Cornerstones of Financial Accounting
Cornerstones of Financial Accounting
4th Edition
ISBN: 9781337690881
Author: Jay Rich, Jeff Jones
Publisher: Cengage Learning
Question
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Chapter 1, Problem 43E
To determine

Concept Introduction:

Balance Sheet: The Balance sheet is a summary of Assets, Liabilities and equity accounts that reports the financial position of the business as on a specific date. Assets are further classifies into Current Assets, Long Term Investments, Plant Assets and Intangible assets. And Liabilities are further classified into Current Liabilities and Long term liabilities.

Income Statement:

Income Statement is the part of the financial statement which is prepared to calculate the net income earned by the organization. In the income statement, all expenses are subtracted from the revenues to calculate the net income. It is prepared for a particular period.

Requirement-1:

To Prepare:

The classified balance sheet for Jerrsion Company at Dec. 31, 2019.

Expert Solution
Check Mark

Answer to Problem 43E

The classified balance sheet for Jerrsion Company at Dec. 31, 2019 is as follows:

    Jerrsion Company
    Balance Sheet
    As on Dec. 31, 2019
    ASSETS
    Current Assets:
    Cash $ 11,400
    Accounts Receivables $ 95,500
    Short Term Investment $ 21,000
    Prepaid Insurance $ 5,700
    Inventory $ 187,900 $ 321,500
    Long Term Investment $ 32,700
    Property, Plant and Equipment:
    Land $ 41,000
    Equipment $ 309,000
    Less: Accumulated depreciation $(172,400) $ 136,600
    Trucks $ 106,100
    Less: Accumulated depreciation $ (31,200) $ 74,900
    Building $ 419,900
    Less: Accumulated depreciation $(216,800) $ 203,100
    Total Assets $ 809,800
    LIABILITIES AND EQUITY
    LIABILITIES
    Current Liabilities:
    Income Taxes Payable $ 21,600
    Interest Payable $ 12,600
    Accounts Payable $ 65,100
    Salaries Payable $ 14,400
    Notes Payable $ 150,000
    $ 263,700
    Long Term Liabilities:
    Bonds Payable $ 200,000
    Equity:
    Common Stock $ 150,000
    Retained earnings $ 196,100 $ 346,100
    Total Liabilities and Equity$ 809,800

Explanation of Solution

Balance sheet is a summary of Assets, Liabilities and equity accounts that reports the financial position of the business as on a specific date. Assets are further classifies into Current Assets, Long Term Investments, Plant Assets and Intangible assets. And Liabilities are further classified into Current Liabilities and Long term liabilities. The classified balance sheet for Jerrsion Company at Dec. 31, 2019 is as follows:

    Jerrsion Company
    Balance Sheet
    As on Dec. 31, 2019
    ASSETS
    Current Assets:
    Cash $ 11,400
    Accounts Receivables $ 95,500
    Short Term Investment $ 21,000
    Prepaid Insurance $ 5,700
    Inventory $ 187,900 $ 321,500
    Long Term Investment $ 32,700
    Property, Plant and Equipment:
    Land $ 41,000
    Equipment $ 309,000
    Less: Accumulated depreciation $(172,400) $ 136,600
    Trucks $ 106,100
    Less: Accumulated depreciation $ (31,200) $ 74,900
    Building $ 419,900
    Less: Accumulated depreciation $(216,800) $ 203,100
    Total Assets $ 809,800
    LIABILITIES AND EQUITY
    LIABILITIES
    Current Liabilities:
    Income Taxes Payable $ 21,600
    Interest Payable $ 12,600
    Accounts Payable $ 65,100
    Salaries Payable $ 14,400
    Notes Payable $ 150,000
    $ 263,700
    Long Term Liabilities:
    Bonds Payable $ 200,000
    Equity:
    Common Stock $ 150,000
    Retained earnings $ 196,100 $ 346,100
    Total Liabilities and Equity$ 809,800
To determine

Concept Introduction:

Balance Sheet: The Balance sheet is a summary of Assets, Liabilities and equity accounts that reports the financial position of the business as on a specific date. Assets are further classifies into Current Assets, Long Term Investments, Plant Assets and Intangible assets. And Liabilities are further classified into Current Liabilities and Long term liabilities.

Income Statement:

Income Statement is the part of the financial statement which is prepared to calculate the net income earned by the organization. In the income statement, all expenses are subtracted from the revenues to calculate the net income. It is prepared for a particular period.

Requirement-2:

To Calculate:

The working capital and current ration as on Dec. 31, 2019.

