Changes to the Balance Sheet

C. The accounting equation that must stay in balance is: Assets = Liabilities + Owner’s Equity. The net result of the change to one side of the equals sign must also be the same result on the other side. Trading one asset for another (which is the same thing as paying cash for another asset) gives no net change to either side. (d.) keeps the accounting equation in balance. A company cannot pay and owe more at the same time. Paying would reduce the liability.

D. Paying cash decreases assets and increasing amounts owed increases a liability. This puts the accounting equation out of balance. (- assets = + liabilities and 0 owners equity). All other transactions are common transactions of a business and the accounting equation remains in balance.

D. Retained earnings will change when the following occurs: 1) profit of loss, 2) dividends paid to owners. Dividends received is investment income and it is reported on the income statement. Issuing stock to investors increases common stock. An asset purchased does not change owner’s equity. Asset purchases will increase assets and at the same time either decreases another asset used to pay for the new asset or increase a liability if the new asset was not paid for.

D. “Payables” and “long-term debt” are amounts owed. Repayment decreases amounts owed. Common stock is ownership and is not borrowed (owed).

B. Equipment could increase and increase a liability if the equipment is not paid for at the time of purchase. An amount paid cannot increase what is owed. This reduces assets and increases liabilities and puts the accounting equation out of balance. A prepaid expense is trading one asset for another; cash for the prepaid.

A. Did the money the company invested in other companies increase or decrease from 200x to 201x? Increase by $1,365

B. How much did total intangible assets increase from 200x to 201x? What did the company do that increased total intangibles assets?

Total increase is $14,081. The increase is mostly related to franchise rights and goodwill due to purchasing other companies.

C. Determine the increase in the amounts owed to banks and financing institutions

                Total increase is $11,558. Amounts owed almost doubled.

D. Determine the increase in amounts owed to suppliers from 200x to 201x.

Accounts payable          $ 8,859 (201x)         $ 6,657 (200x)                increase of $2,202

       An increase indicates that more was put on account that was paid to suppliers.

E. Determine the amount the company received from investors for ownership in 201x.

Common stock, $0.25 par value; Authorized — 5,600 shares;
Issued — 3,520 and 3,520 shares + capital surplus,
respectively

              10,937   (201x)                            
                9,417   (200x)
                    1,520 Increase from investors contributing more money
                        in return for ownership.

F. Determine the increase in the amount paid for physical assets, net used by the company from 200x to 201x.
                                   The increase is $5,166

PROPERTY, PLANT AND EQUIPMENT       14,727 (201x)          9,561 (200x)

An increase indicates that more was paid to purchase additional assets
than assets sold.

G. Determine the change in items held for sale to customers from 200x to 201x.

Inventories          2,650 (201x)         2,354 (200x)         Increase of $296

An increase indicates that more was purchased from suppliers than was sold.

H. Determine net income for 201x assuming the company did not pay dividends to owners during 201x.

A. Determine the change in everything the investor owns from 201x to 202x.

Total Equity:    3,182,466 (202x)
less 1,948,496 (201x)
is $1,233,970 increase

B. Determine the change in the amount paid for net physical assets used by the company from 201x to 202x.

Total increase of $413,287
This increase indicates that more was paid to purchase additional assets than were sold or used up.

C. Determine the change in items held for sale to customers from 201x to 202x.
Can you determine if the change was paid for by looking at the balance sheet?

Inventories     1,451,546 (202x)      1,249,127 (201x)
increase of $202,419

Accounts payables
1,337,620 (202x)     1,007,517    (201x)
increase of $330,103

Accounts payable represents primarily what is owed for inventories and other items of repeat purchases. You cannot determine for certain; however, the fact that accounts payable has increase more than inventory indicates that the increase in inventory has not yet been paid for.

D. How much did total intangible assets change from 201x to 202x? Explain what occurred to cause this change.

Increase of $828,593. The largest increase is in goodwill which occurs when another company is purchased.

E. Determine net income for 202x assuming the company paid dividends to owners in the amount of $500,000 during 202x.

F. Determine the increase in amounts owed to suppliers from 201x to 202x.
Explain why this liability is not listed first for current liabilities.

Accounts payables     1,337,620 (202x)      1,007,517 (201x)
increase of $330,103

Accounts that are expected to be paid first are listed first as liabilities.
Accounts payable normally must be paid within 30 days. The debt listed before accounts payable must be payable in less than 30 days to be listed before
accounts payable. The payment is most likely due the first day of the first month.

G. Did the money the company has in the bank or invested with no risk increase or decrease from 201x to 202x?

H. Determine the change in what the company has paid for services before the service is provided to the company in 202x compared to 201x.

I. Determine the change in the amounts owed to banks and financing institutions
from 201x to 202x. Explain what occurred to cause the change.

Decrease of $5,112 is due to the company repaying slightly more than new
borrowings. How much was borrowed and how much was repaid cannot
be determined.

A. Determine the amount the company received from investors for ownership in 202x.

Common Stock and Paid in capital 63,415 (202x) from 62,856 (201x)
The increase occurred because investors contributed $559 in 202x.

B. How much was paid during 202x to repay debt that had to be paid in 202x?

Short-term debt was $1,000 in 201x and is $0 in 202x. The company repaid all of the short-term debt in 202x. $1,000 was repaid.

C. Determine the change in the amount paid for net physical assets used by the
company from 201x to 202x.

Property and Equipment changed from $7,630 in 201x to $8,162 in 202x
The total amount of the change is $532 added.

D. Determine the change in amounts owed to suppliers from 201x to 202x.

Accounts Payable increased from $4,025 in 201x to $4,197 in 202x
This is an increase of $172.

E. Did the money the company has in the bank or invested with no risk increase or decrease from 201x to 202x?

Cash and cash equivalents increased by $4,105 from $5,505 in 201x to $9,610 in 202x.

F. Which line item would include amounts the company has paid for services before the service is provided to the company in 202x?

This is normally reported as “prepaid expenses”. The fact that the company does not have a separate line item is an indication that it is not large enough to matter. It is included in “other” in the current assets section.

G. Determine the change in items held for sale to customers from 201x to 202x.

Inventories increased from $740 to $1,372,
an increase of $632.

H. How much was paid during 202x to purchase other companies, that was more than the net assets purchased?

Goodwill increased from $12,394 to $12,581 an increase of $187.
Goodwill is the amount paid to purchase other companies over and above the net assets acquired.

I. How much does Microsoft have invested in other companies that it intends to keep invested for more than one year at the end of 202x?

Equity and other investments: $10,865

J. Explain what could have occurred to cause the change in intangible assets, net
from 201x to 202x?

Intangible assets, net decreased from $1,158 to $744. A decrease in an intangible asset is caused by selling the intangible asset or the intangible asset lost probable future economic benefit.

K. How much did Microsoft borrow during 202x that must be repaid in more than one year?

Long-term debt increased from $4,939 to $11,921, an increase of $6,982.
The increase indicates that additional borrowings occurred. The increase is the net of what was borrowed and what was repaid; therefore, you cannot determine from the balance sheet how much was borrowed or how much was repaid. This is stated on the cash flow statement. You can only determine that the total amount owed increased by $6,982.

L. Determine net income for 202x assuming the company paid dividends to owners in the amount of $1,000 during 202x.