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Chapter 5: 1 (page 248)

(L03) (Preparation of a Classified Balance Sheet, Periodic Inventory) Presented below is a list of accounts in alphabetical order.

Accounts Receivable-Inventory-Ending

Accumulated Depreciation—Buildings-Land

Accumulated Depreciation—Equipment Land for Future Plant Site

Accumulated Other Comprehensive Income - Loss from Flood

Advances to Employees- Noncontrolling Interest

Advertising Expense - Notes Payable (due next year)

Allowance for Doubtful Accounts - Paid-in Capital in Excess of Par— preferred stock

Bond Sinking Fund -Patents

Bonds Payable - Payroll Taxes Payable

Buildings - Pension Liability

Cash (in bank) - Petty Cash

Cash (on hand) - Preferred Stock

Cash Surrender Value of Life Insurance -Premium on Bonds Payable

Commission Expense- Prepaid Rent

Common Stock- Purchase Returns and Allowances

Copyrights - Purchases

Debt Investments (trading)- Retained Earnings

Dividends Payable- Salaries and Wages Expense (sales)

Equipment - Salaries and Wages Payable

Freight-In Sales- Discounts

Gain on Disposal of Equipment- Sales Revenue

Interest Receivable - Treasury Stock (at cost)

Inventory—Beginning Unearned Subscriptions Revenue

Instructions Prepare a classified balance sheet in good form. (No monetary amounts are to be shown.)

Short Answer

Expert verified

The company’s balance sheet reports only those accounts whose balances must be carried forward to next year.

Step by step solution

01

Definition of Off-Balance Sheet Items

The items that are not reported on the balance sheet of the company are known as off-balance sheet items. It includes items that are not directly owned by the business entity and liabilities towards which the business entity does not have a direct obligation.

02

Classified Balance sheet

Particular

Amount $

Amount $

Assets

Current assets:

Cash (in bank)

Cash (on hand)

Other cash accounts (petty cash)

Accounts receivables

Less: allowance for doubtful accounts

Inventory at end

Prepaid rent

Interest receivable

Advance to employees

Cash surrender value of life insurance

Total current assets

Long term investment:

Debt investment

Property, plant, and equipment

Land

Building

Less: Accumulated depreciation – building

Equipment

Less: Accumulated depreciation – equipment

Intangible assets

Patent

Copyrights

Total assets

Liabilities and shareholder’s equity

Current liabilities:

Note payable

Salaries and wages payable

Dividend payable

Payroll tax payable

Unearned subscription payable

Total current liabilities

Non-Current liabilities

Land held for future use

Pension liability

Bond sinking fund

Bond payable

Add: premium on bond payable

Total non-current liabilities

Stockholder’s equity:

Preferred stock

Common stock

Additional paid-in preferred capital

Less: Treasury stock

Retained earnings

Accumulated other comprehensive income

Non-controlling interest

Total stockholder’s equity

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Most popular questions from this chapter

(Classification of Balance Sheet Accounts) Presented below are the captions of Faulk Company’s balance sheet.

(a) Current assets

(f) Current liabilities

(b) Investments

(g) Noncurrent liabilities

(c) Property, plant, and equipment

(h) Capital stock

(d) Intangible assets

(i) Additional paid-in capital

(e) Other assets

(j) Retained earnings

Instructions

Indicate by letter where each of the following items would be classified.

1. Preferred stock

11. Cash surrender value of life insurance

2. Goodwill

12. Note payable

3. Salaries and wages payable

13. Supplies

4. Account payable

14. Common stock

5. Building

15. Land

6. Equity investment (trading)

16. Bond sinking fund

7. Current maturity of long-term debt

17. Inventory

8. Premium on bond payable

18. Prepaid insurance

9. Allowance for doubtful accounts

19. Bond payable

10. Accounts receivable

20. Income tax payable

P5-4 (L03) GROUPWORK (Preparation of a Corrected Balance Sheet) The balance sheet of Kishwaukee Corporation as of December 31, 2017, is as follows.

