Financial Management & Analysis assignments

Topics: Generally Accepted Accounting Principles, Balance sheet, Asset Pages: 10 (1040 words) Published: May 15, 2014


MBA 680 Assignment #2 (WEEK 2)
Abdullah Alshawdhabi
Coleman University

Chapter 3
Question 3-1 Construct a balance sheet for EDCO on Dec 31, 201X using the following information: (Remember that the check is if Assets = Liabilities + Equity, if it balances you are probably correct, if it doesn’t balance, one or more of the items is mis-categorized or has the wrong sign). Cash in the bank is $140,700

Account Payable = $515,450
The value of common stock outstanding = $400,000
To date accumulated depreciation of building = $135,200
Retained earnings = $899,700
Investments in Marketable Securities = $35,000
A bank note not due to be paid back to the bank until 3 years from today= $75,000 Accounts Receivable = $715,000
Accumulated depreciation of capital equipment = $675,350
Petty Cash kept in the office for minor purchases = $500
The corporation holds a note from a Board Member(who owes the corporation money for a personal loan) is due to pay back $12,500, within a year and $34,000 2 years from today Original purchase costs of all capital equipment to date = $913,000 Inventories on hand = $300,000

Original purchase price of Land = $75,000
Accumulated depreciation on Land = $0
Original purchase price of building = $475,000
ANSWER
EDCO
 
For the year of Dec 31, 2013
 
Balance Sheet
 
Assets
$
     Cash in the bank
140,700.00
     Original purchase price of building
475,000.00
    To date accumulated depreciation of building
(135,200.00)
    Investments in Marketable Securities
35,000.00
    Accounts Receivable
715,000.00
     Original purchase costs of all capital equipment to date 913,000.00
      Accumulated depreciation of capital equipment
(675,350.00)
Inventories on hand
300,000.00
   Original purchase price of Land
75,000.00
    Accumulated depreciation on Land
0.00
Current assets
12,500.00
Long term asset
34,000.00
      Petty Cash kept in the office for minor purchases 500.00
Total Assets
1,890,150.00
Liabilities
 
   Account Payable
515,450.00
   A bank note not due to be paid back to the bank until 3 years from today 75,000.00
Total Liabilities
590,450.00
 
 
Stockholders' ` Equity
 
   The value of common stock outstanding
400,000.00
  Retained earnings
899,700.00
Total Stockholders ` Equity
1,299,700.00
Total Liabilities and Stockholders ` Equity
1,890,150.00

Question 3-2 In your own words,
Define PREPAID EXPENSES and explain why it would be considered a current asset, Define UNEARNED INCOME and explain why it is considered a current liability, Explain why these items are accounted for in a similar fashion even though they are in two different portions of the balance sheet. ANSWERS

Define PREPAID EXPENSES and explain why it would be considered a current asset, Answer: - Prepaid Expense is an expense made in the advance for the use of service and goods. For instance, expenses insurance such as buildings, cars, the prepaid expense are considered as current assets because it is paid in advance currently for the future use. Define UNEARNED INCOME and explain why it is considered a current liability, Answer:-Unearned income is a way of payment received in advance for services or goods is sold. It is an income not collected from salaries, wages, business income from self employment and trips. It includes dividend from share, that is from investment, house rental, property rental, Child support, interest income, pension, Royalties , Un employment compensation and social security Benefits. It is considered a liability is less than a year or life of the operating period. C. Explain why these items are accounted for in a similar fashion even though they are in two different portions of the balance sheet. Answer:- Prepaid expense and unearned income are placed in different portions of the balance...
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