MBA 621-Financial and Managerial Accounting
July 11, 2015
Indicate the net effect on assets, liabilities and owners’ equity resulting from each of the following transactions:
1. Capital stock was issued for $100,000 cash
This will increase assets by $100,000 and increase equity by $100,000
2. Bonds payable of $25,000 were refunded with capital stock.
The liabilities will be decreased by 25,000 and increase equity by 25,000
3. Depreciation on plant and equipment equaled $8,500 for the year.
This will reduce assets by 8,500 and reduce equity by $8,500
4. Inventory was purchased for $15,900 cash
This will decrease cash by 15,900
5. $9,400 worth of inventory was purchased on credit.
This will increase the inventory by $9,400 and Accounts payables by $9,400
6. Inventory costing $4,500 was sold for $7,200 on credit.
This will increase revenue and Accounts Receivables by 7,200
7. $3,500 in cash was received for merchandise sold on credit.
Accounts receivables reduced by 3,500 and cash increased by 3,500
8. Dividends of $3,000 were declared.
Accounts payables will increase by 3,000
9. The declared dividends of $3,000 were paid.
Cash will decrease by $3,000 and account payables will decrease by $3000
10. The company declared a stock split, and replaced each outstanding share with two new shares.
The assets will increase
Case 2-1- The Maynard Company
Balance Sheet- June 1 and June 30 Current Assets:
See Attached Excel Spreadsheets
1. See Attached
2. The expenses at the end of the month, the ratio improved from 4.35% to 2.15 by June 30. The company is very stable and in good financial condition. They also had a payment of $11,700 to the owner.
3. The retained earning account was decreased be the dividend payment, which was the 11,700 to the owner.
4. The equity from the shareholders doesn’t affect the company is worth, the company’s production keeps it financially secure.
Case 3-2 Lone Pine Café