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A=L+E
Reference Account
a Cash
a Common Stock
b Equipment
b Notes Payable
b Cash
d Land
d Common Stock
e Notes Receivable
Debit
Credit
$ 70,000
$ 5,040
$ 18,000
$ 13,500
$ 4,500
$ 15,000
$
100
$ 2,500
d Cash
Example:
Reference Account
a Cash
Equipment
$ 64,960
$ 17,900
3,000
Debit
Credit
$
100
$
100
Requirement 1:
Ref.
Beg.
a
d
$
$
$
CASH
70,000 $
3,000 $
Ref.
2,500 e
4,500 b
$
66,000
Correct!
Beg.
NOTES RECEIVABLE
$
$
2,500
$
2,500
Correct!
EQUIPMENT
Beg. $
b
$
18,000
$
18,000
Correct!
LAND
Beg. $
d
$
15,000
$
15,000
Correct!
Ref.
NOTES PAYABLE
Ref.
$
- Beg.
$
13,500 b
$
13,500
Correct!
Ref.
COMMON STOCK
$
$
5,040
$
100
Ref.
Beg.
a
d
$
5,140
Correct!
ADDITIONAL PAID-IN
CAPITAL
$
- Beg.
$
64,960 a
$
17,900 d
$
82,860
Correct!
Requirement 2:
Using the balances in the T-accounts, fill in the following amounts for the accounting equation:
Assets
$ 101,500
Liabilities $
13,500 + Stockholders' Equity $
88,000
Correct!
Correct!
Correct!
Requirement 3:
Explain your response to events (c) and (f).
The agreemnt c does not inlvove exchange of goods or service. It's not a trasaction.
For trasaction f, onwer got a loan from personal bank and not business. It has no
effect on the business.
13,852
966
9,803
1,404
3,423
29,448
2,124
3,404
9,557
44,533
11,656
10,345
22,001
13,615
35,616
34
12,153
28,236
(31,506)
8,917
44,533
50
300
13,000
875
1,410
400
11,000
11,000
60
Assume that the following transactions (in millions) occurred during the remainder of
2012 (ending on February 1, 2013):
a. Borrowed $50 from banks due in two years.
b. Lent $300 to affiliates, who signed a six-month note.
c. Purchased additional investments for $13,000 cash; one-fifth were long term and the
rest were short term.
d. Purchased property, plant, and equipment; paid $875 in cash and $1,410 with
additional long-term bank loans.
e. Issued 1,000 additional shares of stock for $400 in cash.
f. Sold short-term investments costing $11,000 for $11,000 cash.
g. Dell does not actually pay dividends; it reinvests its earnings into the company for
growth purposes. Assume instead for this problem that Dell declared and paid $60 in
dividends during 2012.
Required:
1. Prepare a journal entry for each transaction. Use the account titles in the Dell balance
sheet.
2. Create T-accounts for each balance sheet account and include the February 3, 2012,
balances. Post each journal entry to the appropriate T-accounts.
3. Prepare a balance sheet from the T-account ending balances for Dell at February 1,
2013, based on these transactions.
4. Compute Dell's current ratio for 2012 (year ending on February 1, 2013). What does
this suggest about the company?
Requirement 1:
A=L+SE
Reference
a
a
b
b
c
c
c
d
d
d
e
e
e
g
g
Debit
Credit
$
50
$
50
$
300
$
300
$ 2,600
$ 10,400
$ 13,000
$ 2,285
$
875
$ 1,410
$
400
$
10
$
390
$
60
$
60
Account
Cash A+
Loan L+
Note Receivable A+
Cash ALong-term investment A+
Short-term investment A+
Cash APropety, plant, equip A+
Cash ALoan L+
Cash A+
Common Stock SE+
Additional paid-in capital SE+
Retained earning SE+
Cash A-
Example:
Reference Account
a Cash
Equipment
Debit
Credit
$
100
$
100
Requirement 2:
Ref.
Beg. $
a
e
f
$
$
$
$
Cash
13,852
50 $
300.00
400 $ 13,000.00
11,000 $
875.00
$
60.00
11,067
Ref.
366
Beg. $
Beg. $
10,103
Inventories
1,404
1,404
3,423
4,409
Accounts payable
Ref.
$
11,656 Beg.
Ref.
b
c
d
g
Short-term investments
966
Beg. $
c
$
10,400
$ 11,000.00 f
Ref.
11,656
Other short-term
obligations
$
10,345 Beg.
10,345
Long-term liabilties
$
13,615 Beg.
$
50 a
$
1,410 d
15,075
Beg.
Long-term investments
3,404
$
2,600
Beg. $
6,004
9,557
Common stock
Ref.
$
34 Beg.
$
10 e
44
Additional paid-in
capital
$
12,153 Beg.
$
390 e
12,543
Retained earnings
$
28,236 Beg.
$
60
28,176
Other stockholders'
equity
$
31,506
(31,506)
Student Name:
Class:
Problem 02-05
Requirement 3:
DELL, INC.
Balance Sheet
at February 1, 2013
(in millions)
Assets
Current Assets:
Cash
Short-term investments
Receivables and other assets
Inventories
Other current assets
Total current assets
11,067
366
10,103
1,404
3,423
26,363
Correct!
4,409
6,004
9,557
46,333
Correct!
11,656
10,345
22,001
15,075
37,076
Correct!
Stockholders' Equity
Common stock
Additional paid-in capital
Retained earnings
Other stockholders' equity items
Total stockholders' equity
Total liabilities and stockholders' equity
44
12,543
28,176
(31,506)
9,257
46,333
Correct!
Requirement 4:
Current Ratio
1.20
Correct!