Essay on Chapter 2 Solutions

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CHAPTER 2

The Financial Statements

BRIEF EXERCISES

BE2–1

2008

2008 2008 Beginning Ending Retained 2008 2008 2008 Retained Earnings + Revenues – Expenses – Dividends = Earnings

$28.2 + $43.3 – $38.2 – X = $30.6

X = $2.7

2008 Dividends as a percentage of 2008 net income:

2008 Dividends = $ 2.7 = 52.9% 2008 Net income ($43.3-$38.2) $ 5.1

BE2–2

1) Current Liabilities financed $32 billion of the assets. Current Liabilities divided by Total assets = $32/$59 = 54.2%

2) Long-term debt financed $18 billion of the assets. Long-term debt divided by total assets = $18/$59 = 30.5%

3) Stockholders’ equity financed $9 billion
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| |or Financing | | |Flows |Stockholders Equity |
|1 |Financing |Yes |No |Yes |Yes |
|2 |Operating |Yes |Yes |Cannot tell |Yes |
|3 |Operating |Yes |Yes |Yes |Yes |
|4 |Investing |Yes |No |Cannot tell |No |
|5 |Financing |Yes |No |Yes |No |
|6 |Financing |Yes |No |Yes |Yes |
|7 |Investing |Yes |No |Yes |No |
|8 |Operating |Yes |No |Yes |No |

E2–2

| |Operating, Investing,|Balance Sheet |Income Statement |Statement of Cash |Statement of |
| |or Financing | | |Flows |Shareholders
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