Kamil's Car Repair Shop Ltd. started the year with total assets of $70,000 and total liabilities of$40,000. During the y...

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Kamil's Car Repair Shop Ltd. started the year with total assets of $70,000 and total liabilities of
$40,000. During the year, the business recorded $100,000 in car repair revenues, $65,000 in
expenses, and dividends of $5,000. Shareholders' equity at the end of the year was
$60,000.
$65,000.
$70,000.
$75,000.
Bayer AG, with headquarters in Leverkusen, Germany, is an international, research-based group of
companies active in health care, nutrition, and high-tech materials. Popular products include ASPIRIN,
Alka-Seltzer, and One-A-Day vitamins. The following is Bayer’s (simplified) statement of financial position
as at September 30, 2012:
BAYER AG
Statement of Financial Position
At September 30, 2012 (in millions of euros)
Assets:
Current assets
Cash and cash equivalents
€
Receivables
Inventories
Other assets

3,181
8,644
6,539
1,514

19,878
Non-current assets:
Investments
Property, plant, and equipment
Intangible assets
Other assets

319
9,480
19,477
2,767

32,043

Total assets

Liabilities and Shareholders’ Equity
Current liabilities:
Trade accounts payable
Financial liabilities
Provisions
Other short-term liabilities

€ 51,921

€ 3,397
3,721
4,593
1,502

13,213

Non-current liabilities:

Provisions
Deferred income taxes
Financial liabilities
Other liabilities

7,524
2,401
7,521
2,254

19,700

Shareholders’ equity:
Contributed capital
Retained earnings

8,284
10,724

19,008

Total liabilities and shareholders’ equity

€ 51,921

Assume that the following transactions occurred in the last quarter of 2012:
a. Issued additional shares for €60 in cash.
b. Borrowed €615 from banks due in two years.
c. Declared and paid €1,160 in dividends to shareholders.
d. Purchased additional intangibles for €64 cash.
e. Purchased property, plant, and equipment; paid €1,514 in cash and €5,410 with additional long-term
bank loans.
f. Acquired additional investments; paid €623 in cash.
g. Lent €125 to an associated company that signed a six-month note.
h. Sold investments costing €461 for the same amount in cash.
Required:
1. Prepare a journal entry for each transaction. (If no entry is required for a transaction/event, select
"No journal entry required" in the first account field. Enter your answers in millions.)

2. Post the above entries in the below T-accounts for each financial statement account and include the
September 30, 2012, balances. Post each journal entry to the appropriate T-accounts. (Enter your
answers in millions.)

3. Prepare a statement of financial position for Bayer based on the T-account ending balances at
December 31, 2012.

4-a Compute Bayer’s current ratio at December 31, 2012. (Round your answer to 2 decimal places.)
The following are the summary account balances from a recent statement of financial position of Modern
Sportswear Inc. The accounts are followed by a list of transactions for the month of January 2015. All
amounts are shown in millions of dollars:
Cash
Long-term borrowings
Trade receivables
Inventories
Deferred income taxes (credit)
Property and equipment, net

$

635
2,229
1,503
551
2,518
10,759

Trade payables
Income tax payable
Prepayments
Retained earnings
Other non-current assets
Share capital

$

1,822
300
16
4,266
1,126
3,455

The accounts have normal debit or credit balances, but they are not necessarily listed in good order.
The following additional information is also available:
a. Purchased new equipment costing $150 by issuing long-term debt.
b. Received $900 on trade receivables.
c. Received and paid the telephone bills for $1.
d. Earned $500 in sales to customers on account; the cost of sales was $300..
e. Paid employees $100 for wages earned in January.
f. Paid half of the income taxes payable.
g. Purchased inventory for $223 on account.
h. Prepaid rent for February for a warehouse for $12.
i. Paid $10 of long-term borrowings and $1 in interest on the debt.
j. Purchased a patent (an intangible asset) for $8 cash.
Required:
1&2. Post the above transactions in to the appropriate T-accounts. (Enter your answers in millions.)

3. Show the effects of each transaction on net earnings and cash. (Enter any decreases to account
balances with a minus sign. Enter your answers in millions.)

4-a. Prepare a statement of earnings for the month of January 2015. (Enter your answers in millions.)

4-b. Prepare a classified statement of financial position as at January 31, 2015. (Enter your answers in
millions.)

5. Prepare the operating activities section of the statement of cash flows for January 2015. (Negative
amounts/Cash outflows should be entered with a minus sign. Enter your answers in millions.)
6. Compute the company’s total asset turnover ratio. (Round your answer to 3 decimal places.)

Mitakis Inc., a small service repair company, keeps its records without the help of an accountant. After
much effort, an outside accountant prepared the following unadjusted trial balance as at the end of the
company’s fiscal year, December 31, 2015:
Account Titles
Cash
Trade receivables
Supplies inventory
Prepaid insurance
Equipment (five-year life, no residual value)
Accumulated depreciation, equipment
Other assets
Trade payables
Note payable (two years; 7% each December 31)
Contributed capital (4,000 shares)
Retained earnings
Service revenue
Other expenses, excluding income tax

Totals

$

Debit
19,600
7,000
1,300
900
27,000

Credit

$

12,000

5,100
2,500
5,000
16,000
10,300
48,000
32,900

$

93,800

$

93,800

Data not yet recorded at December 31, 2015, include the following:
a. Depreciation expense for 2015, $3,000.
b. Insurance expired during 2015, $450.
c. Wages earned by employees not yet paid on December 31, 2015, $1,100.
d. Supplies inventory on December 31, 2015, reflecting $600 remaining on hand.
e. Income tax expense, $2,950.
Required:
1. Prepare the adjusting entries at December 31, 2015. (If no entry is required for a
transaction/event, select "No journal entry required" in the first account field.)
2. Show the effects of the adjusting entries on net earnings and cash. (If there is no cash flow effect,
select "None". Enter any decreases to account balances with a minus sign.)

3-a. Prepare a statement of earnings for 2015. (Round your Earnings per share to 2 decimal places.)

3-b. Prepare a statement of financial position at December 31, 2015.

4. Compute the net earnings for the year, assuming that you did not make an adjustment to the balance
of the supplies inventory account.
5. Prepare the closing entries at December 31, 2015. (If no entry is required for a transaction/event,
select "No journal entry required" in the first account field.)










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