Chapter 2 Sample Solutions for Review

Chapter 2 Sample Solutions for Review - E2.3 Use the...

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E2.3. Use the accounting equation to solve for the missing information Firm A: A = L + PIC + ( Beg. RE + NI - DIV = End. RE) $420,000 = $215,000 + $75,000 + ( $78,000 + ? - $50,000 = ? ) In this case, the ending balance of retained earnings must be determined first: $420,000 = $215,000 + $75,000 + End. RE. Retained earnings, 12/31/10 = $130,000 Once the ending balance of retained earnings is known, net income can be determined: $78,000 + NI – $50,000 = $130,000 Net income for 2010 = $102,000 Firm B: A = L + PIC + ( Beg. RE + NI - DIV = End. RE ) $540,000 = $145,000 + ? + ( ? + $83,000 - $19,000 = $310,000 ) $540,000 = $145,000 + PIC + $310,000 Paid-in capital, 12/31/10 = $85,000 Beg. RE + $83,000 - $19,000 = $310,000 Retained earnings, 1/1/10 = $246,000 Firm C: A = L + PIC + ( Beg. RE + NI - DIV = End. RE ) $325,000 = ? + $40,000 + ( $42,000 + $113,000 - $65,000 = ? ) In this case, the ending balance of retained earnings must be determined first: $42,000 + $113,000 - $65,000 = End. RE Retained earnings, 12/31/10 = $90,000 Once the ending balance of retained earnings is known, liabilities can be determined: $325,000 = L + $40,000 + $90,000 Total liabilities, 12/31/10 = $195,000 E2.5. Prepare the retained earnings portion of a statement of changes in owners' equity for the year ended December 31, 2010: Retained Earnings, December 31, 2009………………………………… $ 311,800 Less: Net loss for the year ended December 31, 2010…………………..
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