Chapter 4, Question 1

Santos Charcuterie and Bakery

Account Balance
Account
($)

Accounts Receivable: House Accounts 6,200

Allowance for Doubtful House Accounts 1,500

Accounts Receivable: Credit Cards 12,300

Cashiers Banks 5,000
Cash on Deposit in Local Bank 80,200
Food Inventory 17,850
Paper and Supplies Inventory 5,175
Prepaid Expenses 27,950

Santos Charcuterie and Bakery

Current Assets $
Cash 85,200
Accounts Receivable Net 17,000
Inventories 23,025
Prepaid Expenses 27,950
Total Current Assets 153,175

a. Why must Sean address the issue of allowances for

doubtful house accounts if he is to accurately calculate his
total current assets?
Answer: His allowance for Doubtful House Accounts is large.
He is at risk because of heavy losses, and it affects the
liquidity
b. What are two examples of prepaid expenses Sean may
have incurred and thus must address if he is to accurately
calculate his total current assets?
Answer: two examples of prepaid expenses Sean may have
incurred are on the account of his inventories. He should
make the payment earlier other than due date is of no use

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incurred are on the account of his inventories. He should
make the payment earlier other than due date is of no use

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Chapter 4, Question 3

Balance Sheet Accounts: The Restaurant Kwan Manages

Investments $373,256
Other Current Liabilities 73,954
Building 627,998
Accounts Payable 213,659
Long-Term Debt 395,315
Cash 85,986
Furnishings and Equipment 308,334
Beverage Inventory 15,125
Notes Payable 47,858
Marketable Securities 196,154

Current Asset Accounts

(In Order of Liquidity) Dollar Amounts

Cash $85,986
Marketable Securities 196,154
account receivables 19,721
Inventory and prepaid expense 65,793
Total Current Assets $367,654
 a. What is the amount of the operation's total current assets?
Answer: The amount of the operation’s total current assets is $367,654
b. What is the first current asset account listed and why is it listed first?
Answer: Cash in hand is listed first because it is used for daily expense. The company needs it to runs the operation
everyday.

c. What is the last current asset account listed and why is it listed last?
Answer: the last current asset is inventory prepaid expense because it is the payment made by company for goods
services to be received in the future. Not for now.

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nages
Paid in Capital $486,486
Accumulated Depreciation 203,144
Food Inventory 31,818
Common Stock 133,421
Prepaid Expenses 15,000
Retained Earnings 477,500
Land 309,080
Supplies Inventory 3,850
Allowance for Doubtful Accounts 4,000
Accounts Receivable 23,721

ent assets?
nt assets is $367,654
why is it listed first?
ed for daily expense. The company needs it to runs the operation

why is it listed last?

expense because it is the payment made by company for goods and

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Chapter 4, Question 4

Balance Sheet Accounts

Investments $1,275,000 Paid in Capital
Other Current Liabilities 1,590,000 Accumulated Depreciation
Building 3,250,000 Inventories
Accounts Payable 1,460,000 Common Stock
Long-Term Debt 1,800,000 Retained Earnings
Cash 587,500 Land
Furnishings and Equipment 1,850,000 Net Receivables
Notes Payable 335,000 Other Assets
Marketable Securities 840,000

Aidan's Lodge
Balance Sheet December 31 This Year

LIABILITIES AND OWNERS’

ASSETS
EQUITY
Current Assets Current Liabilities
net receivable $2,675,000 notes payable
inventories 380,000 accounts payable
Marketable Securities 840,000 other current liabilities
cash 587,500 Total Current Liabilities
Total Current Assets 4,482,500
Long-Term Liabilities
Investments 1,275,000 long-term debt
Total Liabilities
Property and Equipment
land 1,957,500
building 3,250,000 Owners’ Equity
furnishing and equipment 1,850,000 common stock

Less: Accumulated Depreciation 1,185,000 paid in capital

Net Property and Equipment 5,872,500 retained earnings

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 Total Owners’ Equity
Other Assets 170,000

TOTAL ASSETS 11,800,000 TOTAL LIABILITIES AND OWNERS’

EQUITY

Yes, I have added in the "Accumulated Depreciation" and "Other Assets" to avoid over confussion. Iam
also telling you that the value you are looking to get for Total Asset (cell B33) is $11,800,000. I hope this
helps.

