Help yourself get in by getting ready
Peter Regan teaching MBA Math at Tuck

MBA Math Sample Exercise

Accounting: Transaction Recording 

Moving well beyond generic GMAT aptitude questions, the MBA Math sample exercises allow prospective MBA students to self assess their proficiency with the quantitative building blocks of the MBA first year curriculum.

MBA focused, time efficient, and convenient, the MBA Math online course builds your quantitative skills. Furthermore, the MBA Math transcript provides a concise summary for admissions officers that you are up to speed.

Visit www.mbamath.com to learn more!

Exercise

Ruston Company
Balance Sheet
As of January 4, 2009
(amounts in thousands)
Cash 9,300 Accounts Payable 2,500
Accounts Receivable 5,000 Debt 2,300
Inventory 5,500 Other Liabilities 6,500
Property Plant & Equipment 15,900 Total Liabilities 11,300
Other Assets 1,400 Paid-In Capital 5,700
    Retained Earnings 20,100
    Total Equity 25,800
Total Assets 37,100 Total Liabilities & Equity 37,100

Transfer the journal entries to T-accounts for the transactions below, compute closing amounts for the T-accounts, and construct a final balance sheet to answer the question.

Journal amounts in thousands

Date Account and Explanation Debit Credit
Jan 4 Accounts Payable 8  
     Cash   8
  Paid money owed to supplier    
Jan 5 Property, Plant & Equipment 49  
     Cash   49
  Paid cash for machine    
Jan 6 Cash 70  
     Paid-In Capital   70
  Issued stock    
Jan 7 Cash 20  
     Inventory   16
     Retained Earnings   4
  Sold and delivered product to customer    
Jan 8 Cash 51  
     Debt   51
  Borrowed money from bank    
Jan 9 Inventory 14  
     Accounts Payable   14
  Bought manufacturing supplies on credit    
Jan 10 Cash 10  
     Accounts Receivable   10
  Received customer payment    


What is the final amount in Total Assets?

Solution

Solution Commentary

(3:53)

Manual Solution

The first step is to transfer the journal entries to T-accounts:

Cash
Balance 9,300 8
70 49
20  
51  
10  
PP&E, Net
Balance 15,900  
49  
   
   
   
Accounts Payable
8 Balance 2,500
  14
   
   
   
Other Liabilities
  Balance 6,500
   
   
   
   
Accounts Receivable
Balance 5,000 10
   
   
   
   
Other Assets
Balance 1,400  
   
   
   
   
Debt
  Balance 2,300
  51
   
   
   
Paid-In Capital
  Balance 5,700
  70
   
   
   
Inventory
Balance 5,500 16
14  
   
   
   
Retained Earnings
  Balance 20,100
  4
   
   
   


Next, we compute the net balances for the T-accounts:

Cash
Balance 9,300 8
70 49
20  
51  
10  
Balance 9,394  
PP&E, Net
Balance 15,900  
49  
   
   
   
Balance 15,949  
Accounts Payable
8 Balance 2,500
  14
   
   
   
  Balance 2,506
Other Liabilities
  Balance 6,500
   
   
   
   
  Balance 6,500
Accounts Receivable
Balance 5,000 10
   
   
   
   
Balance 4,990  
Other Assets
Balance 1,400  
   
   
   
   
Balance 1,400  
Debt
  Balance 2,300
  51
   
   
   
  Balance 2,351
Paid-In Capital
  Balance 5,700
  70
   
   
   
  Balance 5,770
Inventory
Balance 5,500 16
14  
   
   
   
Balance 5,498  
Retained Earnings
  Balance 20,100
  4
   
   
   
  Balance 20,104


Finally, we create a balance sheet using the closing T-account amounts:

Ruston Company
Balance Sheet
As of January 10, 2009
(amounts in thousands)
Cash 9,394 Accounts Payable 2,506
Accounts Receivable 4,990 Debt 2,351
Inventory 5,498 Other Liabilities 6,500
Property Plant & Equipment 15,949 Total Liabilities 11,357
Other Assets 1,400 Paid-In Capital 5,770
    Retained Earnings 20,104
    Total Equity 25,874
Total Assets 37,231 Total Liabilities & Equity 37,231

The final amount in Total Assets is $37,231,000

Peter Regan teaches decision science courses at Dartmouthís Tuck School and Dukeís Fuqua School. He also teaches pre-term quantitative skills courses at Tuck and Cornellís Johnson School. He created the MBA Math self-paced, online pre-MBA quantitative skills course covering finance, accounting, economics, statistics, and spreadsheets.

© 2009 DecisionClass, LLC. All rights reserved.