FUNDAMENTALS OF FINANCIAL ACCOUNTING
6th Edition
ISBN: 9781260823875
Author: PHILLIPS
Publisher: MCGRAW-HILL CUSTOM PUBLISHING
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 2, Problem 1PB
Determining Financial Statement Effects of Various Transactions
Swish Watch Corporation manufactures, sells, and services expensive watches. The company has been in business for three years. At the end of the previous year, the accounting records reported total assets of $2,255,000 and total liabilities of $1,780,000. During the current year, the following summarized events occurred:
- a. Issued additional shares of common stock, for $109,000 cash.
- b. Borrowed $186,000 cash from the bank and signed a 10-year note.
- c. A stockholder sold $5,000 of his stock in Swish Watch Corporation to another investor.
- d. d. Built an addition on the factory buildings for $200,000 and paid cash to the contractor.
- e. Purchased equipment for the new addition for $44,000, paying $12,000 in cash and signing a six-month note for the balance.
- f. Returned a $4,000 piece of equipment, from (e), because it proved to be defective: received a cash refund.
Required:
- 1. Complete the spreadsheet that follows, using plus ( + ) for increases and minus (−) for decreases for each account. The first transaction is used as an example.
- 2. Did you include event (c) in the spreadsheet? Why?
- 3. Based on beginning balances plus the completed spreadsheet, provide the following amounts (show computations):
- a. Total assets at the end of the year.
- b. Total liabilities at the end of the year.
Total stockholders’ equity at the end of the year.
- 4. At the end of the current year, has the financing for Swish Watch Corporation’s investment in assets primarily come from liabilities or stockholders’ equity?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Income Statement
Goldfinger Corporation had account balances at the end of the current year as follows: sales revenue, $13,600; cost of goods sold, $8,300; operating expenses, $3,200; and income tax expense, $630. Assume
shareholders owned 500 shares of Goldfinger's common stock during the year.
Prepare Goldfinger's income statement for the current year.
GOLDFINGER CORPORATION
Income Statement
For the Year Ended December 31, Current Year
Sales revenue
Selected current year-end financial statements of Cabot Corporation follow. (All sales were on credit; selected balance sheet amounts at December 31 of the prior year were inventory, $49,900; total assets, $249,400; common stock, $89,000; and retained earnings, $31,607.)
CABOT CORPORATION
Balance Sheet
December 31 of current year
Assets Liabilities and Equity
Cash $ 10,000 Accounts payable $ 16,500
Short-term investments 9,400 Accrued wages payable 3,600
Accounts receivable, net 30,000 Income taxes payable 3,400
Merchandise inventory 40,150 Long-term note payable, secured by mortgage on plant assets 70,400
Prepaid expenses 2,500 Common stock 89,000
Plant assets, net 153,300 Retained earnings 62,450
Total assets $ 245,350 Total liabilities and equity $ 245,350
CABOT CORPORATION
Income Statement
For Current Year Ended December 31
Sales $ 452,600
Cost of goods sold 298,050
Gross profit 154,550
Operating expenses 98,800
Interest expense 4,100
Income before taxes 51,650
Income tax…
Selected current year-end financial statements of Cabot Corporation follow. (All sales were on credit; selected balance sheet amounts at December 31 of the prior year were inventory, $51,900; total assets, $219,400; common stock, $81,000; and retained earnings, $34,953.)
