# Balance sheet cash 1525 accounts receivable 1525

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Balance Sheet Cash \$1,525 Accounts receivable 1,525 Income Statement Revenue \$3,050 SE2-8 \$60,000 for June and \$40,000 for July (GAAP) \$100,000 for June and \$0 for July (Cash basis) 2-3
Solutions Manual-Chapter 2 SE2-9 The statement of cash flows will show the biggest difference because cash inflow from operations will be larger under the company that allows cash sales only. Revenue accounted for in accounts receivable will not appear on the statement of cash flows. The balance sheet for the “cash only” company will have cash listed under assets whereas the “cash and credit” company will have cash and accounts receivable listed, but the total assets for each company will be the same. SE2-10 Current ratio provides a measure of a company's ability to meet its short term obligations. The decrease in the ratio from 1.5 in 2008 to 1.03 in 2009 reflects a decrease in liquidity, which may mean that the company could have a more difficult time paying its current debts. From balance sheet at 6/30/2008 6/30/2009 Current assets \$150,000 \$180,000 Current liabilities \$100,000 \$175,000 Current Ratio = current assets current liabilities 2008 1.50 = \$150,000 \$100,000 2009 1.03 = \$180,000 \$175,000 SE2-11 a. preventive control b. detective control c. corrective control Solutions to Exercises Set A E2-1A Cash on hand is not included in the income statement; it is an asset. The amount due from customers has been included in sales from this year or prior years. Amount due from customers is a receivable and is an asset. Rent for 2008 should be included on the income statement for the current fiscal year ending December 31, 2008. The 2009 rent is an asset (prepaid rent). E2-2A Items 1, 2, 3, 4, 6 are relevant facts, but item 5 is an opinion. You could rely on number 1 after you saw the car. Number 2 is not reliable considering the amount of miles the car has been driven. You could rely on number 3 only after viewing the odometer, and you could rely on number 4 after you see receipts for the oil changes. Finally, you could rely on number 6 once the maintenance record is provided and the mechanic is checked out. E2-3A Van 50,000 Balance sheet - asset Interest receivable 32,500 Balance sheet - asset Cash 78,000 Balance sheet - asset, Statement of cash flows Short-term loan payable 15,875 Balance sheet - liability Net cash from operating activities 28,000 Statement of cash flows Building 31,853 Balance sheet - asset Common stock 75,000 Statement of changes in shareholders' equity Balance sheet - shareholders' equity item Retained earnings 100,000 Statement of changes in shareholders' equity 2-4
Full file at Balance sheet - shareholders' equity item Net cash from investing activities 40,000 Statement of cash flows Interest payable 650 Balance sheet - liability Long-term mortgage payable 85,000 Balance sheet - liability Salaries payable 1,315 Balance sheet - liability Net cash from financing activities 10,000 Statement of cash flows E2-4A a. \$105,000 – \$60,000 – x = \$15,000 x = 30,000 b. This is the balance of earnings from prior year that were not distributed to owners of the company. This information may help a potential investor to assess the going concern capability and financial stability of the company. c. \$30,000 +\$15,000 – \$2,000 = \$43,000 E2-5A 1. b—liabilities