Acct301 Case 1-3

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Student Name: Course #-Section: ACCT301

EXERCISE 1-3

| |(a) |(b)
|
|Accounts payable and accrued liabilities |L |O |
|Accounts receivable |A |O |
|Property, plant, and equipment |A |I |
|Food and beverage operations revenue |R |O |
|Golf course operations revenue |R |O |
|Inventory |A |O |
|Long-term debt |L |F |
|Office and general expense |E |O |
|Professional fees expense |E |O
|
|Wages and benefits expense |E |O |

PROBLEM 1-3A

(a) ECKERSLEY SERVICE CO. Income Statement For the Month Ended June 30, 2010

Revenues Revenue $7,000
Expenses
Wage expense $1,400 Supplies expense 1,000 Gas and oil expense 600 Advertising expense 400 Utilities expense 300 Total expenses 3,700 income $3,300

ECKERSLEY SERVICE CO.
Retained Earnings Statement
For the Month Ended June 30, 2010

Retained earnings, June 1 $0
Add: Net income 3,300 3,300

Less: Dividends 2,000
Retained earnings, June 30 $1,300

ECKERSLEY SERVICE CO.
Balance Sheet
June 30, 2010

Assets
Cash $4,600
Accounts receivable 4,000
Supplies 2,400
Equipment 29,000 Total assets $40,000

Liabilities and Stockholders’ Equity
Liabilities
Notes payable $12,000 Accounts payable 500 Total liabilities $12,500
Stockholders’ equity Common stock 26,200 Retained earnings 1,300 27,500 Total liabilities and stockholders’ equity $40,000

(b) The first month for Eckersley Service Co. was a success because instead of losing money, they made $3,300.

(c) Businesses usually don’t distribute dividends after this short of time. Although they distributed dividends, they still had plenty of retained cash to do other things with like paying down debts.

EXERCISE 2-1

Code Account Code Account

|CL |Accounts payable and accrued liabilities |CL |Income taxes payable |
|CA | |CA |Inventories |
| |Accounts receivable | | |
|PPE | |LTI |Investments |
| |Accumulated depreciation | | |
|PPE | |PPE |Land |
| |Buildings | | |
|CA | |LTL |Long-term debt |
| |Cash and short-term investments | | |
|CL | |CA |Materials and supplies |
| |Dividends payable | | |
|IA | |PPE |Office equipment and furniture |
| |Goodwill | | |
| | |CA | |
| | | |Prepaid expenses |

PROBLEM 2-4A

(a) Bedene is more profitable than Groneman. Bedene had a net income of $328,000 and its earnings per share were $3.28. Groneman had a net income of $142,200 and its earnings per share were $2.48.

(b) Bedene is the more liquid company. The working capital of Bedene is $340,875 and Groneman’s was less than half that at $149,988.

(c) Bedene seems to be the more solvent company. The debt to asset ratio of Bedene is 18.6% and Groneman’s was 21.2%. Bedene had free cash of $12,000 and Groneman only had $1,000.