CABOT CORPORATION
Balance Sheet
December 31 of current year
Assets
Liabilities and Equity
Cash
$ 12,000
Accounts payable
$ 16,500
Short-term investments
9,000
Accrued wages payable
3,800
Accounts receivable, net
33,200
Income taxes payable
4,700
Merchandise inventory
36,150
Long-term note payable, secured by mortgage on plant assets
71,400
Prepaid expenses
2,800
Common stock
81,000
Plant assets, net
151,300
Retained earnings
67,050
Total assets
$ 244,450
Total liabilities and equity
$ 244,450
CABOT CORPORATION
Income Statement
For Current Year Ended December 31
Sales
$ 455,600
Cost of goods sold
298,050
Gross profit
157,550
Operating expenses
99,500
Interest expense…
Chapter 2 Solutions
FUNDAMENTALS OF FINANCIAL ACCOUNTING
Ch. 2 - Define the following: a. Asset b. Current asset c....Ch. 2 - Define a transaction anti give an example of each...Ch. 2 - For accounting purposes, what is an account?...Ch. 2 - What is the basic accounting equation?Ch. 2 - Prob. 5QCh. 2 - Prob. 6QCh. 2 - Prob. 7QCh. 2 - What is a journal entry? What is the typical...Ch. 2 - What is a T-account? What is its purpose?Ch. 2 - Prob. 10Q
Ch. 2 - Prob. 11QCh. 2 - Which of the following is not an asset account? a....Ch. 2 - Which of the following statements describe...Ch. 2 - Total assets on a balance sheet prepared on any...Ch. 2 - The duality of effects can best be described as...Ch. 2 - The T-account is used to summarize which of the...Ch. 2 - Prob. 6MCCh. 2 - A company was recently formed with 50,000 cash...Ch. 2 - Which of the following statements would be...Ch. 2 - Prob. 9MCCh. 2 - Prob. 10MCCh. 2 - Prob. 1MECh. 2 - Prob. 2MECh. 2 - Matching Terms with Definitions Match each term...Ch. 2 - Prob. 4MECh. 2 - Prob. 5MECh. 2 - Prob. 6MECh. 2 - Prob. 7MECh. 2 - Identifying Events as Accounting Transactions Half...Ch. 2 - Determining Financial Statement Effects of Several...Ch. 2 - Preparing Journal Entries For each of the...Ch. 2 - Posting to T-Accounts For each of the transactions...Ch. 2 - Reporting a Classified Balance Sheet Given the...Ch. 2 - Prob. 13MECh. 2 - Prob. 14MECh. 2 - Identifying Transactions and Preparing Journal...Ch. 2 - Prob. 16MECh. 2 - Prob. 17MECh. 2 - Prob. 18MECh. 2 - Prob. 19MECh. 2 - Prob. 20MECh. 2 - Prob. 21MECh. 2 - Prob. 22MECh. 2 - Prob. 23MECh. 2 - Prob. 24MECh. 2 - Prob. 25MECh. 2 - Prob. 1ECh. 2 - Identifying Account Titles The following are...Ch. 2 - Classifying Accounts and Their Usual Balances As...Ch. 2 - Determining Financial Statement Effects of Several...Ch. 2 - Recording Journal Entries Refer to E2-4. Required:...Ch. 2 - Prob. 6ECh. 2 - Recording Journal Entries Refer to E2-6. Required:...Ch. 2 - Analyzing the Effects of Transactions in...Ch. 2 - Inferring Investing and Financing Transactions and...Ch. 2 - Analyzing Accounting Equation Effects, Recording...Ch. 2 - Recording Journal Entries and Preparing a...Ch. 2 - Analyzing the Effects of Transactions Using...Ch. 2 - Explaining the Effects of Transactions on Balance...Ch. 2 - Calculating and Evaluating the Current Ratio...Ch. 2 - Prob. 15ECh. 2 - Determining Financial Statement Effects of Various...Ch. 2 - Recording Transactions (in a Journal and...Ch. 2 - Recording Transactions (in a Journal and...Ch. 2 - Prob. 1PACh. 2 - Recording Transactions (in a Journal and...Ch. 2 - Recording Transactions (in a Journal and...Ch. 2 - Determining Financial Statement Effects of Various...Ch. 2 - Prob. 2PBCh. 2 - Recording Transactions (in a Journal and...Ch. 2 - Finding and Analyzing Financial Information Refer...Ch. 2 - Finding and Analyzing Financial Information Refer...Ch. 2 - Prob. 4SDCCh. 2 - Prob. 5SDCCh. 2 - Accounting for the Establishment of a Business...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Use the horizontal model, or write the journal entry, for each of the following transactions and adjustments that occurred during the first year of operations at Kissick Co. Issued 210,000 shares of $6-par-value common stock for $1,260,000 in cash. Borrowed $540,000 from Oglesby National Bank and signed a 13% note due in two years. Incurred and paid $420,000 in salaries for the year. Purchased $650,000 of merchandise inventory on account during the year. Sold inventory costing $630,000 for a total of $980,000, all on credit. Paid rent of $110,000 on the sales facilities during the first 11 months of the year. Purchased $170,000 of store equipment, paying $50,000 in cash and agreeing to pay the difference within 90 days. Paid the entire $120,000 owed for store equipment and $610,000 of the amount due to suppliers for credit purchases previously recorded. Incurred and paid utilities expense of $44,000 during the year. Collected $845,000 in cash from