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Chapter 5: 1 (page 238)

(L03) Harding Corporation has the following accounts included in its December 31, 2017, trial balance: Accounts Receivable \(110,000, Inventory \)290,000, Allowance for Doubtful Accounts \(8,000, Patents \)72,000, Prepaid Insurance \(9,500, Accounts Payable \)77,000, and Cash $30,000. Prepare the current assets section of the balance sheet, listing the accounts in proper sequence.

Short Answer

Expert verified

Current assets of the business entity total$431,500.

Step by step solution

01

Definition of Current Assets

Current assets of the business entity can be defined as the resources that will provide monetary benefits to the business entity within one year. It includes receivables, cash, and inventory.

02

Current asset section

Particular

Amount $

Amount $

Account receivables

$110,000

Less: Allowance for doubtful accounts

(8,000)

$102,000

Inventory

290,000

Prepaid insurance

9,500

Cash

30,000

Total current assets

$431,500

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Most popular questions from this chapter

Net income for the year for Tanizaki, Inc. was \(750,000, but the statement of cash flows reports that net cash provided by operating activities was \)860,000. Tanizaki also reported capital expenditures of \(75,000 and paid dividends in the amount of \)30,000. Compute Tanizaki’s free cash flow

Case 3: Deere & Company Presented below is the SEC-mandated disclosure of contractual obligations provided by Deere & Company in a recent annual report. Deere & Company reported current assets of \(50,060 and total current liabilities of \)21,394 at year-end. (All dollars are in millions.)

Aggregate Contractual Obligations

The payment schedule for the company’s contractual obligations at year-end in millions of dollars is as follows:

Total

Less than 1 year

1-3 Years

4 and 5 Years

More than 5 Years

Debt

Equipment Operations

\( 5,091

\) 434

\( 270

\)775

\( 3,612

Financial services

31,692

9,962

11,477

6,578

3,675

Total

36,783

10,396

11,747

7,353

7,287

Interest on debt

4,777

609

1,069

745

2,354

Account payable

2,743

2,611

90

39

3

Capital lease

87

39

42

4

2

Purchase obligations

3,007

2,970

37

0

0

Operating leases

371

121

134

70

46

Total

\) 47,768

\( 16,746

\)13,119

8,211

9,692

Instructions

(a) Compute Deere & Company’s working capital and current ratio (current assets ÷ current liabilities) with and without the off-balance-sheet contractual obligations reported in the schedule.

(b) Briefly discuss how the information provided in the contractual obligation disclosure would be useful in evaluating Deere & Company for loans (1) due in one year and (2) due in five years.

The comparative balance sheets of Madrasah Corporation at the beginning and end of the year 2017 appear below.

MADRASAH CORPORATION

BALANCE SHEETS

Assets

Dec 31, 2017

Jan 1, 2017

Inc./Dec.

Cash

\(20,000

\)13,000

\(7,000 Inc.

Accounts receivable

106,000

88,000

18,000 Inc.

Equipment

39,000

22,000

17,000 Inc.

Less: Accumulated depreciation – Equipment

17,000

11,000

6,000 Inc.

Total

\)148,000

\(112,000

Liabilities and Stockholder’s equity

Account payable

\)20,000

\(15,000

5,000 Inc.

Common stock

100,000

80,000

20,000 Inc.

Retained earnings

28,000

17,000

11,000 Inc.

Total

\)148,000

\(112,000

Net income of \)44,000 was reported, and dividends of $33,000 were paid in 2017. New equipment was purchased and none was sold.

Instructions

(a) Prepare a statement of cash flows for the year 2017.

(b) Compute the current ratio (current assets ÷ current liabilities) as of January 1, 2017, and December 31, 2017, and compute free cash flow for the year 2017.

(c) In light of the analysis in (b), comment on Madrasah’s liquidity and financial flexibility.

Net income for the year for Carrie, Inc. was \(750,000, but the statement of cash flows reports that net cash provided by operating activities was \)860,000. What might account for the difference?

Crane Corporation has the following accounts included in its December 31, 2017, trial balance: Equity Investments (trading) \(21,000, Goodwill \)150,000, Prepaid Insurance \(12,000, Patents \)220,000, and Franchises $130,000. Prepare the intangible assets section of the balance sheet.
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