Expert Solution
Check Mark

Answer to Problem 43E

The working capital and current ration as on Dec. 31, 2019 is as follows:

    Working Capital $ 57,800
    Current Ratio 1.22

Explanation of Solution

The working capital and current ration as on Dec. 31, 2019 is calculated as follows:

    Current Assets:
    Cash $ 11,400
    Accounts Receivables $ 95,500
    Short Term Investment $ 21,000
    Prepaid Insurance $ 5,700
    Inventory $ 187,900
    Total Current Assets (A)$ 321,500
    Current Liabilities:
    Income Taxes Payable $ 21,600
    Interest Payable $ 12,600
    Accounts Payable $ 65,100
    Salaries Payable $ 14,400
    Notes Payable $ 150,000
    Total Current Liabilities (B)$ 263,700
    Working Capital (A-B)$ 57,800
    Current Ratio (A/B) 1.22
To determine

Concept Introduction:

Balance Sheet: The Balance sheet is a summary of Assets, Liabilities and equity accounts that reports the financial position of the business as on a specific date. Assets are further classifies into Current Assets, Long Term Investments, Plant Assets and Intangible assets. And Liabilities are further classified into Current Liabilities and Long term liabilities.

Income Statement:

Income Statement is the part of the financial statement which is prepared to calculate the net income earned by the organization. In the income statement, all expenses are subtracted from the revenues to calculate the net income. It is prepared for a particular period.

Requirement-3:

To Discuss:

The liquidity of the company.

Expert Solution
Check Mark

Answer to Problem 43E

The firm is less liquid because its current ratio is lower than 2.

Explanation of Solution

The working capital and current ration as on Dec. 31, 2019 is calculated as follows:

    Current Assets:
    Cash $ 11,400
    Accounts Receivables $ 95,500
    Short Term Investment $ 21,000
    Prepaid Insurance $ 5,700
    Inventory $ 187,900
    Total Current Assets (A)$ 321,500
    Current Liabilities:
    Income Taxes Payable $ 21,600
    Interest Payable $ 12,600
    Accounts Payable $ 65,100
    Salaries Payable $ 14,400
    Notes Payable $ 150,000
    Total Current Liabilities (B)$ 263,700
    Working Capital (A-B)$ 57,800
    Current Ratio (A/B) 1.22

The firm is less liquid because its current ratio is lower than 2.

