Q 2-1

Using Assets = Liabilities + Owners' Equity Current Ratio = Current Assets / Cur
Assets = Current + Noncurrent
Liabilities = Current + Noncurrent
Current Assets Noncurrent Assets Assets Current Liabilties
a. - - $ 95,000 -
b. - - $ 65,000 -
c. $ 25,000 $ 70,000 $ 95,000 -
d. $ 33,000 $ 55,000 $ 88,000 $ 15,000
e. $ 35,000 $ 60,000 $ 95,000 $ 25,000

Q 2-2
Assets Amount Liabilities Amount
Current Assets Current Liabilities
Cash $ 89,000 Accounts payable $ 241,000
Accounts receivable $ 505,000 Estimated tax liability $ 125,000
Inventories $ 513,000 Accrued expenses $ 107,000
Marketable Securities $ 379,000 Total Current Liabilities $ 473,000
Total Current Assets $ 1,486,000 Noncurrent Liabilities
Noncurrent Assets Notes payable $ 200,000
Land (at cost) $ 230,000 Bonds payable $ 700,000
Buildings (at cost) $ 1,120,000 Total Noncurrent Liabilities $ 900,000
Equipment (at cost) $ 761,000 Owners'Equity

Accumulated depreciation
on buildings $ (538,000) Capital Stock $ 1,000,000

Accumulated depreciation
on equipment $ (386,000) Retained earnings $ 620,000
Investment in peerless
company $ 320,000 Total Owners' Equity $ 1,620,000
Total Noncurrent Assets $ 1,507,000
Total Assets $ 2,993,000 Total Liabilities & OE $ 2,993,000

Q 2-3 Assets Liabilities & Owners' Equity

1 Cash (CA) $ 100,000 Capital Stock (OE) $ 100,000
2 Bonds Payable (NCL) $ (25,000)
Capital Stock (OE) $ 25,000
3 Depreciation on plant and $ (8,500) Retained earnings (OE) $ (8,500)
4 Cash (CA) $ (15,000)
Inventory (CA) $ 15,000
5 Inventory (CA) $ 9,400 Accounts Payable (CL) $ 9,400
6 Inventory (CA) $ (4,500)
Accounts receivable (CA) $ 7,200 Retained earnings (OE) $ 2,700
7 Cash (CA) $ 3,500
Accounts receivable (CA) $ (3,500)
8 Dividends (OE) $ 3,000
 Retained earnings (OE) $ (3,000)
9 Cash (CA) $ (3,000) Dividends payable (OE) $ (3,000)
10 No effect

Net effect on assets $ 100,600 Net effect on liabilities $ 100,600

Q 2-4 Carson Leggatt Shoe Store

Balance Sheet as of June 1
Assets Liabilties & Owners' Equity
Current Assets Owners' Equity
Cash 50000 Carson's Equity 50000
Inventory 50000 Leggatt's Equity 50000
Total Assets 100000 Total Liabilites & Owners' Equity 100000

Carson Leggatt Shoe Store

Balance Sheet as of June 30
Assets Amount Liabilities Amount
Current Assets Current Liabilities
Cash $ 22,100 Total Current Liabilities $ -
Inventory $ 58,500 Noncurrent Liabilities
Total Current Assets $ 80,600 Bank loan $ 50,000
Noncurrent Assets Total Noncurrent Liabilities $ 50,000
Land $ 25,000 Owners'Equity
Building $ 50,000 Carson's Equity 51550
Total Noncurrent Assets $ 75,000 Leggatt's Equity 54050
Total Owners' Equity $ 105,600
Total Assets $ 155,600 Total Liabilities & OE $ 155,600

Carson Leggatt Shoe Store

Accounts, June 30
Carson
Capital (June 1) $ 50,000

(Income from sale of inventory

will be spilt in half between the
two as both invested the same
Earnings $ 7,750 amount of capital in the store)
Drawings $ (6,200)
Capital (June 30) $ 51,550

Leggatt
Capital (June 1) $ 50,000
Earnings $ 7,750
Drawings $ (3,700)
Capital (June 30) $ 54,050

