ACCT1101 – Introduction to Financial Accounting
Chapter 2
Assignment questions - suggested answers
(E2-4, E2-5, E2-13, E2-14, P2-5)
E2–4.
Event Assets = Liabilities + Stockholders’ Equity
a. Cash +40,000 Common
stock +1,000
Additional
paid-in
capital +39,000
b. Equipment +15,000 Accounts
payable +12,000
Cash –3,000
c. Cash +10,000 Notes payable +10,000
d. Note
receivable +800
Cash –800
e. Land +13,000 Notes payable +9,000
Cash –4,000
1
ACCT1101 – Introduction to Financial Accounting
Chapter 2
E2–5.
Req. 1 (dollars in millions)
Event Assets = Liabilities + Stockholders’ Equity
a. Buildings +303 Notes payable
Equipment +1,202 (long-term) +1,073
Cash – 432
b. Cash +695 Common stock +10
Additional paid-in
capital +685
c. Dividends Retained
payable +1,159 earnings –1,159
d. Short-term +5,928
investments
Cash -5,928
e. No effects
f. Cash +2,423
Short-term
investments –2,423
Req. 2
The separate entity assumption states that transactions of the business are separate
from transactions of the owners. Since transaction (e) occurs between the owners and
others in the stock market, there is no effect on the business.
E2–13.
a. Cash (+A) ............................................................................ 70,000
Common stock (+SE) ................................................... 5,000
Additional paid-in capital (+SE)………………………….. 65,000
b. No transaction has occurred because there has been no
exchange or receipt of cash, goods, or services.
c. Cash (+A) ............................................................................ 18,000
Notes payable (long-term) (+L) .................................... 18,000
d. Equipment (+A) ................................................................... 11,000
Cash (-A) ..................................................................... 1,500
Notes payable (short-term) (+L) ................................... 9,500
e. Notes receivable (short-term) (+A) ...................................... 2,000
Cash (-A) ..................................................................... 2,000
f. Store fixtures (+A) ............................................................... 15,000
Cash (-A) ..................................................................... 15,000
2
ACCT1101 – Introduction to Financial Accounting
Chapter 2
E2–14.
(in millions of Euros)
a. Retained earnings (-SE) ..................................................... 2,106
Dividends payable (+L) ................................................ 2,106
b. No transaction has occurred because there has been no exchange or receipt of
cash, goods, or services.
c. Dividends payable (-L) ........................................................ 2,212
Cash (-A) ..................................................................... 2,212
d. Cash (+A) ............................................................................ 8,952
Notes payable (+L)....................................................... 8,952
e. Cash (+A) ............................................................................ 753
Equipment (-A) ............................................................ 753
f. Equipment (+A) ................................................................... 8,410
Cash (-A) ..................................................................... 5,823
Notes payable (+L) ...................................................... 2,587
g. Investments (+A) ................................................................. 3,592
Cash (-A) ..................................................................... 3,592
P2–5. (dollars in millions)
Req. 1
a. Cash (+A) ............................................................................ 18,266
Long-term debt (+L) ..................................................... 18,266
b. Long-term investments (+A) ................................................ 4,200
Short-term investments (+A) .............................................. 16,800
Cash (-A) ..................................................................... 21,000
c. Property, plant, and equipment (+A) ................................... 10,981
Cash (-A) ..................................................................... 9,571
Short-term notes payable (+L) ..................................... 1,410
d. Cash (+A) ............................................................................ 1,469
Common stock (+SE) ................................................... 1
Additional paid-in capital (+SE) .................................... 1,468
e. Cash (+A) ............................................................................ 18,810
Short-term investments (-A) ........................................ 18,810
f. Retained earnings (-SE) ..................................................... 11,126
Dividends payable (+L) ................................................ 11,126
3
ACCT1101 – Introduction to Financial Accounting
Chapter 2
P2–5. (continued)
Req. 2
Short-Term
Cash Investments Accounts Receivable
Beg. 20,289 Beg. 53,892 Beg. 17,874
(a) 18,266 21,000 (b) (b) 16,800 18,810 (e)
(d) 1,469 9,571 (c) 51,882 17,874
(e) 18,810
28,263
Inventories Other Current Assets
Beg. 4,855 Beg. 31,735
4,855 31,735
Long-Term Property, Plant, and Other
Investments Equipment Noncurrent Assets
Beg. 194,714 Beg. 33,783 Beg. 18,177
(b) 4,200 (c) 10,981
198,914 44,764 18,177
Accounts Accrued Unearned
Payable Expenses Revenue
49,049 Beg. 25,744 Beg. 7,548 Beg.
49,049 25,744 7,548
Short-term Dividends
Notes Payable Payable
18,473 0 Beg.
1,410 (c) 11,126 (f)
19,883 11,126
Other
Long-term Debt Noncurrent Liabilities
97,207 Beg. 43,251 Beg.
18,266 (a)
115,473 43,251
Common Stock Additional Retained
Paid-in Capital Earnings
1 Beg 35,866 Beg. 98,180 Beg.
1 (d) 1,468 (d) (f) 11,126
2 37,334 87,054
4
ACCT1101 – Introduction to Financial Accounting
Chapter 2
P2–5. (continued)
Req. 3
Apple, Inc.
Trial Balance
At September 29, 2018
(in millions)
Debit Credit
Cash 28,263
Short-term Investments 51,882
Accounts receivable 17,874
Inventories 4,855
Other current assets 31,735
Long-term investments 198,914
Property, plant, and equipment 44,764
Other noncurrent assets 18,177
Accounts payable 49,049
Accrued expenses 25,744
Unearned revenue 7,548
Short-term notes payable 19,883
Dividends payable 11,126
Long-term debt 115,473
Other noncurrent liabilities 43,251
Common stock 2
Additional paid-in capital 37,334
Retained earnings 87,054
Totals 396,464 396,464
5
ACCT1101 – Introduction to Financial Accounting
Chapter 2
P2–5. (continued)
Req. 4
Apple, Inc.
Balance Sheet
At September 29, 2018
(in millions)
ASSETS
Current Assets:
Cash $ 28,263
Short-term investments 51,882
Accounts receivable 17,874
Inventories 4,855
Other current assets 31,735
Total current assets 134,609
Long-term investments 198,914
Property, plant, and equipment 44,764
Other noncurrent assets 18,177
Total assets $396,464
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable $49,049
Accrued expenses 25,744
Unearned revenue 7,548
Dividends payable 11,126
Short-term notes payable 19,883
Total current liabilities 113,350
Long-term debt 115,473
Other noncurrent liabilities 43,251
Total liabilities 272,074
Stockholders’ Equity:
Common stock 2
Additional paid-in capital 37,334
Retained earnings 87,054
Total stockholders’ equity 124,390
Total liabilities and stockholders’ equity $396,464
Req. 5
Current Current Assets $134,609
= = = 1.19
Ratio Current Liabilities $113,350
For every $1 of short-term liabilities, Apple Inc. has approximately $1.19 of current
assets. This suggests that Apple has sufficient current resources to pay current
liabilities. Apple has a very efficient cash management system and keeps its current
resources at lower levels to maximize investment opportunities.