Chapter 4 and 15 Handout

Acct 5000
Chapter 4 Handout
25. Prepare the adjusting entries for each situation for Sibley Co., which began operations on September
1, 2021.
a. The company records a $1,750 depreciation expense on machinery.
b. Upon inception, the company received $21,000 for one-year membership revenues. The company
also has a calendar year-end.
c. The company’s attorney, who bills at $42 per hour and agrees to bill Sibley Co. upon settlement, spent
45 hours on a legal issue. He expects the issue to be resolved in March of the following year
26. Prepare the closing entry for Sibley Co. when it earned membership revenues of $5,200 and rent
revenue of $6,200, and it incurred startup expenses of $1,550, wages expense of $3,400, utilities
expense of $1,900, and miscellaneous expense of $600
27. Prepare Sibley Co.’s post-closing trial balance. The company’s accounts on December 31, 2021,
include Cash, $900; Notes Payable, $965; Accounts Receivable, $1,500; Accounts Payable, $2,900; Janice
Sibley, Capital, $2,185; Accrued Expenses, $2,400; Prepaid Expenses, $1,275; Machinery, $4,000, with
$890 accumulated depreciation; and Land, $1,665.
31. Given the following amounts, calculate the working capital.
a. Current assets of $480 and current liabilities of $285.
b. Total assets of $5,090, long-term assets of $2,050, total liabilities of $3,500, and current liabilities of
$2,200.
c. Total assets of $8,450, long-term assets of $2,600, long-term liabilities of $2,200, and owner’s equity
of $1,500.
32. Calculate working capital for the companies in each situation.
Current assets
Fixed assets
Current liabilities
Long-term liabilities
Company A
$16,080
13,300
15,000
9,500
Company B
$12,000
10,900
14,500
4,900
Company C
$17,850
5,400
19,800
2,200
33. Using the balance sheet below, calculate working capital.
Sharp Sharks
Balance Sheet
June 30, 2021
Assets
Cash
Marketable securities
Accounts receivable
Prepaid expenses
Property, plant, and equipment
$ 1,800
1,750
5,400
2,450
18,050
Total assets
$29,450
Liabilities
Accounts payable
Unearned revenue
Accrued expenses
Current portion of long-term debt
Long-term debt
$ 4,500
3,400
1,600
1,300
8,900
Owner’s Equity
Owner’s equity
Total liabilities and owner’s equity
9,750
$29,450
34. With the following amounts, calculate the company’s current ratio, rounding to two decimal places.
Compare the ratios in each situation to determine which has the strongest position.
a. Current assets of $17,500 and current liabilities of $13,050
b. Total assets of $22,780, fixed assets of $5,760, and current liabilities of $16,900
c. Total liabilities of $17,900, current assets of $10,980, and long-term debt of $10,200
35. Calculate Clayton Corporation’s current ratio with the following information, rounding to two
decimal places. Determine if the company is in a stronger position in Year 1 or Year 2.
Current assets
Fixed assets
Current liabilities
Long-term liabilities
Year 2
Year 1
$ 6,500
11,000
7,250
9,500
$ 6,550
15,000
9,000
12,000
36. Calculate the current ratio for each situation, rounding to two decimal places. Determine which
company has the strongest position to pay current liabilities.
a. Current assets of $1,780, total liabilities of $5,200, and current liabilities of $2,800
b. Current assets of $2,200, fixed assets of $8,670, shareholders’ equity of $1,700, and long-term debt of
$7,100
c. Current liabilities of $3,500, long-term debt of $2,700, shareholders’ equity of $1,900, and fixed assets
of $6,800
Acct 5000
Chapter 15 Handout
4. Perform a horizontal analysis on Tortoise Cleaning Corporation’s 2018 and 2019 balance
sheets. Round percentages to one decimal place.
