Financial accounting: Ethan Allen Interiors; Swish Watch Corporation

Please complete the attached 2 practice problems.

1. PA2-2 Recording Transactions (in a Journal and T-Accounts), Preparing and
Interpreting the Balance Sheet
Ethan Allen Interiors Inc. is a leading manufacturer and retailer of home furnishings in 315 retail
stores in the United States and abroad. The following is adapted from a recent Ethan Allen
balance sheet as of June 30. Dollars are in thousands.
Cash $ 75,688 Other assets $ 6,665
Accounts receivable 32,845 Accounts payable 80,993
Inventories 174,147 Wages and other expenses payable 48,028
Prepaid expenses and Long-term debt 9,321
other current assets 36,076 Other long-term liabilities 39,224
Property, plant, and equipment 293,626 Contributed capital 116,719
Intangibles 69,708 Retained earnings 394,470

Assume that the following events occurred in the quarter ended September 30:
a. Paid $3,400 cash for an additional "other asset."
b. Issued additional shares of stock for $1,020 in cash.
c. Purchased property, plant, and equipment; paid $1,830 in cash and will pay the remaining $9,400 in two years
d. Sold, at cost, other assets for $310 cash.
e. Conducted negotiations to purchase a sawmill, which is expected to cost $34,000.

Required:
1. Prepare journal entries to record transactions a-e.
2. Create T-accounts for each of the accounts on the balance sheet and enter the balances at the end of June as beginning balances for the July 1-September 30 quarter.
3. Enter the effects of the transactions in T-accounts (including referencing) and determine the September 30 balances.
4. Explain your response to event e.
5. Prepare a classified balance sheet at September 30.
6. As of September 30, has the financing for Ethan Allen's investment in assets primarily come from liabilities or stockholders' equity?

2. PB2-1 Determining Financial Statement Effects of Various Transactions
Swish Watch Corporation manufactures, sells, and services expensive, ugly watches. The company
has been in business for three years. At the end of the most recent year, 2006, the accounting
records reported total assets of $2,255,000 and total liabilities of $1,780,000. During the current
year, 2007, the following summarized events occurred:

a. Issued additional shares of stock for $109,000 cash.
b. Borrowed $186,000 cash from the bank and signed a 10-year note.
c. A stockholder sold $5,000 of his capital stock in Swish Watch Corporation to another investor.
d. Built an addition on the factory for $200,000 and paid cash to the construction company.
e. Purchased equipment for the new addition for $44,000, paying $12,000 in cash and signing a six-month note for the balance.
f. Returned a $4,000 piece of equipment, from e, because it proved to be defective; received a cash refund.
g. At the end of 2006, lent $2,000 cash to the company president, Thor Gunnarson, who signed a note with terms requiring repayment of the loan in one year.

Required:
1. Complete the spreadsheet that follows, using plus (+) for increases and minus (-) for
decreases for each account. The first transaction is used as an example.

______ _______ Assets = Liabilities + Stockholders' Equity
Notes Notes Contributed Retained
Cash Receivable Equipment Building Payable Capital Earnings
(a) + 109,000 = +109,000

2. Did you include event c in the spreadsheet? Why?
3. Based on beginning balances plus the completed spreadsheet, provide the following amounts
(show computations):
a. Total assets at the end of the year.
b. Total liabilities at the end of the year.
c. Total stockholders' equity at the end of the year.
4. As of December 31, 2007, has the financing for Swish Watch Corporation's investment in assets primarily come from liabilities or stockholders' equity