Problem 15: Solution

1. Total current assets at the beginning of 20X1: There is insufficient information as figures are provided for the end of 20X1 and 20X2.

2. Total net book value of property and equipment at the end of 20X2:

$5,998 – $1,300 = $4,698

3. Net means the allowance for doubtful accounts has been subtracted from accounts receivable.

4. Sale of treasury stock during 20X2:

Beginning balance + purchases – ending balance = sales

$142 + $50 – $111 = $81

5. Money raised by selling common stock. Consider both the common stock and additional paid-in capital accounts.

BB EB Change

Common stock $494 $642 $ 148

Additional paid-in capital 0 1,745 1,745

Money raised $1,893

6. Amount of money borrowed as long-term debt during 20X2.

Ending bal. – beginning bal. + reclassified = borrowed

$2,406 – $920 + $200 = $1,686

7. Average selling price per share of common stock during 20X2.

Aver. SP = Money raised [answer 5] ÷ number of shares sold

= $1,893 ÷ (249 - 193)

= $33.80

Problem 15: Solution (continued)

8. Net working capital at the end of 20X2.

NWC = Current assets – Current liabilities

= $1,151 - $1,198

= -47

9. Amount of dividends paid during 20X2. Analyze dividends payable account.

Beg. bal. + div. declared – ending bal. = dividends paid

$300 + $450 - $200 = $550

10. Net income for 20X2. Analyze retained earnings account.

Ending bal. – beg. bal. + dividends declared = net income

$935 – $902 + $450 = $483

Problem 16: Solution

1. There is not enough information to determine this.

2. Current Assets = Cash + Receivables $136,500

3. Net working capital = Current assets – Current Liab.

$136,500 - ($18,000 + $25,000 + $5,000) = $88,500

4. Beginning Accounts Payable is $18,000. Ending

A/P is $21,000. Therefore, cash increases by: $3,000

5. Net book value = Equipment - Depreciation

$925,000 - $64,000 = $861,000

6. Net Earnings = Change in RE + Dividends payable

$27,000 + $6,000 = $33,000

7. Change in common stock $5,000

Change in paid-in capital $25,000

($20,000 + $5,000)/10,000 $2.50/share

8. Note payable beginning X2 $675,000

Note payable X2 (reclassified to current) 42,000

Note payable ending X2 690,000

$675,000 - $42,000 = $633,000

$633,000 + new LTD = $690,000

New long-term debt = $690,000 - $633,000 = $57,000

9. Gain on sale = selling price - NBV

$12,000 - $10,000 = $2,000

10. Equipment beginning X2 $800,000

Equipment ending X2 925,000

Cost of equipment sold during 20X2 25,000

New purchases = $925,000 - ($800,000 - $25,000) = $150,000

11. Depreciation Expense in X2 = change in Depr. for X2

Accumulated depreciation beginning X2 $20,000

Accumulated depreciation ending X2 64,000

Written off depreciation 15,000

Depreciation Expense X2 = $59,000

Problem 17: Solution

1. Current assets = current liabilities × current ratio

= 1.2 × $105,380

= $126,456

2. Cash + Inventory + Accounts Receivable = Current Assets

$49,765 + $36,072 + $15,491 + Accounts Receivable = $126,456

Accounts Receivable = $126,456 - ($49,765 + $36,072 + $15,491)

= $25,128

3. .3 × Total assets = current assets

.3 × Total assets = $126,456

Total assets = $126,456 ÷ .3 = $421,520

4. Owners' Equity = Assets - Current Liabilities - Long-Term Debt

= $421,520 - $105,380 - $60,000

= $256,140

Problem 18: Solution

1. -$2,000

2. $20,000

3. $140,000

4. $180,000

5. $5,000

6. $18,700

7. $11,700

8. $8,700

Problem 19: Solution

Lancer's Balance Sheet

December 31, 20X3

Assets

Current Assets:

Cash $ 5,000

Marketable securities 10,000

Accounts receivable (net) 90,000

Food inventory 15,000

Prepaid expenses 9,000

Total current assets 129,000

Investments 50,000

Property and Equipment

Land 80,000

Building 420,000

Equipment 100,000

Less Accumulated depreciation (141,000)

Net property and equipment 459,000

Total Assets $638,000

Liabilities and Owners' Equity

Current Liabilities:

Accounts payable $ 15,000

Income taxes payable 20,000

Current maturities of

long-term debt 50,000

Dividends payable 10,000

Accrued expenses 25,000

Total current liabilities 120,000

Long-term debt 250,000

Owners' Equity:

Capital stock 89,000

Paid-in capital in excess of par 68,000

Retained earnings 111,000

Total Owners’ Equity 268,000

Total Liabilities and

Owners' Equity $638,000

Problem 20: Solution

Martin's Motel

Dollar Common-Size

20X1 20X2 Differences Dec. 31, 20X2

Current Assets

Cash

House Bank $ 50 $ 40 $(10) .4%

Demand Deposit 60 60 0 .6

Total Cash 110 100 (10) 1.0

Accounts Receivable 1,241 1,400 159 14.0