customers during…arrow_forwardUse the horizontal model, or write the journal entry, for each of the following transactions and adjustments that occurred during the first year of operations at Kissick Co. Issued 100,000 shares of $5-par-value common stock for $500,000 in cash. Borrowed $250,000 from Oglesby National Bank and signed a 12% note due in three years. Incurred and paid $190,000 in salaries for the year. Purchased $320,000 of merchandise inventory on account during the year. Sold inventory costing $290,000 for a total of $455,000, all on credit. Paid rent of $55,000 on the sales facilities during the first 11 months of the year. Purchased $75,000 of store equipment, paying $25,000 in cash and agreeing to pay the difference within 90 days. Paid the entire $50,000 owed for store equipment and $310,000 of the amount due to suppliers for credit purchases previously recorded. Incurred and paid utilities expense of $18,000 during the year. Collected $412,000 in cash from customers during the year for credit…arrow_forwardPrepare journal entries to record the following transactions involving both the short-term and long-term investments of Cancun Corp., all of which occurred during the current year. a. On February 15, paid $160,000 cash to purchase GMI’s 90-day short-term notes at par, which are dated February 15 and pay 10% interest (classified as held-to-maturity). b. On March 22, bought 700 shares of Fran Inc. common stock at $51 cash per share. Cancun’s stock investment results in it having an insignificant influence over Fran. c. On May 15, received a check from GMI in payment of the principal and 90 days’ interest on the notes purchased in part a. d. On July 30, paid $100,000 cash to purchase MP Inc.’s 8%, six-month notes at par, dated July 30 (classified as trading securities). e. On September 1, received a $1 per share cash dividend on the Fran Inc. common stock purchased in part b. f. On October 8, sold 30 shares of Fran Inc. common stock for $54 cash per share. g. On October 30, received a…arrow_forward
- Use the horizontal model, or write the journal entry, for each of the following transactions and adjustments that occurred during the first year of operations at Kissick Co. Issued 220,000 shares of $5-par-value common stock for $1,100,000 in cash. Borrowed $540,000 from Oglesby National Bank and signed a 13% note due in two years. Incurred and paid $400,000 in salaries for the year. Purchased $700,000 of merchandise inventory on account during the year. Sold inventory costing $620,000 for a total of $960,000, all on credit. Paid rent of $330,000 on the sales facilities during the first 11 months of the year. Purchased $140,000 of store equipment, paying $53,000 in cash and agreeing to pay the difference within 90 days. Paid the entire $87,000 owed for store equipment and $590,000 of the amount due to suppliers for credit purchases previously recorded. Incurred and paid utilities expense of $37,000 during the year. Collected $875,000 in cash from customers during the year for credit…arrow_forwardFollowing are the transactions and adjustments that occurred during the first year of operations at Kissick Co. Issued 195,000 shares of $5-par-value common stock for $975,000 in cash. Borrowed $510,000 from Oglesby National Bank and signed a 11% note due in three years. Incurred and paid $380,000 in salaries for the year. Purchased $730,000 of merchandise inventory on account during the year. Sold inventory costing $570,000 for a total of $910,000, all on credit. Paid rent of $220,000 on the sales facilities during the first 11 months of the year. Purchased $160,000 of store equipment, paying $52,000 in cash and agreeing to pay the difference within 90 days. Paid the entire $108,000 owed for store equipment and $600,000 of the amount due to suppliers for credit purchases previously recorded. Incurred and paid utilities expense of $34,000 during the year. Collected $835,000 in cash from customers during the year for credit sales previously recorded. At year-end, accrued $56,100 of…arrow_forwardFollowing are the transactions and adjustments that occurred during the first year of operations at Kissick Co. Issued 191,000 shares of $5-par-value common stock for $955,000 in cash. Borrowed $530,000 from Oglesby National Bank and signed a 10% note due in three years. Incurred and paid $390,000 in salaries for the year. Purchased $720,000 of merchandise inventory on account during the year. Sold inventory costing $570,000 for a total of $910,000, all on credit. Paid rent of $220,000 on the sales facilities during the first 11 months of the year. Purchased $180,000 of store equipment, paying $51,000 in cash and agreeing to pay the difference within 90 days. Paid the entire $129,000 owed for store equipment and $620,000 of the amount due to suppliers for credit purchases previously recorded. Incurred and paid utilities expense of $34,000 during the year. Collected $845,000 in cash from customers during the year for credit sales previously recorded. At year-end, accrued $53,000 of…arrow_forward
