Financial Accounting

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Just Data
2-1.A. Given: A=$95,000; L=$40,000
OE = 95,000 - $40,000
OE = $55,000

2-1 B. Given: A = $65,000; OE = $40,000
L = $65,000 - $40,000
L = $25,000

2-1 C. Given: Current Assets = $25,000; L = $40,000; OE = $55,000
Non-Current Assets = $95,000 - $25,000
Non-Current Assets = $70,000

2-1 D. Given: Current Ratio = 2.2:1; Current Asset = $33,000, Non-current Asset = $55,000; Liabilities = $15,000
Current Liabilities = Current Assets / Ratio
Current Liabilities = $33,000/2.2
Current Liabilities = $15,000
OE = Total Assets - Total Liabilities
OE = $88,000 - $15,000
OE = $73,000

2-1 E. Given: Non-current Assets = $60,000; Total Assets = $95,000; Current Assets = $35,000; OE = $70,000
Current Liabilities = $95,000 - $70,000
Current Liabilities = $25,000
Current Ratio = $35,000 / $25,000
Current Ratio = 1.4:1
2-2

|J.L. Gregory Company |
|Balance Sheet As of |
|June 30 |

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Related Searches




| | | | | | | |
| | | | | | | |
| | | | | | | |
|ASSETS | | | |LIABILITIES AND OWNER'S EQUITY | | |
| | | | | | | |
|Current Assets | | | |Current Liabilities | | |
|Cash |$89,000 | | |Accounts Payable |$241,000 | |
|Marketable Securities |$379,000 | | |Bonds Payable |$700,000 | |
|A/C Receivables |$505,000 | | |Accrued Expenses |$107,000 | |
|Inventories |$513,000 | | |Notes Payable |$200,000 | |
| | | | |Tax Liabilities |$125,000 | |
| | | | | | | |
|Total Current Assets | |$1,486,000 | |Total Current Liabilities | |$1,373,000 |
| | | | | | | |
| | | | | | | |
|Properties, Plant and Equipment | | | |Shareholder's Equity | | |
|Land | |$230,000 | |Paid-in Capital |$1,000,000 | |
|Building and Equipment |$1,881,000 | | |Retained Earnings |$620,000 | |
|Less: Accumulated Depreciation |$924,000 |$957,000 | | | | |
|Net: Properties, Plant and Equipment | |$1,187,000 | |Total Shareholder's Equity | |$1,620,000 |
| | | | | | | |
| | | | | | | |
|Other Assets | | | | | | |
|Investment in the Peerless Company | |$320,000 | | | | |
| | | | | | | |
| | | | | | | |
|Total Assets | |$2,993,000 | |Total Liabilities and Shareholder's Equity |$2,993,000 |

Retained Earnings = Assets – (Liabilities + Paid-in Capital)
= $2,993,000 – ($1,373,000 + $1,000,000)
= $2,993,000 – $2,373,000
= $620,000

2-3

|1 |Increase in asset; increas in owner's equity |
|2 |Decrease in Liabilities; increase in owner's equity |
|3 |Decrease in asset |
|4 |Increase in asset |
|5 |Increase in liabilities |
|6 |Increase in asset |
|7 |Increase in asset |
|8 |No effect since it is only a declaration |
|9 |Decrease in owner's equity |
|10 |Decrease in owner's equity |

2-4

2-5
2-6

|Brian Company |
|Balance Sheet As of |
|December 31 |
| | | | | | | |
|ASSETS | | | |LIABILITIES | | |
| | | | | | | |
|Current Assets | | | |Current Liabilities | | |
|Cash |$2,000 | | |Accounts Payable |$5,000 | |
|A/C Receivables |$7,000 | | |Current Portion of Bonds Payable |$2,000 | |
|Marketable Securities |$3,500 | | |Wages Payable |$1,500 | |
|Plant & Equipment |$8,500 | | | | | |
| | | | | | | |
|Total Current Assets | |$21,000 | |Total Current Liabilities | |$8,500 |
| | | | | | | |
|Other Assets | | | |Other Liabilities | | |
|Long - Term Investments | |$1,500 | |Bonds Payable | |$8,000 |
| | | | | | | |
| | | | | | | |
|Total Assets | |$22,500 | |Total Liabilities | |$16,500 |
| | | | | | | |
| | | | | | | |
| | | | | | | |
|Current Ratio : 2.47 | | | | | | |
|The current ratio measures the company's | | | | | | |
|capacity to meet its current obligation. | | | | | | |

