Financial Management

Chapter 2

E2-1:

1. Common Stock is issued for $500,000 in cash (Financing-under statement of shareholder’s equity)

2. Twenty units of inventory are sold for $50 each (Operating- under assets in the balance sheet)

3. Employee wages are paid. (Operating-Cash paid to employees under Cash in a balance sheet)

4. A new warehouse facility is purchased. (Investing-under assets in property, plant and equipment on a balance sheet.

5. Principle payments on outstanding debt are paid. (Financing-under Liability and shareholder’s Equity on balance sheet).

6. Dividends are paid to the shareholders. (Financing- under Liabilities and Shareholder’s equity on a balance sheet)

7. A 4 year old vehicle, used as a delivery truck, is sold for $9000, its book value. (Operating-under operating income on an income statement)

8. A utility bill for March is paid in April. (Financing-under Liabilities and Shareholder’s equity, short term notes payable on balance sheet)

E2-3:

a. Equipment-Balance Sheet

b. Fees earned-Income Statement

c. Retained Earnings-Income Statement

d. Wage Expense-Income Statement

e. Patent-Balance Sheet

f. Cost of goods sold-Income statement

g. Common Stock-Balance Sheet

h. Dividend Payable- Balance Sheet

i. Accumulated Depreciation- Income Statement