FINANCIAL ACCOUNTING (LL)-W/CONNECT
FINANCIAL ACCOUNTING (LL)-W/CONNECT
10th Edition
ISBN: 9781260696295
Author: Libby
Publisher: MCG
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Chapter 2, Problem 3P

1.

To determine

Open the T-accounts for each of the balance sheet accounts, and enter the beginning balance for the current year.

1.

Expert Solution
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Explanation of Solution

T-account:

T-account refers to an individual account, where the increases or decreases in the value of specific asset, liability, stockholder’s equity, revenue, and expenditure items are recorded.

T-accounts for each of the balance sheet accounts are as follows:

Cash
Beg.22,000
Investments (short-term)
Beg.3,000
Accounts Receivable
Beg.3,000
Equipment
Beg.50,000
Factory Building
Beg.90,000
Intangibles
Beg.5,000
Accounts Payable
 15,000Beg.
Accrued Liabilities Payable
 4,000Beg.
Notes Payable (short-term)
 7,000Beg.
Long-Term Notes Payable
 47,000Beg.
Common Stock
 10,000Beg.
Additional Paid-in Capital
 80,000Beg.
Retained Earnings
 31,000Beg.

2.

To determine

Prepare the T-account for the given balance sheet accounts, and to determine the ending balance of each account.

2.

Expert Solution
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Explanation of Solution

T-accounts for each of the balance sheet accounts are as follows:

Cash
Beg.22,000
(e)11,00010,000(a)
(f)9,0005,000(b)
(i)1,0005,000(c)
 3,000(g)
 8,000(h)
12,000
Investments (short-term)
Beg.3,000
(a)10,000
  
13,000
Accounts Receivable
Beg.3,000
 
  
3,000
Inventory
Beg.20,000
  
20,000
Notes Receivable (long-term)
Beg.1,000
(b)5,000 
6,000
Equipment
Beg.50,000
(c)18,0001,000(i)
End.67,000
Factory Building
Beg.90,000
(h)24,000 
End.114,000
Intangibles
Beg.5,000
(g)3,000 
End.8,000
Notes Payable (short-term)
 7,000Beg.
 13,000(c)
 9,000(f)
 29,000
Accounts Payable
 15,000Beg.
 15,000
Accrued Liabilities Payable
 4,000Beg.
 4,000
Long-Term Notes Payable
 47,000Beg.
 16,000(h)
 63,000
Common Stock
 10,000Beg.
 1,000(e)
 11,000
Additional Paid-in Capital
 80,000Beg.
 10,000(e)
 90,000
Retained Earnings
 31,000Beg.
 31,000

3.

To determine

Explain the response for event (d).

3.

Expert Solution
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Explanation of Solution

Business transaction:

Business transaction is a record of any economic activity, resulting in the change in the value of the assets, the liabilities, and the stockholder’s equities, of a business. Business transaction is also referred to as financial transaction.

In this case, hiring a new president is not creating any impact on assets, liabilities and stockholder’s equity of the business, because it is not a business transaction.

4.

To determine

Prepare the trial balance of Company C at December 31.

4.

Expert Solution
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Explanation of Solution

Trial balance:

Trial balance is the summary of accounts, and their debit and credit balances at a given time. It is usually prepared at end of the accounting period.  Debit balances are listed in left column and credit balances are listed in right column.  The totals of debit and credit column should be equal.  Trial balance is useful in the preparation of the financial statements.

Trial balance of Company J is as follows:

Company J
Trial balance
At December 31
ParticularsDebit($)Credit($)
Cash12,000
Investments (short-term)13,000
Accounts receivable3,000
Inventory20,000
Notes receivable (long-term)6,000
Equipment67,000
Factory building114,000
Intangibles8,000
Accounts payable15,000
Accrued liabilities payable4,000
Notes payable (short-term)29,000
Notes payable (long-term)63,000
Common stock11,000
Additional paid-in capital90,000
Retained earnings31,000
    Total243,000243,000

Table (1)

Therefore, the total of debit, and credit columns of trial balance is $243,000 and agree.

5.

To determine

Prepare a classified balance sheet of Company J.

5.

Expert Solution
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Explanation of Solution

Classified balance sheet:

This is the financial statement of a company which shows the grouping of similar assets and liabilities under subheadings.

