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Chapter 5: 11BE (page 239)

Stowe Company’s December 31, 2017, trial balance includes the following accounts: Investment in Common Stock \(70,000, Retained Earnings \)114,000, Trademarks \(31,000, Preferred Stock \)152,000, Common Stock \(55,000, Deferred Income Taxes \)88,000, Paid-in Capital in Excess of Par—Common Stock \(174,000, and Noncontrolling Interest \)63,000. Prepare the stockholders’ equity section of the balance sheet.

Short Answer

Expert verified

The stockholder’s equity section of the balance sheet totals$558,000.

Step by step solution

01

Definition of Additional Paid-in-Capital

The excess amount received by the business entity for issuing shares in excess of the par value of the shares is reported in the accounts as additional paid-up capital under the equity side of the balance sheet.

02

Stockholder’s Equity Section

Particular

Amount $

Common stock

$55,000

Preferred stock

152,000

Paid-in-capital in excess of par – Common stock

174,000

Retained earnings

114,000

Non-Controlling interest

63,000

Total stockholder’s equity

$558,000

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Most popular questions from this chapter

(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.)

Discuss at least two situations in which estimates could affect the usefulness of the information in the balance sheet.

3. Companies that use IFRS:

(a) may report all their assets on the statement of financial position at fair value.

(b) are not allowed to net assets (assets − liabilities) on their statement of financial positions.

(c) may report non-current assets before current assets on the statement of financial position.

(d) do not have any guidelines as to what should be reported on the statement of financial position.

The major classifications of activities reported in the statement of cash flows are operating, investing, and financing. Classify each of the transactions listed below as:

1. Operating activity—add to net income.

2. Operating activity—deduct from net income.

3. Investing activity.

4. Financing activity.

5. Reported as significant noncash activity.

The transactions are as follows.

(a) Issuance of common stock.

(h) Payment of cash dividends.

(b) Purchase of land and building.

(i) Exchange of furniture for office equipment.

(c) Redemption of bonds

(j) Purchase of treasury stock.

(d) Sale of equipment.

(k) Loss on sale of equipment.

(e) Depreciation of machinery.

(l) Increase in accounts receivable during the year.

(f) Amortization of patent.

(m) Decrease in accounts payable during the year.

(g) Issuance of bonds for plant assets.

E5-8 (L02) (Current vs. Long-term Liabilities) Frederic Chopin Corporation is preparing its December 31, 2017, balance sheet. The following items may be reported as either a current or long-term liability.

1. On December 15, 2017, Chopin declared a cash dividend of \(2.50 per share to stockholders of record on December 31. The dividend is payable on January 15, 2018. Chopin has issued 1,000,000 shares of common stock, of which 50,000 shares are held in treasury.

2. At December 31, bonds payable of \)100,000,000 are outstanding. The bonds pay 12% interest every September 30 and mature in installments of \(25,000,000 every September 30, beginning September 30, 2018.

3. At December 31, 2016, customer advances were \)12,000,000. During 2017, Chopin collected \(30,000,000 of customer advances; advances of \)25,000,000 should be recognized in income.

Instructions For each item above, indicate the dollar amounts to be reported as a current liability and as a long-term liability if any.
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