Académique Documents
Professionnel Documents
Culture Documents
a
The balance in the supplies account at the beginning of the year:
The balance in the supplies account at the end of the year:
=> The amount of adjustment:
$
$
$
4,000.00
1,750.00
2,250.00
E3-8.b
The supplies account at the end of first year of operation
Opening balance
Increase
The amount purchased during the year
Decrease
The amount recorded to supplies expenses account
3,100.00
Closing balance
1,100.00
c+d-a
4,200.00
18,653.00
6,000.00
b=
E3-11.a
Entry for unearned revenue did Microsoft make during the year
1
Dr Cash
$
Cr Short-term unearned revenue
In this record, both cash and short-term unearned revenue will increase $18,653 mil
2
???
18,653.00
6,000.00
Chapter: 3
E3-11.b
Percentage of short-term unearned revenue / total revenue
8.1%
E3-12
The usual adjustment transferring rent earned of $36,750 to a revenue account from
the unearned rent account was omitted
This error will affect the following accounts at the end of August
<1>:
Revenue account (income statement) will be understated an amount of $36,750
<2>:
Unearnd rent account (balance sheet) will be overstated an amount of $36,750
E3-14
The wage payable account at the end of first year of operation (October, 31)
Opening balance
Increase
The wage expenses incurred during the year
Decrease
The amount paid during the year
Closing balance
11,900.00
a+b-d
813,100.00
E3-17.a
The balance sheet for The Campbell Soup Company includes accrued expenses:
The income before taxes for the year was
$
$
598,000.00
1,106,000.00
If accruals apply to the current year was not recorded at the end of the year, the
income before taxes would have been overstated a amount of:
598,000.00
c=
825,000.00
???
E3-17.b
Percentage of the misstatement in (a) to the reported income
54.1%
Chapter: 3
E3-23.a
The estimated amount of depreciation on equipment for the current year is
133,000.00
133,000.00
$
$
133,000.00
133,000.00
E3-23.b
If the adjustment in (a) was omitted, the following items would be erroneously stated
<1>
accumulated depreciation of equipment account would be understated:
Hence, the balance sheet will be overstated
$
$
133,000.00
133,000.00
$
$
133,000.00
133,000.00
<2>
133,000.00
Chapter: 3
E3-29
Classified balance sheet as of April 30, 20Y8
La - Z - Boy Inc.
Balance Sheet
April 30, 20Y8
Assets
Current assets
Cash
Account receivable
Inventories
Other current assets
Total current assets
Fixed assets
Property, plant, and equipment
Intangible assets (trade names)
Less accumulated depreciation
Total fixed assets
Other long-term assets
Total assets
$
$
$
$
$
$
$
421,802.00
3,100.00
301,199.00 $
115,262.00
161,299.00
138,444.00
17,218.00
$
432,223.00
$
$
$
123,703.00
37,529.00
593,455.00
132,104.00
97,211.00
$
$
364,140.00
593,455.00
123,703.00
Liabilities
Current liabilities
Accounts payable
Accrued expenses
Debt due within one year
Total current liabilities
Long-term liabilities
Long-term debt
Other long-term liabilities
Total liabilities
$
$
$
$
$
49,537.00
77,447.00
5,120.00
29,937.00
67,274.00
Stockholders Equity
Capital stock
Retained earnings
Total stockholders equity
Total liabilities and stockholders equity
$
$
256,322.00
107,818.00
Check
Chapter: 3
FA3 - 1
Year 2
Current assets
Cash
Account receivable
Inventories
Prepaid and other current assets
Total current assets
Total current liabilities
Year 1
Change
a
b
c
d
e
f
655
109
1,137
96
1,997
1,634
711
94
1,258
92
2,155
1,748
=e-f
=e/f
=(e-c)/f
363
1.22
0.53
407
1.23
0.51
FA3 - 4 Assess the change in liquidity (the ability to convert an asset to cash)
Based on the 2 ratios above (Current ratio and Quick ratio)
The most sensitive ratio we may apply for the assessment of liquidity is quick ratio. From year 1 to year 2, this ratio has
increased from 0.51 to 0.53. This fact shows an improvement in the liquidity of the company.
FA3 - 5 By looking at the detail elements of this ratio' formalation. We see that while total current liabilities reduced 114 mil,
the current asset (excluding inventory) only reduced 37 mil. This result may suggest that company may have used more long
term liablities or euity resources in Year 2 to sponsor for its business operation
The cost of longterm liabilites or equity resources are normally higher than short team libilites (normally at 0% interest rate)
This fiancial strategy could result in higher interest expenses, and eventually reduce net income of the company.
Chapter: 3
(56)
15
(121)
4
(158)
(114)