Recording Transactions, Preparing Journal Entries, Posting to T-Accounts, Preparing the Balance Sheet, and Evaluating the Current Ratio

Dell Inc., headquartered in Austin, Texas, is the global leader in selling computer products and services. The following is Dell's (simplified) balance sheet from a recent year.

Assume that the following transactions (in millions of dollars) occurred during the remainder of 2009 (ending on January 29, 2010):
a. Borrowed $30 from banks due in two years.
b. Lent $250 to affiliates, who signed a six-month note.
c. Purchased additional investments for $13,000 cash; one-fifth were long term and the rest were short term.
d. Purchased property, plant, and equipment; paid $875 in cash and $1,410 with additional long-term bank loans.
e. Issued additional shares of stock for $200 in cash.
f. Sold short-term investments costing $10,000 for $10,000 cash.
g. Dell does not actually pay dividends; it reinvests its earnings into the company for growth purposes. Assume instead for this problem that Dell declared and paid $52 in dividends during 2009.
Required:
1. Prepare a journal entry for each transaction.
2. Create T-accounts for each balance sheet account and include the January 30, 2009, balances. Post each journal entry to the appropriate T-accounts.
3. Prepare a balance sheet from the T-account ending balances for Dell at January 29, 2010, based on these transactions.
4. Compute Dell's current ratio for 2009 (year ending on January 29, 2010). What does this suggest about thecompany?

Transcribed Image Text:

DELL INC. Balance Sheet at January 30, 2009 (dollars in millions) ASSETS Current assets $ 8,352 Cash Short-term investments 740 Receivables and other assets 6,443 Inventories 867 Other 3,749 20,151 Noncurrent assets 2,277 Property, plant, and equipment Long-term investments 454 Other noncurrent assets 3,618 $26,500 Total assets LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities $ 8,309 6,550 Accounts payable Other short-term obligations 14,859 Long-term liabilities Stockholders' equity Contributed capital Retained carnings Other stockholders' equity items 7,370 11,189 20,986 (27.904) $26.500 Total stockholders' equity and liabilities