# Calculate Stockholders Equity - PDF by vwx17635

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```									                                                                                                                        Exercises: Set B            1
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E1-1B   This information relates to Connor Co. for the year 2010.                                                     Prepare income statement
and retained earnings
Retained earnings, January 1, 2010         \$64,000                                                   statement.
Dividends paid during 2010                   6,000
Rent expense                                10,400
Service revenue                             58,000
Utilities expense                            2,400
Salaries expense                            30,000

Instructions
After analyzing the data, prepare an income statement and a retained earnings statement
for the year ending December 31, 2010.

E1-2B The following information was taken from the 2007 financial statements of phar-                                 Prepare income statement
maceutical giant Merck and Co. All dollar amounts are in millions.                                                    and retained earnings
statement.
Retained earnings, January 1, 2007          \$39,095.1                                                (SO 4)
Materials and production expense              6,140.7
Dividends                                     3,310.7
Sales revenue                                24,197.7
Research and development expense              4,882.8
Tax expense                                      95.3
Other revenue                                    46.2

Instructions
(a) After analyzing the data, prepare an income statement and a retained earnings state-
ment for the year ending December 31, 2007.
(b) Suppose that Merck decided to reduce its research and development expense by 50%.
What would be the short-term implications? What would be the long-term implica-
tions? How do you think the stock market would react?

E1-3B   Presented here is information for Anne Charlotte Inc. for 2010.                                               Prepare a retained earnings
statement.
Retained earnings, January 1      \$130,000                                                      (SO 4)
Revenue from legal services        410,000
Total expenses                     170,000
Dividends                           82,000

Instructions
Prepare the 2010 retained earnings statement for Anne Charlotte Inc.

E1-4B The following items and amounts were taken from Marley Inc.’s 2010 income                                       Prepare an income statement.
statement and balance sheet.                                                                                          (SO 4)

Cash and short-term                              Inventories                         \$ 64,618
investments                       \$ 84,700       Receivables                           88,419
Retained earnings                  123,192       Sales revenue                        599,951
Cost of goods sold                 438,458       Income taxes payable                   6,499
Selling, general, and                            Accounts payable                      49,384
administrative expenses         120,131        Franchising revenues                   4,786
Prepaid expenses                    7,818        Interest expense                       1,994

Instructions
Prepare an income statement for Marley Inc. for the year ended December 31, 2010.
2     chapter 1 Introduction to Financial Statements

Calculate missing amounts.     E1-5B   Here are incomplete financial statements for Brandon, Inc.
(SO 4, 5)
BRANDON, INC.
Balance Sheet

Assets                       Liabilities and Stockholders’ Equity
Cash                           \$ 5,000       Liabilities
Inventory                       10,000         Accounts payable              \$ 5,000
Building                        45,000       Stockholders’ equity
Total assets                   \$60,000         Common stock                    (a)
Retained earnings               (b)
Total liabilities and
stockholders’ equity          \$60,000

Income Statement
Revenues                          \$80,000
Cost of goods sold                  (c)
Net income                        \$ (d)

Retained Earnings Statement
Beginning retained earnings   \$10,000
Net income                      (e)
Dividends                       5,000
Ending retained earnings          \$29,000

Instructions
Calculate the missing amounts.
Compute net income and         E1-6B Sleep Cheap is a private camping ground near the Lathom Peak Recreation Area.
prepare a balance sheet.       It has compiled the following financial information as of December 31, 2010.
(SO 4, 5)
Revenues during 2010: camping fees \$137,000 Dividends                    \$ 9,000
Revenues during 2010: general store  25,000 Notes payable                  50,000
Accounts payable                     11,000 Expenses during 2010          129,000
Cash                                  8,500 Supplies                        2,500
Equipment                           119,000 Common stock                   40,000
Retained earnings (1/1/2010)    5,000
Instructions
(a) Determine net income from Sleep Cheap for 2010.
(b) Prepare a retained earnings statement and a balance sheet for Sleep Cheap as of De-
cember 31, 2010.
(c) Upon seeing this income statement, Terry Stevens, the campground manager
immediately concluded, “The general store is more trouble than it is worth—let’s
get rid of it.” The marketing director isn’t so sure this is a good idea. What do you
think?
Prepare an income statement.   E1-7B Kellogg Company is the world’s leading producer of ready-to-eat cereal and a
(SO 4, 5)                      leading producer of grain-based convenience foods such as frozen waffles and cereal bars.
The following items were taken from its 2007 income statement and balance sheet. All
dollars are in millions.
Retained earnings                \$4,217       Long-term debt             \$ 3,270
Cost of goods sold                6,597       Inventories                    924
Selling and                                   Net sales                   11,776
administrative expenses          3,311      Accounts payable             1,081
Cash                                 524      Common stock                   105
Notes payable                      1,489      Income tax expense             444
Interest expense                     319      Other expense                    2
Instructions
Prepare an income statement for Kellogg Company for the year ended December 31, 2007.
Exercises: Set B               3