KISHWAUKEE CORPORATION

Balance Sheet

December 31, 2017

Assets

Goodwill (Note 2)

\(120,000

Building (Note 1)

1,640,000

Inventory

312,100

Land

950,000

Accounts receivable

170,000

Treasury Stock (50,000 shares)

87,000

Cash on hand

175,900

Assets allocated to trustee for plant expansion

Cash in bank

70,000

Debt investment (held to maturity)

138,000

\)3,663,000

Equities

Note payable (Note 3)

\(600,000

Common stock authorized and issue, 1,000,000 shares no par

1,150,000

Retained earnings

103,000

Non-controlling Interest

55,000

Appreciation capital (Note 1)

570,000

Income tax payable

75,000

Reserve for depreciation recorded to the date of building

410,000

\)3,663,000

Note 1: Buildings are stated at cost, except for one building that was recorded at appraised value. The excess of appraisal value over cost was \(570,000. Depreciation has been recorded based on cost.

Note 2: Goodwill in the amount of \)120,000 was recognized because the company believed that book value was not an accurate representation of the fair value of the company. The gain of \(120,000 was credited to Retained Earnings.

Note 3: Notes payable are long-term except for the current installment due of \)100,000.

Instructions

Prepare a corrected classified balance sheet in good form. The notes above are for information only

5. A company has purchased a tract of land and expects to build a production plant on the land in approximately five years. During the 5 years before construction, the land will be idle. Under IFRS, the land should be reported as:

(a) land expense.

(b) property, plant, and equipment.

(c) an intangible asset.

(d) a long-term investment.

E5-10 (L02,3) (Current Liabilities) Norma Smith is the controller of Baylor Corporation and is responsible for the preparation of the year-end financial statements. The following transactions occurred during the year.

(a) On December 20, 2017, a former employee filed a legal action against Baylor for \(100,000 for wrongful dismissal. Management believes the action to be frivolous and without merit. The likelihood of payment to the employee is remote.

(b) Bonuses to key employees based on net income for 2017 are estimated to be \)150,000.

(c) On December 1, 2017, the company borrowed \(600,000 at 8% per year. Interest is paid quarterly.

(d) Accounts receivable at December 31, 2017, is \)10,000,000. An aging analysis indicates that Baylor’s expense provision for doubtful accounts is estimated to be 3% of the receivables balance.

(e) On December 15, 2017, the company declared a \(2.00 per share dividend on the 40,000 shares of common stock outstanding, to be paid on January 5, 2018.

(f) During the year, customer advances of \)160,000 were received; $50,000 of this amount was earned by December 31, 2017.

Instructions For each item above, indicate the dollar amount to be reported as a current liability. If a liability is not reported, explain why.

(Preparation of a Corrected Balance Sheet) Uhura Company has decided to expand its operations. The bookkeeper recently completed the balance sheet presented below in order to obtain additional funds for expansion.

UHURA Company

Balance Sheet

For the year ended 2017

Current assets

Cash

\(230,000

Accounts receivables (Net)

340,000

Inventory (Lower of average cost or market)

401,000

Equity investment (Trading)

140,000

Property, Plant and Equipment

Building (net)

570,000

Equipment (net)

160,000

Land held for future use

175,000

Intangible assets

Goodwill

80,000

Cash surrender value of life insurance

90,000

Prepaid expenses

12,000

Current liabilities

Account payable

135,000

Note payable

125,000

Pension obligation

82,000

Rent payable

49,000

Premium on bond payable

53,000

Long-term Liabilities

Bond payable

500,000

Stockholders equity

Common stock \)1 par, authorized 400,000 shares, issued 290,000

290,000

Additional paid in capital

160,000

Retained earnings

Instructions

Prepare a revised balance sheet given the available information. Assume that the accumulated depreciation balance for the buildings is \(160,000 and for the equipment, \)105,000. The allowance for doubtful accounts has a balance of $17,000. The pension obligation is considered a long-term liability.
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