(L02,3) (Balance Sheet Classifications) Presented below are a number of balance sheet accounts of Deep Blue Something, Inc.

(a) Debt Investments.

(h)Interest Payable.

(b) Treasury Stock.

(i) Deficit.

(c) Common Stock.

(j) Equity Investments(ownership stake of less than 20%).

(d) Dividends Payable.

(k) Income Taxes Payable.

(e) Accumulated Depreciation—Equipment.

(l) Unearned Subscriptionsrevenue.

(f) Construction in Process.

(m) Work in Process.

(g) Petty Cash.

(n) Salaries and WagesPayable.

Instructions For each of the accounts above, indicate the proper balance sheet classification. In the case of borderline items, indicate the additional information that would be required to determine the proper classification.

Short Answer

Expert verified

The asset classification is based on the period for which they are held.

Step by step solution

01

Definition of Petty Cash

The business entity keeping some cash in hand to pay small expenses daily is petty cash. It includes employee reimbursement and refreshment expenses.

02

Classified balance sheet

Particular

Amount $

Assets

Current Assets:

Petty cash

Work in Process

Debt Investments

Total current assets

Non-current assets:

Construction in process

Total non-current assets

Total assets

Liabilities:

Current liabilities

Interest Payable

Dividends Payable

Income Taxes Payable

Unearned Subscriptions revenue

Salaries and Wages Payable

Deficit

Total current liabilities

Non-current liabilities

Total liabilities

Equity

Common Stock

Total equity

Total liabilities and equity

03

Contra Items

Accumulated depreciation – equipment and treasury stock are contra account. Accumulated depreciation –equipment will be deducted from the value of the equipment.

Treasury stock: Treasury stock will be deducted from the shareholder’s equity.

04

Borderline items

Equity investment is a borderline item because its classification depends upon the period for which the equities are held.

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