To fully assess fort worths long term viability you

3. To fully assess Fort Worth’s long-term viability, you would need the following infor-
mation about the $30,000 note payable:

When is it due?

What is the interest rate?

Is interest paid periodically or only at maturity?

Have any assets been offered as collateral for the loan?

1-26
FINANCIAL ACCOUNTING SOLUTIONS MANUAL
LO 2 PROBLEM 1-7A CORRECTED FINANCIAL STATEMENTS
1. HEIDI’S BAKERY INC.
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2007
Revenues:
Pastry cash sales $23,700
Pastry credit sales 22,100 $45,800
Expenses:
Utilities $ 9,500
Salaries and wages 18,200 27,700
Net income $18,100
2. HEIDI’S BAKERY INC.
STATEMENT OF RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 2007
Beginning balance, January 1, 2007 $39,900
Add: Net income 18,100
Deduct: Cash dividends 5,600
Ending balance, December 31, 2007 $52,400
3. HEIDI’S BAKERY INC.
BALANCE SHEET
DECEMBER 31, 2007
Assets Liabilities and Stockholders’ Equity
Cash $ 3,700 Accounts payable $ 6,800
Accounts receivable 15,500 Notes payable 40,000
Building and equipment 60,000 Capital stock 30,000
Land 50,000 Retained earnings 52,400
Total liabilities and
Total assets $129,200 stockholders’ equity $129,200

CHAPTER 1 • ACCOUNTING AS A FORM OF COMMUNICATION
1-27
PROBLEM 1-7A (Concluded)
4. Memorandum to the company president:
TO: Company president
FROM: Student’s name
DATE: January 1, 2008
SUBJECT: Corrected income statement
Attached please find the original income statement you prepared, along with a cor-
rected version of that same statement. Fortunately, your disappointment with the
2007 net income is not warranted, as you will see from my revised statement. The
difference between the net loss on the original income statement of $900 and the re-
vised net income of $18,100, or $19,000, can be explained as follows:
1. Accounts receivable of $15,500 does not belong on the income statement; in-
stead, services provided on account of $22,100 should be shown on the state-
ment; the difference is $6,600.
2. Dividends are not an expense and thus they do not belong on the income state-
ment: $5,600.
3. Accounts payable is a liability and appears on a balance sheet: $6,800.
These corrections result in increased income of $19,000. Also note that notes
payable should be reported on the balance sheet as a liability, not as an offset to
building and equipment. Please let me know if I can be of any further assistance in
interpreting the results of our operations for 2007.
LO 2 PROBLEM 1-8A STATEMENT OF RETAINED EARNINGS FOR BRUNSWICK COR-
PORATION
1. BRUNSWICK CORPORATION
STATEMENT OF RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 2004
Beginning balance, December 31, 2003 $1,202,000,000
Add: 2004 net income 269,800,000
Deduct: 2004 dividends (58,100,000 )
Ending balance, December 31, 2004 $1,413,700,000
2. The statement of stockholders’ equity would include all changes in stockholders’
equity such as issuances and retirements of stock in addition to the information nor-
mally provided in a retained earnings statement.

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FINANCIAL ACCOUNTING SOLUTIONS MANUAL
LO 5 PROBLEM 1-9A ROLE OF THE ACCOUNTANT IN VARIOUS ORGANIZATIONS
1. Financial accountant
2. Tax accountant
3. Financial accountant
4. Not an accounting position
5. Managerial accountant
6. Managerial accountant
7. Not an accounting position
8. Auditor
9. Not an accounting position
10.