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    Exercises in Financial Management

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    Tutors for Rent, Inc., performs adjusting entries every month, but closes its accounts only at yearend.
    The company's year-end adjusted trial balance dated December 31, 2002, was:
    EXERCISE 5.1
    Accounting Terminology
    LO 1-7
    EXERCISE
    Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 91,100
    Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,500
    Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300
    Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000
    Accumulated depreciation: equipment . . . . . . . . . . . . . . . . . . . . . . . $ 5,000
    Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500
    Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,500
    Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
    Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,000
    Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
    Tutoring revenue earned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,000
    Salary expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,000
    Supply expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200
    Advertising expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300
    Depreciation expense: equipment . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000
    Income taxes expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,600
    176,000 $176,000
    $TUTORS FOR RENT, INC.
    da. Prepare an income statement and statement of retained earnings for the year ended December
    31, 2002. Also prepare the company's balance sheet dated December 31, 2002.
    b. Does the company appear to be liquid? Defend your answer.
    c. Has the company been profitable in the past? Explain.

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    EXERCISE 5.2
    Financial Statement Preparation

    Tutors for Rent, Inc., performs adjusting entries every month, but closes its accounts only at yearend. The company's year-end adjusted trial balance dated December 31, 2002, was:

    a. ...

    $2.19

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