Q 2-5 Assets Liabilities & Owners' Equity

Jan. 4 Cash (CA) $ 12,000 Retained earnings (OE) $ 5,000
 Inventory (CA) $ (7,000)
6 No effect
8 Inventory (CA) $ 7,000 Accounts Payable (CL) $ 7,000
11 Cash (CA) $ 2,500 Retained earnings (OE) $ 1,000
Inventory (CA) $ (1,500)
16 Inventory (CA) $ (2,000) Retained earnings (OE) $ 1,400
Accounts receivable (CA) $ 3,400
26 Cash (CA) $ (4,200) Retained earnings (OE) $ (4,200)
29 Cash (CA) $ (20,000)
Land (NCA) $ 20,000
31 Cash (CA) $ (2,800)
Prepaid Insurance (CA) $ 2,800
Net effect on assets $ 10,200 Net effect on liabilities $ 10,200

Marvin Company
Balance Sheet as of January 31
Assets Amount Liabilities Amount
Current Assets Current Liabilities
Cash $ 12,500 Accounts payable $ 7,000
Accounts receivable $ 3,400 Total Current Liabilities $ 7,000
Inventory $ 46,500 Noncurrent Liabilities
Prepaid insurance $ 2,800 Notes payable $ 20,000
Total Current Assets $ 65,200 Total Noncurrent Liabilities $ 20,000
Noncurrent Assets Owners'Equity
Land $ 20,000 Capital $ 55,000
Total Noncurrent Assets $ 20,000 Retained earnings $ 3,200
Total Owners' Equity $ 58,200
Total Assets $ 85,200 Total Liabilities & OE $ 85,200

Q 2-6 Brian Company

Balance Sheet as of December 31
Assets Amount Liabilities Amount
Current Assets Current Liabilities
Cash $ 2,000 Accounts payable $ 5,000
Accounts receivable $ 7,000 Wages payable $ 1,500
Marketable Securities $ 3,500 Current portion of bonds payable $ 2,000
Total Current Assets $ 12,500 Total Current Liabilities $ 8,500
Noncurrent Assets Noncurrent Liabilities
Long term investments $ 1,500 Bonds payable $ 8,000
Plant and equipment $ 8,500 Total Noncurrent Liabilities $ 8,000
Total Noncurrent Assets $ 10,000

Current Ratio Current Assets/Current Liabilities 1.47

Current Ratio shows entity's ability to meet its current obligations
CASE Music Mart Inc.

Assets Liabilities & Owners' Equity

1 Inventory (CA) $ 5,000 Accounts Payable (CL) $ 5,000
2 Cash (CA) $ 2,300 Retained earnings (OE) $ 800
Inventory (CA) $ (1,500)
3 Accounts receivable (CA) $ 2,620 Retained earnings (OE) 920
Inventory (CA) $ (1,700)
4 Insurance (fire) (3 yrs) (CA) $ 1,224
Cash (CA) $ (1,224)
5 Land (NCA) $ 24,000 Mortgage Payable (NCL) $ 18,000
Cash (CA) $ (6,000)
6 Land (NCA) $ (12,000) Mortgage Payable (NCL) $ (9,000)
Cash (CA) $ 3,000
7 No effect
8 Cash (CA) $ (1,000) Retained earnings (OE) $ (1,000)
9 Inventory (CA) $ (750) Retained earnings (OE) $ (750)
10 No effect
11 Cash (CA) $ (6,000) Notes payable $ (6,000)
12 No effect
13 Cash (CA) $ 1,310 Retained earnings (OE) $ 460
Inventory (CA) $ (850)
Net effect on assets $ 8,430 Net effect on liabilities $ 8,430

Music Mart Inc.

Balance Sheet as of January 31
Assets Amount Liabilities Amount
Current Assets Current Liabilities
Cash $ 25,636 Accounts payable $ 5,000
Accounts receivable $ 2,620 Notes payable $ 6,500
Inventory $ 4,700 Total Current Liabilities $ 11,500
Prepaid insurance $ 1,224 Noncurrent Liabilities
Total Current Assets $ 34,180 Mortgage Payable $ 9,000
Noncurrent Assets Total Noncurrent Liabilities $ 9,000
Land $ 12,000 Owners'Equity
Total Noncurrent Assets $ 12,000 Paid-in capital $ 25,000
Retained earnings $ 680
Total Owners' Equity $ 25,680
Total Assets $ 46,180 Total Liabilities & OE $ 46,180
t Ratio = Current Assets / Current Liabilities

Noncurrent Liabilities Liabilities Owners' Equity

- $ 40,000 $ 55,000
- $ 25,000 $ 40,000
- $ 40,000 $ 55,000
- $ 15,000 $ 73,000
- $ 25,000 $ 70,000 Current Ratio = 1.4