Fundamentals of Financial Accounting Phillips, Libby and Libby: Answer the following: 6. Chapter 2- PB2-2 , PB2-2 Recording Transactions (in a Journal and T-Accounts), Preparing andInterpreting the Balance SheetStarbucks is a coffee company-a big coffee company. During a 10-year period, the number ofStarbucks locations grew from 165 to over 5,800 stores-an average increase of 43 percent everyyear. The following is adapted from a recent Starbucks annual report. Starbucks' year-end isSeptember 30 and dollars are reported in thousands.Cash $ 174,500 Accounts payable $462,600Accounts receivable 97,500 Short-term bank loans 74,900Inventories 263,200 Long-term debt 5,100Other current assets 312,100 Other long-term liabilities 23,500Property, plant, and equipment 1,265,800 Contributed capital 930,300Other long-term assets 179,500 Retained earnings 796,200Assume that the following events occurred in the following quarter, which ended December 31:a. Paid $10,400 cash for additional other long-term assets.b. Issued additional shares of stock for $5,300 in cash.c. Purchased property, plant, and equipment; paid $11,800 in cash and signed additional longtermloans for $8,900.d. Sold, at cost, other long-term assets for $3,000 cash.e. Conducted negotiations to purchase a coffee farm, which is expected to cost $7,400.Required:1. Prepare journal entries to record transactions a-e.

a. dr Other long-term assets(+A) 10,400cr Cash (-A) 10,400

b. dr Cash (+A) 5,300cr Contributed capital (+SE) 5,300

c. dr Property, plant, and equipment (+A) 20,700cr Cash (A) 11,800

cr Long-term debt (+L) 8,900

d. dr Cash (+A) 3,000cr Other long-term assets (A) 3,000

e. No effect

2. Create T-accounts for each of the accounts on the balance sheet and enter the balances at the end of September as beginning balances for the October 1-December 31 quarter.

3. Enter the effects of the transactions in T-accounts (including referencing) and determine the December 31 balances.

Req. 2 and 3

CashAccounts

Receivable InventoriesBeg. 174,500 Beg. 97,500 Beg. 263,200(b) 5,300 10,400 (a)(d) 3,000 11,800 (c)

160,600 97,500 263,200

Other Current Assets

Property, Plant, and Equipment

Other Long-term Assets

Beg. 312,100 Beg. 1,265,800 Beg. 179,500(c) 20,700 (a) 10,400 3,000 (d)

312,100 1,286,500 186,900

Accounts Payable Short-term Bank Loans Long-Term Debt462,600 Beg. 74,900 Beg. 5,100 Beg.

8,900 (c) 462,600 74,900 14,000

Other Long-Term Liabilities Contributed Capital Retained Earnings

23,500 Beg. 930,300 Beg. 796,200 Beg.5,300 (b)

23,500 935,600 796,200

4. Explain your response to event e.

The negotiations to purchase a coffee farm were not included in the transactions. Because event (e) involves only negotiations, it does not constitute an exchange of cash, goods, or services and thus is not a transaction.

5. Prepare a classified balance sheet at December 31.

StarbucksBalance Sheet

At December 31(in thousands of dollars)

AssetsCurrent assets

Cash $ 160,600Accounts receivable 97,500Inventories 263,200Other current assets 312,100 Total current assets 833,400

Property, plant, and equipment 1,286,500Other long-term assets 186,900Total Assets $2,306,800LiabilitiesCurrent liabilities

Accounts payable $ 462,600Short-term bank loans 74,900 Total current liabilities 537,500

Long-term debt 14,000Other long-term liabilities 23,500 Total Liabilities 575,000Stockholders Equity

Contributed capital 935,600Retained earnings 796,200

Total Stockholders Equity 1,731,800Total Liabilities and Stockholders Equity $2,306,800

6. As of December 31, has the financing for the investment in assets made by Starbucks primarily come from liabilities or stockholders' equity?

As of December 31, financing for Starbucks assets has come primarily from stockholders equity. Stockholders equity financed $1,731,800 of the companys total assets and liabilities financed $575,000.

7. Chapter 3- PB3-1,

PB3-1 Recording Nonquantitative Journal EntriesAbercrombie & Fitch Co. is a specialty retailer of casual apparel. The company's brand was established in 1892. It became a public company in 1996 and then was spun off from The Limited in 1998. The following is a series of accounts for Abercrombie. The accounts are listed alphabetically and numbered for identification. Following the accounts is a series of transactions.For each transaction, indicate the account(s) that should be debited and credited by entering the appropriate account number(s) to the right of each transaction. If no journal entry is needed, write none after the transaction. The first transaction is given as an example.Account No. Account Title Account No. Account Title1 Accounts payable 8 Rent expense2 Accounts receivable 9 Supplies expense3 Cash 10 Supplies4 Contributed capital 11 Unearned revenue5 Equipment 12 Wages expense6 Interest revenue 13 Wages payable7 Prepaid rentTransactions Debit Credita. Example: Incurred wages expense; paid cash. 12 3b. Collected cash on account.c. Used up supplies (cash register tapes, etc.) this period.d. Sold gift certificates to customers; none redeemed this period.e. Purchased equipment, paying part in cash and charging thebalance on account.f. Paid cash to suppliers on account.g. Issued additional stock for cash.h. Paid rent to landlords for next month's use of mall space.i. Earned and received cash for interest on investments.

