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PACCAR - Equation approach method

Analysis of transactions, preparation of statements.

PACCAR produces Kenworth & Peterbilt trucks. The company's actual condensed balance sheet data for Jan 1, 2006 follows (in millions):

Assets Amount Liabilities & Stockholders' Equity Amount

Cash & Cash Equivalents $1,699 Accounts Payable $1,152
Receivables $7,845 Other Liabilities $8,662
Inventories $495
Prepaid Expenses & Other Assets$2,533 Stockholders' Equity $3,901
Property, plant & Equipment $1,143
Total $13,715 $13,715

Suppose the following summarizes some major transactions during Jan, 2006 (in millions):

a. Sold trucks for cash of $160 and on open account of $ 500 , a grand total of $660. PACCAR carried the truck in inventory for $390.

b. Acquired inventory on account , $500.

c. Collected reeivables, $300.

d. On Jan 2, used $250 cash to prepay some rent & insurance for 2006.

e. Payments on accounts payable(for inventories), $450.

f. Paid selling & administrative expenses for cash , $100.

g. A total of $90 of prepaid expenses for rent & insurance expired in Jan 2006.

h. Recognized depreciation expenses of $20 for January.

1. Prepare an analysis of PACCAR transaction, employing the equation approach. Show all the amounts in millions od dollars.

2. Prepare an income statement for the month ended Jan 31, 2006, and a balance sheet as of Jan 31, 2006. Ignore income taxes.

Solution Summary

The equation approach methods for PACCAR is determined.