Tortoise Cleaning Corporation
Comparative Balance Sheet
December 31, 2019 and 2018
Dec. 31, 2019
Dec. 31, 2018
Assets
Current assets
$
500,200
$
480,300
Long-term investments
1,200,450
1,540,600
Property, plant, and equipment (net)
9,750,000
8,890,000
Intangible assets
1,685,000
1,790,000
Total assets
$13,135,650
$12,700,900
Liabilities
Current liabilities
$
$
Long-term liabilities
Total liabilities
700,100
654,300
7,685,000
7,750,300
$ 8,385,100
$ 8,404,600
877,600
$
Stockholders’ Equity
Preferred 4% stock, $10 par
$
875,600
Common stock, $4 par
2,450,000
2,190,000
Retained earnings
1,422,950
1,230,700
$ 4,750,550
$ 4,296,300
T(?tal stockholders’ equity
Total liabilities and stockholders’ equity
$13,135,650
$12,700,900
5. Prepare a vertical analysis. Round percentages to one decimal place
Tortoise Cleaning Corporation
Comparative Balance Sheet
December 31, 2019 and 2018
Dec. 31, 2019
Dec. 31, 2018
Assets
Current assets
$
500,200
$
480,300
Long-term investments
1,200,450
1,540,600
Property, plant, and equipment (net)
9,750,000
8,890,000
Intangible assets
1,685,000
1,790,000
Total assets
$13,135,650
$12,700,900
Liabilities
Current liabilities
$
Long-term liabilities
Total liabilities
700,100
$
654,300
7,685,000
7,750,300
$ 8,385,100
$ 8,404,600
Stockholders’ Equity
Preferred 4% stock, $10 par
$
877,600
$
875,600
Common stock, $4 par
2,450,000
2,190,000
Retained·earnings
1,422,950
1,230,700
$ 4,750,550
$ 4,296,300
Total stockholders’ equity
Total liabilities and stockholders’ equity
$13,135,650
$12,700,900
10. Use the common-sized income statements that compare Greenwood Paper Supply to the
industry average to identify expenses that the company should work toward decreasing
Greenwood Paper Supply
Sales
Cost of goods sold
Gross profit
Selling expenses
Administrative expenses
Total operating expenses
Income from operations
Other revenue
Other expense (interest)
Income before income tax
Income tax expense
Net income
100.0%
45.2
54.8%
16.7%
14.5
31.2%
23.6%
1.2
24.8%
0.9
23.9%
8.4
15.5%
Industry Average
100.0%
46.7
53.3%
12.9%
13.1
26.0%
27.3%
1.8
29.1%
1.0
28.1%
9.8
18.3%
13. Perform a current position analysis by calculating the working capital, current ratio, and
quick ratio on the following company for 2018 and 2019 to determine if its ability to pay current
liabilities has improved or gotten worse. Round ratios to one decimal place.
Current assets
Quick assets
Current liabilities
2018
2018
$195,000
125,000
196,100
$140,600
100,200
145,600
15. Calculate the working capital, current ratio, and quick ratio for 2018 and 20196 with the
following information. Determine if the company is in a better position or worse position to pay
its current liabilities. Round ratios to one decimal place.
Cash and cash equivalents
Temporary investments
Accounts receivable
Inventories
Current liabilities
2019
2018
$110,650
50,300
180,100
110,320
357,000
$100,750
68,900
177,750
100,100
346,200
25. Use the information shown to calculate the following ratios for Allen Ales in 2018: asset
turnover, return on total assets, return on stockholders’ equity, and return on common
stockholders’ equity. The company paid $2,500 in preferred dividends for the year. Round ratios
,to one decimal place.
Sales
Interest expense
Net income
Long-term investments:
Beginning of year
End of year
Total assets:
Beginning of year
End of year
Common stockholders’ equity:
Beginning of year
End of year
Total stockholders’ equity:
Beginning of year
End of year
$345,900
15,700
275,300
67,500
68,300
104,750
108,300
27,200
28,450
36,900
39,200