E1-8B    This information is for Campo Corporation for the year ended December 31, 2010.         Prepare a statement
of cash flows.
Cash   received from lenders          \$20,000                            (SO 5)
Cash   paid for new equipment          35,000
Cash   dividends paid                   6,000
Cash   paid to suppliers               18,000
Cash   balance 1/1/10                  12,000
Instructions
(a) Prepare the 2010 statement of cash flows for Campo Corporation.
(b) Suppose you are one of Campo’s creditors. Referring to the statement of cash flows,
evaluate Campo’s ability to repay its creditors.
E1-9B The following data are derived from the 2007 financial statements of Southwest
Prepare a statement
Airlines. All dollars are in millions. Southwest has a December 31 year-end.
of cash flows.
Cash   balance, January 1, 2007                         \$1,390                       (SO 5)
Cash   paid for repayment of debt                          122
Cash   received from issuance of common stock              139
Cash   received from issuance of long-term debt            500
Cash   paid for property and equipment                   1,331
Cash   paid for dividends                                   14
Cash   paid for repurchase of common stock               1,001
Cash   paid for goods and services                       6,699
Instructions
(a) After analyzing the data, prepare a statement of cash flows for Southwest Airlines
for the year ended December 31, 2007.
(b) Discuss whether the company’s cash from operations was sufficient to finance its in-
vesting activities. If it was not, how did the company finance its investing activities?
E1-10B John Paul is the bookkeeper for Gabelli Company. John has been trying to get              Correct an incorrectly
the balance sheet of Gabelli Company to balance. It finally balanced, but now he’s not           prepared balance sheet.
sure it is correct.                                                                              (SO 5)

GABELLI COMPANY
Balance Sheet
December 31, 2010

Assets                        Liabilities and Stockholders’ Equity
Cash                             \$18,500        Accounts payable                \$16,000
Supplies                           9,500        Accounts receivable             (12,000)
Equipment                         40,000        Common stock                     40,000
Dividends                         10,000        Retained earnings                34,000
Total assets                     \$78,000        Total liabilities and
stockholders’ equity          \$78,000

Instructions
Prepare a correct balance sheet.
E1-11B The following items were taken from the balance sheet of Nike, Inc.                       Classify items as assets,
1. Cash                 \$1,625.6    7. Inventories                        \$2,453.9              liabilities, and stockholders’
2. Accounts receivable   3,035.4    8. Income taxes payable                  214.3              equity and prepare
3. Common stock          2,825.0    9. Property, plant, and equipment      1,874.8              accounting equation.
4. Notes payable           220.1   10. Retained earnings                   5,207.9              (SO 5)
5. Other assets          3,605.1   11. Accounts payable                    1,205.9
6. Other liabilities     2,921.6
Instructions
Perform each of the following.
(a) Classify each of these items as an asset, liability, or stockholders’ equity. (All dollars
are in millions.)
4    chapter 1 Introduction to Financial Statements

(b) Determine Nike’s accounting equation by calculating the value of total assets, total
liabilities, and total stockholders’ equity.
(c) To what extent does Nike rely on debt versus equity financing?
Use financial statement      E1-12B The summaries of data from the balance sheet, income statement, and retained
relationships to determine   earnings statement for two corporations, Bates Corporation and Wilson Enterprises, are
missing amounts.             presented below for 2010.
(SO 5)
Bates Corporation          Wilson Enterprises
Beginning of year
Total assets                            \$110,000                    \$130,000
Total liabilities                         80,000                       (d)
Total stockholders’ equity                 (a)                        90,000
End of year
Total assets                               (b)                       180,000
Total liabilities                        120,000                      55,000
Total stockholders’ equity                50,000                       (e)
Changes during year in retained
earnings
Dividends                                  (c)                          5,000
Total revenues                           215,000                       (f )
Total expenses                           165,000                      80,000
Instructions
Determine the missing amounts. Assume all changes in stockholders’ equity are due to
changes in retained earnings.

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