Classified balance sheet of Company J on December, 31 is as follows:

Company C
 Balance sheet
 December, 31
 Assets $  Liabilities $
 Current assets: Current liabilities: 
 Cash12,000 Accounts payable15,000
 Investment13,000 Accrued liabilities payable4,000
 Accounts receivable3,000 Notes payable29,000
 Inventory20,000Total current liabilities48,000
Total current assets48,000Long-term notes payable63,000
  Total liabilities (A)111,000
 Notes receivable6,000 Stockholders' equity
 Equipment67,000 Common stock11,000
 Factory building114,000 Additional paid-in capital90,000
 Intangibles8,000 Retained earnings31,000
  Total stockholder's equity (B)132,000
 Total assets243,000 Total liabilities and stockholder’s equity  (A+B)243,000

Table (2)

Therefore, the total assets of Company C are $243,000, and the total liabilities and stockholders’ equity is $243,000.

6.

To determine

Calculate the current ratio of Company C and evaluate the ratio.

6.

Expert Solution
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Explanation of Solution

Current Ratio:

A part of liquidity ratios, current ratio reflects the ability to oblige the short term debts of a company. It is calculated based on the current assets and current liabilities; a company has in an accounting period. A current ratio is a useful tool for analysis of financials of a company.

Calculate the current ratio of Company J as follows:

Current ratio=Current assetsCurrent liabilities= $48,000$48,000=1.00

Therefore, the current ration of Company J is 1.00

Current ratio of Company J has relatively low liquidity, because for every one dollar of current liabilities, Company J has only equal amount of one dollar of current assets.

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Chapter 2 Solutions

FINANCIAL ACCOUNTING (LL)-W/CONNECT

Ch. 2 - 11. What is a journal entry? Ch. 2 - 12. What is a T-account? What is its purpose? Ch. 2 - 13. How is the current ratio computed and...Ch. 2 - Prob. 14QCh. 2 - 1. If a publicly traded company is trying to...Ch. 2 - Prob. 2MCQCh. 2 - 3. Total liabilities on a balance sheet at the end...Ch. 2 - 4. The dual effects concept can best be described...Ch. 2 - 5. The T-account is a tool commonly used for...Ch. 2 - Prob. 6MCQCh. 2 - 7. The Cash T-account has a beginning balance of...Ch. 2 - 8. Which of the following statements are true...Ch. 2 - Prob. 9MCQCh. 2 - Prob. 10MCQCh. 2 - Prob. 1MECh. 2 - Matching Definitions with Terms Match each...Ch. 2 - M2-3 Identifying Events as Accounting...Ch. 2 - Classifying Accounts on a Balance Sheet The...Ch. 2 - Determining Financial Statement Effects of Several...Ch. 2 - Prob. 6MECh. 2 - Prob. 7MECh. 2 - Recording Simple Transactions For each transaction...Ch. 2 - Completing T-Accounts For each transaction in M2-5...Ch. 2 - Preparing a Trial Balance Complete M2-9 and then...Ch. 2 - Prob. 11MECh. 2 - Prob. 12MECh. 2 - Prob. 13MECh. 2 - Matching Definitions with Terms Match each...Ch. 2 - Identifying Account Titles The following are...Ch. 2 - Classifying Accounts and Their Usual Balances As...Ch. 2 - Determining Financial Statement Effects of Several...Ch. 2 - Nike, Inc., with headquarters in Beaverton,...Ch. 2 - Refer to E2-4. Required: For each of the events...Ch. 2 - Prob. 7ECh. 2 - Recording Investing and Financing...Ch. 2 - Analyzing the Effects of Transactions in...Ch. 2 - Prob. 10ECh. 2 - Inferring Investing and Financing Transactions and...Ch. 2 - Inferring Investing and Financing Transactions and...Ch. 2 - Jameson Corporation was organized on May 1. The...Ch. 2 - Prob. 14ECh. 2 - Prob. 15ECh. 2 - Prob. 16ECh. 2 - Waldman Furniture Repair Service, a company with...Ch. 2 - Inferring Typical Investing and Financing...Ch. 2 - Prob. 19ECh. 2 - Prob. 20ECh. 2 - Prob. 21ECh. 2 - Prob. 1PCh. 2 - Prob. 2PCh. 2 - Prob. 3PCh. 2 - Required: Using events (a) through (i) in P2-3,...Ch. 2 - Prob. 5PCh. 2 - Refer to P2-5. Required: For each of the...Ch. 2 - Identifying Accounts on a Classified Balance Sheet...Ch. 2 - Russeck Incorporated is a small manufacturing...Ch. 2 - Prob. 3APCh. 2 - Required: Using the events (a) through (h) in...Ch. 2 - Prob. 1CONCh. 2 - Refer to the financial statements of American...Ch. 2 - Prob. 2CPCh. 2 - Refer to the financial statements of American...Ch. 2 - Prob. 4CPCh. 2 - Prob. 5CPCh. 2 - Prob. 6CPCh. 2 - Your best friend from home writes you a letter...Ch. 2 - Prob. 8CP
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