Recording Transactions in T-Accounts, Preparing the Balance Sheet, and Evaluating the Curr...

Recording Transactions in T-Accounts, Preparing the Balance Sheet, and Evaluating the Current Ratio (P2-3)

Ethan Allen Interiors, Inc., is a leading manufacturer and retailer of home furnishings in the United States and abroad. The following is adapted from Ethan Allen’s June 30, 2008, annual financial report. Dollars are in thousands.

Assume that the following events occurred in the first quarter ended September 30, 2008:

a. Issued additional shares of stock for $I.020 in cash.

b. Purchased $3.400 in additional intangibles for cash.

c. Ordered $43.500 in wood and other raw materials for the manufacturing plants.

d. Sold equipment at its cost for $4.020 cash.

e. Purchased $2.980 in short-term investments for cash.

f. Purchased property, plant, and equipment; paid $1,830 in cash and signed additional long-term notes for $9,400.

g. Sold at cost other assets for $310 cash.

h. Declared and paid $300 in dividends.

Required:

1. Create T-accounts for each of the accounts on the balance sheet; enter the balances at June 30. 2008.

2. Record each of the transactions for the first quarter ended September 30, 2008. in the T-accounts (including referencing) and determine the ending balances.

3. Explain your response to event (c ).

4. Prepare a classilied balance sheet at September 30. 2008.

5. Compute the current ratio for the quarter ended September 30. 2008. What does this suggest about Ethan Allen Interiors. Inc.?