- Following are the transactions and adjustments that occurred during the first year of operations at Kissick Company. Issued 220,000 shares of $6 - par - value common stock for $1,320,000 in cash. Borrowed $ 560,000 from Oglesby National Bank and signed a 12% note due in three years. Incurred and paid $430,000 in salaries for the year. Purchased $730,000 of merchandise inventory on account during the year. Sold inventory costing $660,000 for a total of $970, 000, all on credit. Paid rent of $220,000 on the sales facilities during the first 11 months of the year. Purchased $160,000 of store equipment, paying $53,000 in cash and agreeing to pay the difference within 90 days. Paid the entire $107,000 owed for store equipment and $ 630,000 of the amount due to suppliers for credit purchases previously recorded. Incurred and paid utilities expense of $45,000 during the year. Collected $835,000 in cash from customers during the year for credit sales previously recorded. At year - end, accrued…arrow_forwardJuroe Company provided the following income statement for last year: Juroes balance sheet as of December 31 last year showed total liabilities of 10,250,000, total equity of 6,150,000, and total assets of 16,400,000. Required: Note: Round answers to two decimal places. 1. Calculate the times-interest-earned ratio. 2. Calculate the debt ratio. 3. Calculate the debt-to-equity ratio.arrow_forwardGlacier Products Inc. is a wholesaler of rock climbing gear. The company began operations on January 1, Year 1. The following transactions relate to securities acquired by Glacier Products Inc., which has a fiscal year ending on December 31: Instructions 1. Journalize the entries to record the preceding transactions. 2. Prepare the investment-related asset and stockholders equity balance sheet presentation for Glacier Products Inc. on December 31, Year 2, assuming that the Retained Earnings balance on December 31, Year 2, is 700,000.arrow_forward
- Forte Inc. produces and sells theater set designs and costumes. The company began operations on January 1, Year 1. The following transactions relate to securities acquired by Forte Inc., which has a fiscal year ending on December 31: Instructions 1. Journalize the entries to record these transactions. 2. Prepare the investment-related asset and stockholders equity balance sheet presentation for Forte Inc. on December 31, Year 2, assuming that the Retained Earnings balance on December 31, Year 2, is 389,000.arrow_forwardFollowing are the transactions and adjustments that occurred during the first year of operations at Kissick Company. Issued 800,000 shares of $5-par-value common stock for $400,000 in cash. Borrowed $200,000 from Oglesby National Bank and signed a 8% note due in three years. Incurred and paid $160,000 in salaries for the year. Purchased $301,000 of merchandise inventory on account during the year. Sold inventory costing $205,000 for a total of $250,000, all on credit. Paid rent of $44,000 on the sales facilities during the first 11 months of the year. Purchased $60,000 of store equipment, paying $18,000 in cash and agreeing to pay the difference within 90 days. Paid the entire $42,000 owed for store equipment and $227,000 of the amount due to suppliers for credit purchases previously recorded. Incurred and paid utilities expense of $15,000 during the year. Collected $221,000 in cash from customers during the year for credit sales previously recorded. At year-end, accrued $16,000 of…arrow_forwardGoldfinger Corporation had account balances at the end of the currentyear as follows: sales revenue, $29,000; cost of goods sold, $12,000;operating expenses, $6,200; and income tax expense, $4,320. Assumeshareholders owned 4,000 shares of Gold finger's common stock duringthe year. Prepare Goldfinger's income statement for the current year.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Financial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,
Financial Accounting
Accounting
ISBN:9781337272124
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
College Accounting, Chapters 1-27
Accounting
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:Cengage Learning,
The accounting cycle; Author: Alanis Business academy;https://www.youtube.com/watch?v=XTspj8CtzPk;License: Standard YouTube License, CC-BY