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SticeSolution_2008Spg Hung

SticeSolution_2008Spg Hung - Financial Accounting Stice...

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Financial Accounting; Stice & Stice EXERCISES E 4-1 Classification of Balance Sheet Accounts 1. c 6. i 11. h 16. h 2. d 7. g 12. c 17. a or b 3. f 8. b 13. f 18. b or e 4. a 9. c 14. a 19. h 5. a 10. a 15. i 20. i E 4-8 Preparation of a Balance Sheet Hart Corporation Balance Sheet December 31, 2006 Assets Current assets Cash $ 42,000 Investment in securities 30,000 Accounts receivable 55,000 Inventory 88,000 Total current assets $215,000 Long-term investments 10,000 Property, plant, and equipment Land $100,000 Building $200,000 Less: Accum. depr.—Building (27,000 ) 173,000 Equipment $ 64,000 Less: Accum. depr.—Equipment (10,000 ) 54,000 Total property, plant, and equipment 327,000 Intangible assets Patent 18,000 Other assets Long-term receivable* 16,000 Total assets $586,000 *The long-term receivable could also be classified as a long-term investment. Liabilities and Stockholders’ Equity Liabilities Current liabilities Accounts payable $ 66,000 Current portion of long-term debt 72,000 Total current liabilities $ 138,000 Long-term debt 100,000 Total liabilities $ 238,000 Stockholders’ equity Common stock, par value $ 40,000 Additional paid-in capital 200,000
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Financial Accounting; Stice & Stice Retained earnings 108,000 1 Total stockholders’ equity 348,000 Total liabilities and stockholders’ equity $ 586,000 1 Needed to balance the financial statement E 4-10 Asset Definition 1. No asset. No probable future economic benefits are associated with the mine. 2. No asset. The oil field has future economic benefit, but it is not yet controlled by DeBroglie as a result of a past transaction. 3. No asset. There certainly are future economic benefits associated with the geologists, but they are not controlled by DeBroglie, since they always have the option of quitting. 4. No asset. The real estate is not currently controlled by DeBroglie. 5. No asset. The probability of future economic benefit from the crater is low. E 4-11 Liability Definition 1. No liability. There was a liability, but since the payment was made, no further future sacrifice of assets will be required. 2. Liability. Pauli is obligated to deliver services in the future as a result of events (receipt of the advertising) that have already occurred. 3. Liability. It is probable that Pauli will have to sacrifice assets in the future (new carpets) as a result of events that have already occurred (past sales of guaranteed carpets). 4. No liability. Although it is probable that Pauli will have to make payments in the future, the events necessitating those payments have not yet occurred. 5. No liability. Same as (4). E 4-12 Transaction Analysis 1. Bank Total Prepaid Total Acc. Loan Mortgage Stkhlders’ Liab. Cash Invent. Insurance Buildings Equip. Assets Payable Payable Payable Equity & Equity a. Initial investment 880,000 880,000 880,000 880,000 b. Purchased equipment (200,000) 200,000 0 0 c. Bank loan 640,000 640,000 640,000 640,000 d. Purchased building (800,000) 2,000,000 1,200,000 1,200,000 1,200,000 e. Purchased inventory 180,000 180,000 180,000 180,000 f. Paid for insurance (12,000) 12,000 0 0 g. Paid account payable (60,000) __________________________ ______ (60,000) (60,000) __________________________ (60,000)
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Financial Accounting; Stice & Stice 448,000 180,000 12,000 2,000,000 200,000 2,840,000 120,000 640,000 1,200,000 880,000 2,840,000
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