Finc11
Chapter-3 Solutions to Problems
P3-1. Reviewing basic financial statements LG 1; Basic Income statement: In this one-year summary of the firm’s operations, Technica, Inc. showed a net profit for 2012 and the ability to pay cash dividends to its stockholders. Balance sheet: The financial condition of Technica, Inc. at December 31, 2011 and 2012 is shown as a summary of assets and liabilities. Technica, Inc. has an excess of current assets over current liabilities, demonstrating liquidity. The firm’s fixed assets represent over one-half of total assets ($270,000 of $408,300). The firm is financed by short-term debt, long-term debt, common stock, and retained earnings. It appears that it repurchased 500 shares of common stock in 2012. Statement of retained earnings: Technica, Inc. earned a net profit of $42,900 in 2012 and paid out $20,000 in cash dividends. The reconciliation of the retained earnings account from $50,200 to $73,100 shows the net amount ($22,900) retained by the firm. Financial statement account identification LG 1; Basic Account Name Accounts payable Accounts receivable Accruals Accumulated depreciation Administrative expense Buildings Cash Common stock (at par) Cost of goods sold Depreciation Equipment General expense Interest expense Inventories Land Long-term debt Machinery Marketable securities Notes payable Operating expense Paid-in capital in excess of par Preferred stock Preferred stock dividends Retained earnings Sales revenue Selling expense Taxes Vehicles
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P3-2.
(a) Statement BS BS BS BS IS BS BS BS IS IS BS IS IS BS BS BS BS BS BS IS BS BS IS BS IS IS IS BS
(b) Type of Account CL CA CL FA* E FA CA SE E E FA E E CA FA LTD FA CA CL E SE SE E SE R E E FA
This is really not a fixed asset, but a charge against a fixed asset, better known as a contra-asset.
1
P3-3.
Income statement preparation LG 1; Intermediate a. Cathy Chen, CPA Income Statement for the Year Ended December 31, 2012 Sales revenue Less: Operating
P3-1. Reviewing basic financial statements LG 1; Basic Income statement: In this one-year summary of the firm’s operations, Technica, Inc. showed a net profit for 2012 and the ability to pay cash dividends to its stockholders. Balance sheet: The financial condition of Technica, Inc. at December 31, 2011 and 2012 is shown as a summary of assets and liabilities. Technica, Inc. has an excess of current assets over current liabilities, demonstrating liquidity. The firm’s fixed assets represent over one-half of total assets ($270,000 of $408,300). The firm is financed by short-term debt, long-term debt, common stock, and retained earnings. It appears that it repurchased 500 shares of common stock in 2012. Statement of retained earnings: Technica, Inc. earned a net profit of $42,900 in 2012 and paid out $20,000 in cash dividends. The reconciliation of the retained earnings account from $50,200 to $73,100 shows the net amount ($22,900) retained by the firm. Financial statement account identification LG 1; Basic Account Name Accounts payable Accounts receivable Accruals Accumulated depreciation Administrative expense Buildings Cash Common stock (at par) Cost of goods sold Depreciation Equipment General expense Interest expense Inventories Land Long-term debt Machinery Marketable securities Notes payable Operating expense Paid-in capital in excess of par Preferred stock Preferred stock dividends Retained earnings Sales revenue Selling expense Taxes Vehicles
*
P3-2.
(a) Statement BS BS BS BS IS BS BS BS IS IS BS IS IS BS BS BS BS BS BS IS BS BS IS BS IS IS IS BS
(b) Type of Account CL CA CL FA* E FA CA SE E E FA E E CA FA LTD FA CA CL E SE SE E SE R E E FA
This is really not a fixed asset, but a charge against a fixed asset, better known as a contra-asset.
1
P3-3.
Income statement preparation LG 1; Intermediate a. Cathy Chen, CPA Income Statement for the Year Ended December 31, 2012 Sales revenue Less: Operating