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 $3,000,000
1,185,000
380,000
750,000
2,865,000
1,957,500
2,675,000
170,000

$335,000
1,460,000
1,590,000
3,385,000

1,800,000
5,185,000

750,000

3,000,000

2,865,000

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 6,615,000

11,800,000

er confussion. Iam
800,000. I hope this

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Chapter 4, Question 5

Rachel's Restaurant Balance Sheet December 31, This Year

$ %
ASSETS
Current Assets
Cash 57,317 4.5%
Marketable Securities 130,769 10.4%
Net Receivables 80,000 6.3%
Inventories 34,545 2.7%
Total Current Assets 302,631 24.0%

Investments 248,837 19.7%

Property and Equipment
Land 206,053 16.3%
Building 418,665 33.2%
Furnishings and Equipment 205,556 16.3%
Less Accumulated Depreciation 135,429 10.7%
Total Property and Equipment-Net 694,845 55.1%

Other Assets 15,814 1.3%

Total Assets 1,262,127 100.0%

LIABILITIES AND OWNERS’ EQUITY

Current Liabilities
Accounts Payable 142,439 11.3%
Notes Payable 31,905 2.5%
Other Current Liabilities 147,907 11.7%
Total Current Liabilities 322,251 25.5%

Long-Term Liabilities
Long-Term Debt 218,272 17.3%

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 Total Liabilities 540,523 42.8%

Owners’ Equity
Common Stock 78,947 6.3%
Paid in Capital 324,324 25.7%
Retained Earnings 318,333 25.2%
Total Owners’ Equity 721,604 57.2%

TOTAL LIABILITIES AND OWNERS’ EQUITY 1,262,127 100.0%

Select Chain Percentages (Vertical Analysis)

Cash 6.70%
Inventories 1.30%
Accounts Payable 10.50%
Notes Payable 1.10%
a. Compare Rachel’s cash % with the chain units' %. Is it higher or lower? What does this
mean?
Answer: Rachel’s cash % is 4.5%. It is lower than the chain units’%. it means that Rachel
keep lower amount of cash in hand.

b. Compare Rachel’s inventories % with the chain units' %. Is it higher or lower? What
does this mean?
Answer: Rachel’s inventories% is 2.7% which is higher than the chain units’%. it means
that merchandise sale is low

c. Compare Rachel’s accounts payable % with the chain unit’s %. Is it higher or lower?
What does this mean?
Answer: Rachel’s accounts payable % is 11.3%. It is higher than the chain units’ %. It
means that the company is buying more goods or services on credit, rather than paying
cash

d. Compare Rachel’s notes payable % with the chain units’ %. Is it higher or lower? What
does this mean?
Answer: Rachel’s note payable % is 2.5%. It is higher than the chain units’ %. It means
that Rachel has signed notes for payment

Again, I put some figures and equations into the aassets side of this to guide you in the upper
part. I will also tell you the Total Assets in cell B22 is $1,262,127. When you answer parts b, c,
and d, please put effort into this, really study the balance sheet and answer the questions. If,
for instance, your answer to b is "it's higher because she spent more", well, that might be
true but10 that also might not be the reason. Dig deeper and THINK about why there are
differences in the figures. This is the analytical part that will help you in the future, And even
if you are not going to be in the food side of the industry, teaching yourself how to think
critically, analytically, will help you as managers in whatever field you choose to be in. So
Again, I put some figures and equations into the aassets side of this to guide you in the upper
part. I will also tell you the Total Assets in cell B22 is $1,262,127. When you answer parts b, c,
and d, please put effort into this, really study the balance sheet and answer the questions. If,
for instance, your answer to b is "it's higher because she spent more", well, that might be
true but that also might not be the reason. Dig deeper and THINK about why there are
differences in the figures. This is the analytical part that will help you in the future, And even
if you are not going to be in the food side of the industry, teaching yourself how to think
critically, analytically, will help you as managers in whatever field you choose to be in. So
again, I suggest, put effort into this.

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