Answered: The balance sheet of Walgreens, a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

The balance sheet of Walgreens, a leading chain drugstore, as of August 31, 2009, appears
as follows (dollars in millions):

Assets	Liabilities and owners Equity
Cash 2,587	Accounts Payable 4,308
Accounting Receivables 2,496	Othet short-term Payables 2,461
Inventory 6,789	Long-term Payable 3,997
Other Noncurrent Assets 13,270	Shareholders' Equity 14,376
Total Assets 25,142	Total Liabilities and Shareholder's Equity 25,142

REQUIRED:
Assume that the following eight transactions occurred the next year (dollars in millions). Indicate the effect of each transaction on net income (revenues minus expenses), the current ratio
(current assets divided by current liabilities), working capital (current assets minus current
liabilities), and the debt/equity ratio (total liabilities divided by total shareholders’ equity) of
Walgreens. Use the following key: increase (), decrease (), no effect (NE). Treat each
transaction independently.

Transaction	Net income	Ccurrent ratio	Working capital	Dept/equity ratio
1.issued ownership shares for 100 cash
2.Purchased equipment costing 95 for cash.
3.Paid off a 200 long-term liability.
4.Sold inventory costing 500 for 685 cash.
5.Declared a 512 dividend but have not paid.
6.Paid 200 in wages payable.
7.Received 75 from customers on account.
8.Incurred and paid 30 in interest on short-term payables.

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