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Recording Transactions/Financial Statements

Scenario: 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.

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?

Solution Summary

The solution prepares a journal entries to record transactions a-e.T-accounts on a balance sheet and enter the balances.