cash 110,000.00$ 140,000.00$

Account receivebale 75,000.00$ 118,000.00$

Supplies 15,000.00$ 20,000.00$

Total assets 200,000.00$ 278,000.00$

Liabilities

Account payable 40,000.00$ 65,000.00$

Stockholders' Equity

Capital stock 60,000.00$ 60,000.00$

Retained earnings 100,000.00$ 153,000.00$

Total liabilities and stockholders equity 200,000.00$ 278,000.00$

E1-16.b

Retained earnings statement as of November 30,20Y8Opening balance 100,000.00$

Increase 53,000.00$

Decrease 0

Closing balance 153,000.00$

Conclusion: The net income for November is: $53,000

E1-16.b

Retained earnings statement as of November 30,20Y8

Opening balance 100,000.00$

Increase 73,000.00$Decrease (20,000.00)$


Conclusion: The net income for November is: $73,000

Chapter 1


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E1-20

Statement of Cash Flows, For the Month Ended July 31, Year 1

Cash flows from operating activities

Cash received from customers 600,000.00$

Cash paid out for expenses (380,000.00)$

Net cash flows from operating activities 220,000.00$

Cash flows from investing activities

Cash paid out for purchase of equipment (95,000.00)$

Cash flows from financing activities

Cash received from sale of capital stock 200,000.00$

Cash received from note payable 75,000.00$

Cash paid as dividends (25,000.00)$

Net cash flows from financing activities 250,000.00$

Net increase in cash 375,000.00$

July 1, Year 1 cash balance -

July 31, Year 1 cash balance 375,000.00$

P1-5.a

Income statement for the year ended December 31, 2013.

Revenue:

Sales 800,000.00$

Expenses:

Cost of sales (435,000.00)$

Selling and administrative expenses (80,000.00)$

Interest expense (2,000.00)$

Total expenses (517,000.00)$

Net income before taxes 283,000.00$

Income tax expense (53,000.00)$

Net income after taxes 230,000.00$

P1-5.b

Retained earnings statement for the year ended December 31, 2013

Opening balance -$Increase 230,000.00$

Decrease (30,000.00)$


Chapter 1


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P1-5.c

Balance sheet as of December 31, 2013.

Assets

Cash 40,000.00$

Accounts receivable 110,000.00$

Inventories 115,000.00$

Property, plant, and equipment 265,000.00$

Total assets 530,000.00$

Liabilities

Accounts payable 20,000.00$

Income taxes payable 8,000.00$

Note payable (due in 2019) 50,000.00$

Total liabilities 78,000.00$

Stockholders Equity

Capital stock 252,000.00$

Retained earnings 200,000.00$

Total stockholders equity 452,000.00$

Total liabilities and stockholders equity 530,000.00$

P1-5.d

Statement of Cash Flows, For the Year Ended December 31, Year 1

Cash flows from operating activities

Cash receipts from operating activities 690,000.00$

Cash payments for operating activities (657,000.00)$

Net cash flows from operating activities 33,000.00$

Cash flows from investing activities

Cash paid out for purchase of PPE (265,000.00)$

Cash flows from financing activities

Cash received from sale of capital stock 252,000.00$

Cash received from note payable 50,000.00$

Cash paid as dividends (30,000.00)$

Net cash flows from financing activities 272,000.00$

Net increase in cash 40,000.00$

July 1, Year 1 cash balance -$July 31, Year 1 cash balance 40,000.00$

Check -$

Chapter 1


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FA1-4.1

No1 No2 No3

Rate of returt Exxon Mobil Cocal-cola Walmart

FA1-4.2

Exxon Mobil Cocal-cola Walmart

Income before taxes and interest 73,504.00$ 11,856.00$ 26,720.00$

Total assets at the beginning of the year 302,510.00$ 72,921.00$ 180,782.00$

Total assets at the end of the year 331,052.00$ 79,974.00$ 193,406.00$

Rate of return 23.2% 15.5% 14.3%

FA1-4.3

FA1-5

Target Corporation Walmart

Income before taxes and interest a 5,325.00$ 26,720.00$

Total assets at the beginning of the year b 43,705.00$ 180,782.00$

Total assets at the end of the year c 46,630.00$ 193,406.00$

Rate of return 11.8% 14.3%

a( Walmart) / a(Target) 5.02

(b+c of Walmart) / (b+c of Target) 4.14

Analysis:

Case 1 - 2.1

ExxonMobil has the highest rate of return on total assets of 23.2%. This is due to the high demand for

petroleum based products. At the same time, Exxon-Mobils operations have the most risks

1. The Rate of return (RoR) of Walmart (14.3%) is higher than RoR of Target (11.8%). Since two companies

operate in the same industry, this ratio comparision may suggest that Walmart generates more profit than

Target for the same amount of assets

2. When we conpare two elements of RoR, including (1) income before taxes and interest and (2) total

assets, the figures show that:

- Walmar'size of assets is 4 times bigger than Target. This may indicate that Walmart may gain higher

benefits from economy of scales than Target

- While assets is 4 times biggers, Walmar can even generate more income before taxes and interest (5

times bigger than Target's amount). This fact suggests Walmart is more profitable than Target

Chapter 1


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By omitting the other financial statement to conceal a net loss during the past year, Loretta has violated the

ethis and professional conduct in business. The bank needs to review all important information regarding

the financial statements of applicant. Based on the information provided, bank may perform some analysis

and assessement of risks related to the loan application. Since making net loss in last year is a significant

information. Loretta may need to prepare some clearly explanations for that result, and what can be done

to improve the performance of the company

Chapter 1


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Case 1 - 2.2.a

Case 1 - 2.2.b

Case 1 - 2.2.c

Case 1 - 4.2

Both bankers and business owners share the common interest of the business doing well and being

successful. If the business is successful, the bankers will receive their loan payments on time with interest

and the owners (and stockholders) will be rewarded

The difference in the two bank balances, $175,000 ($215,000 $40,000), may not be pure profit from an

accounting perspective. To determine the accounting profit for the 8-month period, the revenues for the

period would need to be matched with the related expenses. The revenues minus the expenses would

indicate whether the business generated net income (profit) or a net loss for the period. Using only the

difference between the two bank account balances ignores such factors as amounts due from customers

(receivables), liabilities (accounts pay-able) that need to be paid for wages or other operating expenses,

additional investments that Dr. Tempkin may have made in the business during the period, or dividends

paid during the period.

Some businesses that have few, if any, receivables or payables may use a cash basis of accounting. Thecash basis of accounting ignores receivables and pay-ables because they are assumed to be insignificant in

amount. However, even with the cash basis of accounting, additional investments during the period and any

dividends during the period have to be considered in determining the net

income (profit) or net loss for the period

Owners are generally willing to provide bankers with information about the operating and financial

condition of the business, such as the following:

Operating Information:

description of business operations

results of past operations

preliminary results of current operations

plans for future operations

Financial Condition:

list of assets and liabilities (balance sheet)

estimated current values of assets

stockholders investment in the business

stockholders commitment to invest additional funds in the business

Owners are normally reluctant to provide proprietary operating information to bankers. Such information,

which could hurt the business if it becomes known by competitors, might include special processes used by

the business or future plans to expand operations into areas that are not currently served by a competitor

Bankers typically want as much information as possible about the ability of the business to repay the loan

with interest. Examples of such information are described in the preceding answer

Chapter 1

worksheet chap 1_accounting

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