3-1 Solutions to Chapter 3 Accounting and Finance 1. Sophie's ...

Chapter 03 - Accounting and Finance24.Assets 2010 2011Liabilities andShareholders’ Equity 2010 2011Cash & marketable securities $ 800 $ 300 Accounts payable $ 300 $ 350Inventories 300 350 Notes payable 1,000 600Accounts receivable 400 450 Long-term debt 2,000 2,400Net fixed assets 5,000 5,800 Total liabilities 3,300 3,350Total assets $6,500 $6,900 Shareholders’ equity 3,200 3,550Total liabilities plusshareholders’ equity $6,500 $6,900Est time: 06–1025. Net working capital (2010) = ($800 + $300 + $400) ($300 + $1,000) = $200Net working capital (2011) = ($300 + $350 + $450) ($350 + $600) = $150Net working capital decreased by $50.Est time: 01–0526.2010 2011Revenue $4,000 $4,100Cost of goods sold 1,600 1,700Administrative expenses 500 550Depreciation expense 500 520Interest expense 150 150Taxable income 1,250 1,180Federal & state income taxes 400 420Net income $ 850 $ 760Increase in retained earnings in 2011 = net income dividends = $760 $410 = $350In 2011, shareholders’ equity increased by the amount of the increase in retained earnings.Est time: 06–1027. Earnings per share in 2010 = $850,000/500,000 shares = $1.70Earnings per share in 2011 = $760,000/500,000 shares = $1.52Est time: 01–053-10