Chapter 1 Notes Financial Accounting

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Chapter 1
Financial Statements and Business Decisions

EXERCISES

E1–2

Req. 1
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Balance Sheet
As at December 31, 2008

|ASSETS | |LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | |Liabilities | | |Cash |$ 48,900 |Accounts payable |$ 7,000 | |Accounts receivable |25,000 |Note payable |3,000 | |Store and office equipment |49,000 |Interest payable |120 | | | | Total liabilities |10,120 | | | | | | | | |Shareholders’ Equity | | | | |Share capital |100,000 | | | |Retained earnings |12,780 | | | | Total shareholders’ equity |112,780 | | | |Total liabilities and | | |Total assets |$122,900 |shareholders' equity |$122,900 |

Req. 2

This is the first year of operations and no dividends were declared. Therefore, the balance of retained earnings, $12,780, at year-end consists entirely of the net income earned during the first year.

E1–4
WAL-MART STORES, INC.
Income Statement
For the Year ended March 29, 2006
(in millions)

|Net sales | |$315,654 | |Expenses: | | | | Cost of sales |$240,391 | | | Operating, selling and general and administrative expenses | | | | |56,733 | | | Interest costs | 1,172 | | | Total costs and expenses, excluding | | | |income taxes | |298,296 | |Income before income taxes | | 17,358 | |Provision for income taxes* | | 5,803 | |Net income | |$ 11,555 |

*Note that “Provision for income taxes” is a common synonym for “Income tax expense.”

E1–6

ANet Income = $100,000 - $82,000 = $18,000;
Shareholders’ Equity = $150,000 - $70,000 = $80,000.

BTotal Revenues = $80,000 + $12,000 = $92,000;
Total Liabilities = $112,000 - $60,000 = $52,000.

CNet Income (Loss) = $80,000 - $86,000 = ($6,000);
Shareholders’ Equity = $104,000 - $26,000 = $78,000....
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