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SOLUTION
October 5
Supplies 2,500
Cash 2,500
October 31
Supplies expense 1,500
Supplies 1,500
SOLUTION
October 4
Prepaid insurance 600
Cash 600
October 31
Insurance expense 50
Prepaid insurance 50
SOLUTION
October 2
Cash 1,200
Unearned service revenue 1,200
October 31
Unearned service revenue 400
Service revenue 400
SOLUTION
October 31
Accounts receivable 2,000
Service revenue 2,000
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LECTURE GUIDE SOLUTIONS – CHAPTER 4
The Accounting Cycle: Accruals and Deferrals
SOLUTION
October 1
Cash 10,000
Notes payable 10,000
October 31
Interest expense (10,000 × 6% × 1/12) 50
Interest payable 50
SOLUTION
October 31
Salaries expense 1,500
Salaries payable 1,500
Example 7 – Depreciation
On October 1, the company purchased office equipment for $4,800. Record the purchase and
depreciation for the month of October. The equipment has an estimated life of 10 years.
SOLUTION
October 1
Office equipment 4,800
Cash 4,800
October 31
Depreciation expense ($4,800 ÷ 10 ÷ 12) 40
Accumulated depreciation: office equipment 40
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LECTURE GUIDE SOLUTIONS – CHAPTER 5
The Accounting Cycle: Reporting Financial Results
Our coverage of Chapter 5 involved an in-class project in which you prepared an income
statement and statement of retained earnings, as well as end-of-year closing entries. To see the
solutions to the in-class project, go to the Chapter 5 homework solutions and look for Exercises
5.2 and 5.4.
You also had two examples in Chapter 5 related to profitability measures and liquidity measures.
Answers to these examples can be found below in the lecture guide solutions to Chapter 14.
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LECTURE GUIDE SOLUTIONS – CHAPTER 13
Statement of Cash Flows
SOLUTION
a. Cash and cash equivalents, January 1 $21,800
Cash and cash equivalents, December 31 60,800
Increase in cash and CE $39,000
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LECTURE GUIDE SOLUTIONS – CHAPTER 13
Statement of Cash Flows
SOLUTION
Refer to Chapter 14, Example 1 below.
SOLUTION
Refer to Chapter 14, Example 1 below.
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LECTURE GUIDE SOLUTIONS - CHAPTER 14
Financial Statement Analysis
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LECTURE GUIDE SOLUTIONS - CHAPTER 14
Financial Statement Analysis
Profitability ratios
Gross profit % sales – CGS 2002 40,238-20,989=19,249 47.8% 50.3% 46.9%
sales 40,238
% change in sales 2002 sales - 2001 sales 2001 → 2002 (40,238 - 39,244) 2.5% 8.0% 8.8%
2001 sales 39,244
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LECTURE GUIDE SOLUTIONS - CHAPTER 14
Financial Statement Analysis
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LECTURE GUIDE SOLUTIONS - CHAPTER 14
Financial Statement Analysis
Operating cycle days to sell inventory + 2002 27 + 59 days 86 days 98 days 74 days
days to collect AR
Free cash flow oper. cash flow – capital 2002 7,742 – 1,679 – 2,095 $3,968
expend.-cash div.
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LECTURE GUIDE SOLUTIONS - CHAPTER 14
Financial Statement Analysis
Solvency measures
Debt ratio total liabilities 2002 27,070 66.4%
total assets 40,776
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LECTURE GUIDE SOLUTIONS - CHAPTER 14
Financial Statement Analysis
Payout ratio cash dividends (com.) 2002 1,971 45.3% 38.5% 28.7%
net income 4,352
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