Please answer the following from the textbook:
Questions: 4.1, 4.2, 4.5, and 4.6
4.1 a. What is the difference between the income statement and balance
sheet in regards to timing?
b. What is wrong with this statement: “The clinic’s cash balance for
2015 was $150,000, while its net income on December 31, 2015,
was $50,000.”
4.2 a. What is the accounting identity?
b. What is the implication of the accounting identity for the numbers
on a balance sheet?
c. What does the accounting identity tell us about a business’s
equity?
4.5 a. On the balance sheet, what is the difference between long-term
investments and property and equipment?
b. What is the difference between gross fixed assets and net fixed
assets?
c. How does depreciation expense on the income statement relate to
accumulated depreciation on the balance sheet?
4.6 a. What is the difference between liabilities and equity?
b. What makes a liability a current liability?
c. Give some examples of current liabilities.
d. What is the difference between long-term debt and notes payable?
Problems: 4.2, 4.3, 4.4, and 4.5
4.2 San Mateo Healthcare had an equity balance of $1.38 million at the
beginning of the year. At the end of the year, its equity balance was
$1.98 million.
a. Assume that San Mateo is a not-for-profit organization. What was
its net income for the period?
b. Now, assume that San Mateo is an investor-owned business.
• Assuming zero dividends, what was San Mateo’s net income?
• Assuming $200,000 in dividends, what was its net income?
• Assuming $200,000 in dividends and $300,000 in additional
stock sales, what was San Mateo’s net income?
4.3 Here is financial statement information on four not-for-profit clinics:
Pittman Rose Beckman Jaffe
December 31, 2014:
Assets $80,000 $100,000 g $150,000
Liabilities 50,000 d $75,000 j
Equity a 60,000 45,000 90,000
December 31, 2015:
Assets b 130,000 180,000 k
Liabilities 55,000 62,000 h 80,000
Equity 45,000 e 110,000 145,000
During 2015:
Total revenues c 400,000 i 500,000
Total expenses 330,000 f 360,000
4.4 The following are selected account balances for Warren Clinic as of
December 31, 2015, in alphabetical order. Create Warren Clinic’s
balance sheet.
Accounts payable $ 20,000
Accounts receivable, net 60,000
Cash 30,000
Equity 230,000
Long-term debt 120,000
Long-term investments 100,000
Net property and equipment 150,000
Other assets 40,000
Other long-term liabilities 10,000
4.5 Consider the following balance sheet:
BestCare HMO
Balance Sheet
June 30, 2015
(in thousands)
Assets
Current Assets:
Cash $2,737
Net premiums receivable 821
Supplies 387
Total current assets $3,945
Net property and equipment 5,924
Total assets $9,869
Liabilities and Net Assets
Accounts payable—medical
services
$2,145
Accrued expenses 929
Notes payable 382
Total current liabilities $3,456
Long-term debt 4,295
Total liabilities $7,751
Net assets—unrestricted (equity) 2,118
Total liabilities and net assets $9,869
a. How does this balance sheet differ from the one presented in
Exhibit 4.1 for Sunnyvale?
b. What is BestCare’s net working capital for 2015?
c. What is BestCare’s debt ratio? How does it compare with
Sunnyvale’s debt ratio?
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