Case 2-1 Maynard Company

|Maynard Company | |Maynard Company |
|Balance Sheet | |Balance Sheet |
|As of June 1 | |As of June 30 |
| | | | | | | |
|ASSETS | |ASSETS |
| | | | | | | |
|Current Assets | | | |Current Assets | | |
|Cash |$34,983 | | |Cash |$66,660 | |
|A/C Receivables |$21,798 | | |A/C Receivables |$26,505 | |
|Merchandise Inventory |$29,835 | | |Merchandise Inventory |$26,520 | |
|Notes Receivables |$11,700 | | |Notes Receivables |$0 | |
|Prepaid Insurance |$3,150 | | |Prepaid Insurance |$2,826 | |
|Supplies on Hand |$5,559 | | |Supplies on Hand |$6,630 | |
| | | | | | | |
|Total Current Assets | |$107,025 | |Total Current Assets | |$129,141 |
| | | | | | | |
|Properties, Plant and Equipment | | | |Properties, Plant and Equipment | | |
|Land | |$89,700 | |Land | |$89,700 |
|Building and Equipment |$598,260 | | |Building and Equipment |$621,660 | |
|Less: Accumulated Depreciation |$161,304 |$436,956 | |Less: Accumulated Depreciation |$163,878 |$457,782 |
|Net: Properties, Plant and Equipment | |$526,656 | |Net: Properties, Plant and Equipment | |$547,482 |
| | | | | | | |
|Other Assets | | | |Other Assets | | |
|Other Non-current Assets | |$4,857 | |Other Non-current Assets | |$5,265 |
| | | | | | | |
|Total Assets | |$638,538 | |Total Assets | |$681,888 |
| | | | | | | |
|LIABILITIES AND OWNER'S EQUITY | |LIABILITIES AND OWNER'S EQUITY |
| | | | | | | |
|Current Liabilities | | | |Current Liabilities | | |
|Accounts Payable |$8,517 | | |Accounts Payable |$21,315 | |
|Taxes Payable |$5,700 | | |Taxes Payable |$7,224 | |
|Accrued Wages Payable |$1,974 | | |Accrued Wages Payable |$2,202 | |
|Bank Notes Payable |$8,385 | | |Bank Notes Payable |$29,250 | |
| | | | | | | |
| | | | | | | |
|Total Current Liabilities | |$24,576 | |Total Current Liabilities | |$59,991 |
| | | | | | | |
|Other non-current liabilities | |$2,451 | |Other non-current liabilities | |$2,451 |
| | | | | | | |
|Shareholder's Equity | | | |Shareholder's Equity | | |
|Paid-in Capital |$390,000 | | |Paid-in Capital |$390,000 | |
|Retained Earnings |$221,511 | | |Retained Earnings |$229,446 | |
| | | | | | | |
|Total Shareholder's Equity | |$611,511 | |Total Shareholder's Equity | |$619,446 |
| | | | | | | |
|Total Liabilities and Shareholder's Equity | |$638,538 | |Total Liabilities and Shareholder's Equity | |$681,888 |

Questions:

1. Prepare Balance Sheets as of June 1 and as of June 30 in Proper Format
|Maynard Company |
|Balance Sheet |
|As of June 1 |
| |
|ASSETS |LIABILITIES AND OWNER'S EQUITY |
|Current Assets | | |Current Liabilities | | |
|Cash |$34,983 | |Accounts Payable |$8,517 | |
|A/C Receivables |$21,798 | |Taxes Payable |$5,700 | |
|Merchandise Inventory |$29,835 | |Accrued Wages Payable |$1,974 | |
|Notes Receivables |$11,700 | |Bank Notes Payable |$8,385 | |
|Prepaid Insurance |$3,150 | | | | |
|Supplies on Hand |$5,559 | | | | |
| | | | | | |
|Total Current Assets | |$107,025 |Total Current Liabilities | |$24,576 |
| |
|Properties, Plant and Equipment | | |Other non-current liabilities | |$2,451 |
|Land | |$89,700 | | | |
|Building and Equipment |$598,260 | |Shareholder's Equity | | |
|Less: Accumulated Depreciation |$161,304 |$436,956 |Paid-in Capital |$390,000 | |
|Net: Properties, Plant and Equipment | |$526,656 |Retained Earnings |$221,511 | |
| |
|Other Assets | | | | | |
|Other Non-current Assets | |$4,857 |Total Shareholder's Equity | |$611,511 |
| |
|Total Assets | |$638,538 |Total Liabilities and Shareholder's Equity | |$638,538 |

|Maynard Company |
|Balance Sheet |
|As of June 30 |
| |
|ASSETS |LIABILITIES AND OWNER'S EQUITY |
|Current Assets | | | | | |
|Cash |$66,660 | |Current Liabilities | | |
|A/C Receivables |$26,505 | |Accounts Payable |$21,315 | |
|Merchandise Inventory |$26,520 | |Taxes Payable |$7,224 | |
|Notes Receivables |$0 | |Accrued Wages Payable |$2,202 | |
|Prepaid Insurance |$2,826 | |Bank Notes Payable |$29,250 | |
|Supplies on Hand |$6,630 | | | | |
| |
|Total Current Assets | |$129,141 |Total Current Liabilities | |$59,991 |
| |
|Properties, Plant and Equipment | | |Other non-current liabilities | |$2,451 |
|Land | |$89,700 | | | |
|Building and Equipment |$621,660 | |Shareholder's Equity | | |
|Less: Accumulated Depreciation |$163,878 |$457,782 |Paid-in Capital |$390,000 | |
|Net: Properties, Plant and Equipment | |$547,482 |Retained Earnings |$229,446 | |
| | | | | | |
|Other Assets | | |Total Shareholder's Equity | |$619,446 |
|Other Non-current Assets | |$5,265 | | | |
| |
|Total Assets | |$681,888 |Total Liabilities and Shareholder's Equity | |$681,888 |

2. Make comments about how the financial condition as of end of June compared with that at the beginning of June.

The current ratio of Maynard Company significantly improved from a margin of 4.35 in June 1 to 2.15 in June 30. The financial condition of the company still proved to be stable and this is further evidenced by the end of the month net income of $19,635 as well as the declaration and payment of the $11,700 dividends to the owner Diane Maynard.

3. Why do retained earnings not increase by the amount of June net income?

Retained earnings did not increase by the amount of June net income because the retained earnings account was decreased by the dividend payment of $11700.

4. As of June 30, do you feel that Maynard Company is worth the amount in Shareholder’s Equity, 619,446? Explain.


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