Chapter 2: Q1BTN-4 (page 94)
Question:Refer to Apple’s financial statements in Appendix A for the following questions.
Required
4. In which fiscal year did it employ more financial leverage: September 26, 2015, or September 27, 2014? Explain.
Answer
Financial leverage was highest in September 2015.
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Zucker Management Services opened for business and completed these transactions in November.
Nov. 1 Matt Zucker, the owner, invested \(30,000 cash along with \)15,000 of office equipment in the company in exchange for common stock.
2 The company prepaid \(4,500 cash for six months’ rent for an office. (Hint:Debit Prepaid Rent for \)4,500.)
4 The company made credit purchases of office equipment for \(2,500 and of office supplies for \)600. Payment is due within 10 days.
8 The company completed work for a client and immediately received \(3,400 cash.
12 The company completed a \)10,200 project for a client, who must pay within 30 days.
13 The company paid \(3,100 cash to settle the payable created on November 4.
19 The company paid \)1,800 cash for the premium on a 24-month insurance policy.
22 The company received \(5,200 cash as partial payment for the work completed on November 12.
24 The company completed work for another client for \)1,750 on credit.
28 The company paid \(5,300 cash in dividends.
29 The company purchased \)249 of additional office supplies on credit.
30 The company paid $831 cash for this month’s utility bill.
Required
1. Prepare general journal entries to record these transactions (use account titles listed in part 2).
The accounting records of Nettle Distribution show the following assets and liabilities as of December 31, 2016 and 2017.
December 31 2016 2017
Cash ……………………………….. \(64,300 \) 15,640
Accounts receivable ……………. 26,240 19,100
Office supplies …………………... 3,160 1,960
Office equipment ………………... 44,000 44,000
Trucks …..………………………… 148,000 157,000
Building …………………………… 0 80,000
Land ……………………………….. 0 60,000
Accounts payable ………………. 3,500 33,500
Note payable …………………….. 0 40,000
Required
1. Prepare balance sheets for the business as of December 31, 2016 and 2017. (Hint:Report only total equity on the balance sheet and remember that total equity equals the difference between assets and liabilities.)
2. Compute net income for 2017 by comparing total equity amounts for these two years and using the following information: During 2017, the owner invested \(35,000 additional cash in the business (in exchange for common stock) and the company paid \)19,000 cash in dividends.
3. Compute the 2017 year-end debt ratio (in percent and rounded to one decimal).
At the beginning of April, Bernadette Grechus launched a custom computer solutions company called Softworks. The company had the following transactions during April.
a. Bernadette Grechus invested \(65,000 cash, office equipment with a value of \)5,750, and \(30,000 of computer equipment in the company in exchange for common stock.
b. The company purchased land worth \)22,000 for an office by paying \(5,000 cash and signing a longterm note payable for \)17,000.
c. The company purchased a portable building with \(34,500 cash and moved it onto the land acquired in b.
d. The company paid \)5,000 cash for the premium on a two-year insurance policy.
e. The company provided services to a client and immediately collected \(4,600 cash.
f. The company purchased \)4,500 of additional computer equipment by paying \(800 cash and signing a long-term note payable for \)3,700.
g. The company completed \(4,250 of services for a client. This amount is to be received within 30 days.
h. The company purchased \)950 of additional office equipment on credit.
i. The company completed client services for \(10,200 on credit.
j. The company received a bill for rent of a computer testing device that was used on a recently completed job. The \)580 rent cost must be paid within 30 days.
k. The company collected \(5,100 cash in partial payment from the client described in transaction i.
l. The company paid \)1,800 cash for wages to an assistant.
m. The company paid \(950 cash to settle the payable created in transaction h.
n. The company paid \)608 cash for minor maintenance of the company’s computer equipment.
o. The company paid \(6,230 cash in dividends.
p. The company paid \)1,800 cash for wages to an assistant.
q. The company paid $750 cash for advertisements on the web during April.
Required
2. Open the following ledger accounts—their account numbers are in parentheses (use the balance column format): Cash (101); Accounts Receivable (106); Prepaid Insurance (108); Office Equipment (163); Computer Equipment (164); Building (170); Land (172); Accounts Payable (201); Notes Payable (250); Common Stock (307); Dividends (319); Fees Earned (402); Wages Expense (601); Computer Rental Expense (602); Advertising Expense (603); and Repairs Expense (604). Post the journal entries from part 1 to the accounts and enter the balance after each posting.
Question:(This serial problem started in Chapter 1 and continues through most of the chapters. If the Chapter 1 segment was not completed, the problem can begin at this point.)
SP 2 On October 1, 2017, Santana Rey launched a computer services company called Business Solutions, which provides consulting services, computer system installations, and custom program development. Rey adopts the calendar year for reporting purposes and expects to prepare the company’s first set of financial statements on December 31, 2017. The company’s initial chart of accounts follows.
Account No. Account No.
Cash ………………...................... 101 Common Stock ……………...... 307
Accounts Receivable ………….. 106 Dividends ………………………. 319
Computer Supplies …………….. 126 Computer Services Revenue ..403
Prepaid Insurance ……………….128 Wages Expense ………………. 623
Prepaid Rent ………………………131 Advertising Expense ………….655
Office Equipment ……………….. 163 Mileage Expense ……………… 676
Computer Equipment ……………167 Miscellaneous Expenses ……. 677
Accounts Payable ………………..201 Repairs Expense—Computer ..684
Required
2. Open ledger accounts (in balance column format) and post the journal entries from part 1 to them.
Review the Google balance sheet in Appendix A. Identify an asset with the word receivablein its account title and a liability with the word payablein its account title.
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