Question

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 (fiscal year ending on Friday nearest January 31).


Assume that the following transactions (in millions) occurred during the remainder of 2012 (ending on February 1, 2013):
a. Borrowed $50 from banks due in two years.
b. Lent $300 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 1,000 additional shares of stock for $400 in cash.
f. Sold short-term investments costing $11,000 for $11,000 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 $60 in dividends during 2012.

Required:
1. Prepare a journal entry for each transaction. Use the account titles in the Dell balance sheet.
2. Create T-accounts for each balance sheet account and include the February 3, 2012, balances. Post each journal entry to the appropriate T-accounts.
3. Prepare a balance sheet from the T-account ending balances for Dell at February 1, 2013, based on these transactions.
4. Compute Dell’s current ratio for 2012 (year ending on February 1, 2013). What does this suggest about thecompany?


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  • CreatedJuly 01, 2014
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