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Chapter 1 Solutions

Cornerstones of Financial Accounting

Ch. 1 - Write the fundamental accounting equation. Why is...Ch. 1 - What information is included in the heading of...Ch. 1 - Define current assets and current liabilities. Why...Ch. 1 - Prob. 14DQCh. 1 - Name the two main components of stockholders;...Ch. 1 - Prob. 16DQCh. 1 - How does the multiple-step income statement differ...Ch. 1 - Explain the items reported on a retained earnings...Ch. 1 - Name and describe the three categories of the...Ch. 1 - Prob. 20DQCh. 1 - Prob. 21DQCh. 1 - Prob. 22DQCh. 1 - Prob. 1MCQCh. 1 - Prob. 2MCQCh. 1 - At December 31, Pitt Inc. has assets of $12,900...Ch. 1 - Prob. 4MCQCh. 1 - Prob. 5MCQCh. 1 - Prob. 6MCQCh. 1 - Use the following information for Multiple-Choice...Ch. 1 - Use the following information for Multiple-Choice...Ch. 1 - Which of the following statements regarding the...Ch. 1 - Prob. 10MCQCh. 1 - Which of the following statements concerning...Ch. 1 - Which of the following sentences regarding the...Ch. 1 - Prob. 13MCQCh. 1 - Prob. 14CECh. 1 - Cornerstone Exercise 1-15 Using the Accounting...Ch. 1 - Cornerstone Exercise 1-16 Financial Statements...Ch. 1 - Prob. 17CECh. 1 - Cornerstone Exercise 1-18 Balance Sheet An...Ch. 1 - Cornerstone Exercise 1-19 Income Statement An...Ch. 1 - Cornerstone Exercise 1-20 Retained Earnings...Ch. 1 - Prob. 21BECh. 1 - Prob. 22BECh. 1 - Brief Exercise 1-23 Business Activities Marni...Ch. 1 - Brief Exercise 1-24 The Accounting Equation...Ch. 1 - Prob. 25BECh. 1 - Brief Exercise 1-26 Income Statement An analysis...Ch. 1 - Retained Earnings Statement Listed below are...Ch. 1 - Brief 1-28 Statement of Cash Flows Listed are...Ch. 1 - Prob. 29BECh. 1 - Prob. 30BECh. 1 - Exercise 1-31 Decisions Based on Accounting...Ch. 1 - Prob. 32ECh. 1 - Prob. 33ECh. 1 - Exercise 1-34 Business Activities Bill and Steve...Ch. 1 - Exercise 1-35 Accounting Concepts OBJECTIVE 06° A...Ch. 1 - Exercise 1-36 The Fundamental Accounting Equation...Ch. 1 - Exercise 1-37 Balance Sheet Structure The...Ch. 1 - Exercise 1-38 Identifying Current Assets and...Ch. 1 - Exercise 1-39 Current Assets and Current...Ch. 1 - Exercise 1-40 Depreciation OBJECTIVE 0° Swanson...Ch. 1 - Exercise 1-41 Stockholders Equity OBJECTIVE o On...Ch. 1 - Prob. 42ECh. 1 - Prob. 43ECh. 1 - Prob. 44ECh. 1 - Prob. 45ECh. 1 - OBJECTIVE 6 Exercise 1-46 Income Statement ERS...Ch. 1 - Exercise 1-47 Multiple-Step Income Statement The...Ch. 1 - Exercise 1-48 Income Statement The following...Ch. 1 - Prob. 49ECh. 1 - Exercise 1-50 Statement of Cash Flows OBJECTIVE o...Ch. 1 - Exercise 1-51 Relationships Among the Financial...Ch. 1 - Exercise 1-52 Relationships Among the Financial...Ch. 1 - Exercise 1-53 Relationships Among the Financial...Ch. 1 - Prob. 54ECh. 1 - Prob. 55ECh. 1 - Problem 1-56A Applying the Fundamental Accounting...Ch. 1 - Problem 1-57A Accounting Relationships Information...Ch. 1 - Prob. 58APSACh. 1 - Prob. 59APSACh. 1 - Problem 1-60A Income Statement and Balance Sheet...Ch. 1 - Problem 1-61A Retained Earnings Statement Dittman...Ch. 1 - Problem 1-62A Retained Earnings Statements The...Ch. 1 - Problem 1-63A Income Statement, Retained Earnings...Ch. 1 - Problem 1-64A Stockholders' Equity Relationships...Ch. 1 - Problem 1-65A Relationships Among Financial...Ch. 1 - Problem 1-563 Applying the Fundamental Accounting...Ch. 1 - Problem 1-57B The Fundamental Accounting Equation...Ch. 1 - Problem 1-583 Arrangement of the Income Statement...Ch. 1 - Prob. 59BPSBCh. 1 - Problem 1-60B Income Statement and Balance Sheet...Ch. 1 - Problem 1-61B Retained Earnings Statement Magical...Ch. 1 - Problem 1-62B Retained Earnings Statements The...Ch. 1 - Problem1-63B Income Statement, Retained Earnings...Ch. 1 - Prob. 64BPSBCh. 1 - Problem 1-65B Relationships Among Financial...Ch. 1 - Prob. 66CCh. 1 - Prob. 67.1CCh. 1 - Prob. 67.2CCh. 1 - Prob. 68.1CCh. 1 - Prob. 68.2CCh. 1 - Prob. 69.1CCh. 1 - Prob. 69.2CCh. 1 - Case 1-70 Financial Statement Analysis Reproduced...Ch. 1 - Prob. 70.2CCh. 1 - Case 1-70 Financial Statement Analysis Reproduced...Ch. 1 - Prob. 71CCh. 1 - Prob. 72CCh. 1 - Prob. 73.1CCh. 1 - Prob. 73.2CCh. 1 - Prob. 73.3CCh. 1 - Case 1-73 Research and Analysis Using the Annual...Ch. 1 - Prob. 73.5CCh. 1 - Prob. 73.6CCh. 1 - Prob. 73.7CCh. 1 - Prob. 74.1CCh. 1 - Case 1-74 Comparative Analysis: Under Armour,...Ch. 1 - Prob. 74.3CCh. 1 - Case 1-74 Comparative Analysis: Under Armour,...Ch. 1 - Case 1-74 Comparative Analysis: Under Armour,...Ch. 1 - Case 1-74 Comparative Analysis: Under Armour,...Ch. 1 - Prob. 75.1CCh. 1 - Prob. 75.2CCh. 1 - Case 1-75 CONTINUING PROBLEM: FRONT ROW...
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