SOLUTIONS TO MODULE 1.docx - SOLUTIONS TO MODULE 1 4th Edition M1-24(20 minutes a b c d e BS and SCF IS BS BS and SE SCF f g h i BS and SE SCF and SE

SOLUTIONS TO MODULE 1.docx - SOLUTIONS TO MODULE 1 4th...

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SOLUTIONS TO MODULE 1 - 4 th Edition M1-24. (20 minutes) a. BS and SCF f. BS and SE b. IS g. SCF and SE c. BS h. SCF and SE d. BS and SE i. IS, SE, and SCF e. SCF E1-28. (20 minutes) ($ millions) a. Using the accounting equation: Assets ($84,351) = Liabilities ($33,148) + Equity (?) Thus: $51,203 = Equity High-tech companies must contend with a substantial amount of risk relating to changing technology. Future cash flows are, therefore, not as certain and cannot support high levels of debt. Thus, the company uses equity financing; 60.7% in the case of Intel. b. Using the accounting equation at the beginning of the year: Assets ($7,071) = Liabilities (?) + Equity ($1,757) Thus: Beginning Liabilities = $5,314 Using the accounting equation at the end of the year: Assets ($7,071 - $1) = Liabilities ($5,314 - $132) + Equity (?) Thus: Ending Equity = $1,888 Alternative approach to solving part (b): Assets($-1) = Liabilities($-132) + Equity(?) where “ ” refers to “change in.” Thus: Ending Equity = $-1 - $-132 = $131 and Ending equity = $1,757 + $131 = $1,888 c. Retained Earnings is the balance sheet account that provides the link between the balance sheet and the income statement.
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