Ethan Allen Interiors, Inc., is a leading manufacturer and retailer of home furnishings in 291 retail stores in the United States and abroad. The following is adapted from Ethan Allen's balance sheet as of March 31, 2011. Dollars are in millions.
Cash................................ $ 71.................... Accounts Payable............$ 23
Accounts Receivable...............20........................Wages Payable............ 114
Inventories......................... 135....................... Long-term Debt........... 173
Other Current Assets............... 30......... Other Noncurrent Liabilities............ 31
Property, Plant, and Equipment. 295................... Contributed Capital.......... 236
Other Noncurrent Assets......... 66...................... Retained Earnings............ 40
Assume that the following events occurred in the quarter ended June 30. Dollars are in millions.
a. Paid $2 cash for an additional "other asset."
b. Issued additional shares of stock for $2 in cash.
c. Purchased property, plant, and equipment; paid $2 in cash and signed a note to pay the remaining $9 in two years.
d. Sold, at cost, other assets for $1 cash.
e. Conducted negotiations to purchase a sawmill, which is expected to cost $36.
Required:
1. Analyze transactions (a)-(e) to determine their effects on the accounting equation. Use the format shown in the demonstration case on page 68.
2. Record the transaction effects determined in requirement 1 using journal entries.
3. Summarize the journal entry effects from requirement 2 using T-accounts. Use the March
2011 ending balances as the beginning balances for the April-June 2011 quarter.
4. Explain your response to event (e).
5. Prepare a classified balance sheet at June 30, 2011.
6. As of June 30, 2011, has the financing for Ethan Allen's investment in assets primarily come from liabilities or stockholders' equity?