Expert Answers

Problem 1
For the following accounts, classify as a current asset (CA), noncurrent asset (NCA), current liability (CL), noncurrent liability (NCL), or stockholders’ equity (SE). Indicate whether each account usually has a debit or credit balance.
Accounts Receivable –
Retained Earnings –
Taxes Payable –
Prepaid Expenses –
Contributed Capital –
Long-Term Investments –
Plant, Property, and Equipment –
Accounts Payable – CL
Short-Term Investments –
Long-Term Debt –

Problem 2
Suppose a company performs the following activities within a year. For each activity, perform transaction analysis and indicate the account, amount, and direction of the effect on the account equation. Use the following headings:
Assets = Liabilities + Stockholders’ Equity
The activities are shown below.
Purchased new equipment costing $20,000, paying $14,000 in cash and signing a note for the rest

Declared $11,000 in dividends to be paid the following year
Sold $2,312 in short-term investments for cash
Investors sold their own stock to other investors on the stock exchange for $121,000
Issued $1,000 of additional common stock shares, and received cash from investors

Problem 3
Shown below are several transactions for a corporation and what accounts are affected. Using the given dollar amounts, explain in words the transaction that took place. Use the transactions to create a balance sheet.
Cash = +$8,000, Contributed Capital = +$8,000
Cash = +$42,000, Note payable (short-term) = + $42,000
Cash = −$2,000, Equipment +$5,000, Note payable (short-term) = +$3,000
Cash = −$6,000, Note receivable (short-term) = +6,000
Cash = −$1,800,  Supplies = +$1,800

Problem 4
Given below is the balance sheet for a company.

Balance Sheet (Millions of Dollars)
Current Assets
Cash     $5,846
Short-term investments 518
Receivables and other assets        4,510
Inventories         607
Other   2,624
Noncurrent Assets
Property, plant, and equipment   $1,594
Long-term investments   318
Other non-current assets               2,533
Total assets         $18,550

Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable             $5,816
Other short-term obligations        4,585
Long-term Liabilities         $5,159
Stockholders’ equity
Contributed Capital         $7,832
Retained Earnings            14,690
Other stockholders’ equity items −19,532
Total stockholders’ equity and liabilities   $18,550

Assume the following transactions (in millions) during the remainder of the initial year.
Borrowed $20 from banks due in two years
Lent $170 to affiliates, who signed a six-month note
Purchased additional investments for $6,000 cash; one-third were long term and the rest were short-term
Purchased $1820 worth of property, plant, and equipment; paid $600 in cash and the remainder with additional long-term bank loans
Issued additional shares of stock for $400 in cash
Sold short-term investments costing $3,000 for $3,000 cash
Declared and paid $13 in dividends during Year 1

Prepare a journal entry for each transaction. Then create T-accounts for each balance sheet account and include the new transactions. Post each journey entry to the appropriate T-accounts. Finally, create an updated balance sheet.

Question 5

A landlord received $5,000 cash for December 2011’s rent but the tenant’s rent for December is $8,000. Which of the following is true for year ended 2011?

A.         $8,000 would be reported on the statement of cash flows
B.         $8,000 would appear on the balance sheet as rent receivable
C.        $8,000 would appear on the income statement as rent revenue earned
D.        $5,000 would appear on the balance sheet as prepaid rent

Question 10
Assume a company’s January 1, 2009, financial position was: Assets, $150,000 and Liabilities, $60,000. During January 2009, the company completed the following transactions: (A) paid on a note payable $10,000 (no interest was paid); (B) collected an accounts receivable, $9,000; (C) paid an accounts payable, $5,000; and (D) purchased a truck, $5,000 cash, and a $20,000 note payable from a bank.

a. What is the company’s January 1, 2009 stockholders’ equity?
b. What are the company’s January 31, 2009 assets, liabilities and stockholders’ equity?