Transaction Debit Credita. 12 3b. 3 2c. 9 10d. 3 11e. 5 1, 3f. 1 3g. 3 4h. 7 3

i. 3 6

8. Chapter 13- PB13-1, PB13-1 Analyzing Financial Statements Using Ratios and Percentage ChangesThe comparative financial statements prepared at December 31, 2004, for Soon Company showedthe following summarized data:Increase (Decrease)2004 over 20032004 2003 Amount PercentageIncome StatementSales revenue* $222,000 $185,000Cost of goods sold 127,650 111,000Gross profit 94,350 74,000Operating expenses 39,600 33,730Interest expense 4,000 3,270Income before income taxes 50,750 37,000Income tax expense (30%) 15,225 11,100Net income $ 35,525 $ 25,900Balance SheetCash $ 40,000 $ 38,000Accounts receivable (net) 18,500 16,000Inventory 25,000 22,000Property and equipment (net) 127,000 119,000Total assets $210,500 $195,000Accounts payable $ 27,000 $ 25,000Income taxes payable 3,000 2,800Note payable, long-term 75,500 92,200Total liabilities 105,500 120,000Capital stock (par $1) 25,000 25,000Retained earnings 80,000 50,000Total liabilities andstockholders' equity $210,500 $195,000*One-half of all sales are on credit.During 2004, cash dividends amounting to $5,525 were declared and paid.Required:

1. Complete the two final columns shown beside each item in Soon Company's comparative financial statements.

Increase (Decrease)2004 over 2003

Amount PercentIncome statement:Sales revenue $ 37,000 20.00%Cost of goods sold 16,650 15.00%Gross profit 20,350 27.50%Operating expenses 5,870 17.40%Interest expense 730 22.32%Income before income taxes 13,750 37.16%Income tax expense 4,125 37.16%Net income $ 9,625 37.16%

Balance sheet:Cash $ 2,000 5.26%Accounts receivable (net) 2,500 15.63%Inventory 3,000 13.64%Property & equipment (net) 8,000 6.72%Total Assets $ 15,500 7.95%

Accounts payable $ 2,000 8.00%Income taxes payable 200 7.14%Note payable, long-term (16,700) -18.11%Total liabilities (14,500) -12.08%

Capital stock ($1 par) 0 0.00%Retained earnings 30,000 60.00%Total liabilities & stockholders'

equity$ 15,500 7.95%

2. Does anything significant jump out at you from the year-over-year analyses?

Looking at the year-over-year analyses, 2004 appears to have been a successful year for Soon Company. The percentage increase in sales (20%) was greater than that for cost of goods sold (15%) and operating expenses (17.4%). The combined result of these changes was a significant increase in net income (37%), which contributed to the 60% increase in retained earnings.

9. Chapter 6 PB6-1,Preparing a Bank Reconciliation and Journal Entries, and Reporting CashThe bookkeeper at Tony Company has asked you to prepare a bank reconciliation as of February28, 2006. The February 28, 2006, bank statement and the February T-account for cash showed thefollowing (summarized):Bank StatementChecks Deposits Other BalanceBalance, February 1, 2006 $52,600Deposits during February $30,650 83,250Interest earned $150 83,400Checks cleared during February $49,200 34,200NSF checks-S. H. Schaffer 320 33,880Bank service charges 40 33,840Balance, February 28, 2006 33,840 Cash (A) Feb. 1 Balance 49,400 Feb. Checks written 50,400Feb. Deposits 38,450Tony Company's bank reconciliation at the end of January 2006, showed outstanding checksof $3,200. No deposits were in transit at the end of January, but a deposit was in transit at the endof February.Required:1. Prepare a bank reconciliation for February.

TONY COMPANYBank Reconciliation

February 28, 2006

Bank Statement Company's BooksEnding balance per bank statement $33,840

Ending balance per Cash account $37,450

Additions: Additions: Deposit in transit* 7,800 Interest earned 150

41,640 37,600Deductions:

Deductions: Bank service charges $ 40

Outstanding checks** 4,400 NSF check S. H. Schaffer 320 360

Up-to-date cash balance $37,240 Up-to-date cash balance $37,240

*$38,450 30,650 = $7,800.**$50,400 49,200 + 3,200= $4,4002. Prepare any journal entries required as a result of the bank reconciliation. Why are they necessary?

(1) dr. Cash (+A) 150cr. Interest revenue (+R,+SE) 150

Interest earned.

(2) dr. Accounts receivable (S. H. Scha