Tutorial 1 - 200 Beg 300 Beg 2,000(a 200 End 2,300 End...

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E1–3. L (1) Notes payable to banks A (10) Machinery and equipment E (2) General and administrative R (11) Net sales L (3) Accounts payable A (12) Inventories L (4) Dividends payable E (13) Marketing, selling, and advertising SE (5) Retained earnings A (14) Buildings A (6) Cash and cash equivalents A (15) Land A (7) Accounts receivable L (16) Income taxes payable E (8) Provision for income taxes* E (17) Distribution and warehousing costs E (9) Cost of goods sold A (18) Investments (in other companies) *Note that “Provision for income taxes” is a common synonym for “Income tax expense.”
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E2–13. Req. 1 Assets $ 7,500 = Liabilities $ 500 + Stockholders’ Equity $ 7,000 Req. 2 Cash Short-Term Investments Property & Equipment Beg. 3,000 Beg. 2,000 Beg. 2,500 (a) 2,000 1,000 (b) 1,250 (c) (b) 1,000 (c) 1,250 300 (d) End. 6,950 End. 1,000 End. 1,250 Short-Term Notes Payable Long-Term Notes Payable
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Unformatted text preview: 200 Beg. 300 Beg. 2,000 (a) 200 End. 2,300 End. Contributed Capital Retained Earnings 5,000 Beg. 2,000 Beg. (d) 300 5,000 End. 1,700 End. Req. 3 Assets $ 9,200 = Liabilities $ 2,500 + Stockholders’ Equity $ 6,700 Req. 4 Financial = Average Total Assets = ($7,500+$9,200) / 2 = $8,350 = 1.22 Leverage Average Stockholders’ Equity ($7,000+$6,700) / 2 $6,850 This ratio indicates that, for every $1 of equity investment, Massimo maintains $1.22 of assets. Massimo’s ratio is lower than the industry average of 2.00, indicating that Massimo maintains a lower debt level and follows a less risky financing strategy than does the average firm in the industry. As such, Massimo can finance expansion by borrowing without taking on excessive debt compared to the industry average....
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