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.
Other assets $6,665
Accounts receivable $32,845
Accounts payable $80,993
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
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?
The solution prepares a journal entries to record transactions a-e.T-accounts on a balance sheet and enter the balances.