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Chapter 5: 3 (page 239)

Included in Outkast Company’s December 31, 2017, trial balance are the following accounts: Prepaid Rent \(5,200, Debt Investments (to be held to maturity until 2020) \)56,000, Unearned Fees \(17,000, Land (held for investment) \)39,000, and Notes Receivable (long-term) $42,000. Prepare the long-term investments section of the balance sheet.

Short Answer

Expert verified

The long-term investment of the business entity totals$95,000.

Step by step solution

01

Long-Term Investment

The investment held by the individual or the business entity for a period exceeding one year is known as a long-term investment. Such assets are held for generating capital gains in the future period.

02

Total Long-Term investment

Particular

Amount $

Investment

$56,000

Land

$39,000

Total long-term investment

$95,000

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Most popular questions from this chapter

Case 2: Sherwin-Williams Company Sherwin-Williams, based in Cleveland, Ohio, manufactures a wide variety of paint and other coatings, which are marketed through its specialty stores and in other retail outlets. The company also manufactures paint for automobiles. The Automotive Division has had financial difficulty. During a recent year, five branch locations of the Automotive Division were closed, and new management was put in place for the remaining branches.

The following titles were shown on Sherwin-Williams’s balance sheet for that year.

Account payable

Machinery and Equipment

Accounts receivable, less allowance

Other accruals

Accrued taxes

Other capital

Building

Other current assets

Cash and Cash equivalents

Other long term liabilities

Common stock

Postretirement obligation other than pension

Employee compensation payable

Retained earnings

Finished good inventories

Short-term investment

Intangible and other assets

Taxes payable

Land

Work in process and raw material inventories.

Long-term debt

Instructions

(a) Organize the accounts in the general order in which they would have been presented in a classified balance sheet.

(b) When several of the branch locations of the Automotive Division were closed, what balance sheet accounts were most likely affected? Did the balance in those accounts decrease or increase?

A recent financial magazine indicated that the airline industry has poor financial flexibility. What is meant by financial flexibility, and why is it important?

A comparative balance sheet for Shabbona Corporation is presented below.

Particular

December 31

2017

2016

Assets

Cash

\(73,000

\)22,000

Accounts receivable

82,000

66,000

Inventory

180,000

189,000

Land

71,000

110,000

Equipment

260,000

200,000

Accumulated depreciation – Equipment

(69,000)

(42,000)

Total

\(597,000

\)545,000

Liabilities and stockholder’s equity

Account payable

\(34,000

\)47,000

Bonds payable

150,000

200,000

Common stock (\(1 par)

214,000

164,000

Retained earnings

199,000

134,000

Total

\)597,000

\(545,000

Additional information:

1. Net income for 2017 was \)125,000. No gains or losses were recorded in 2017.

2. Cash dividends of \(60,000 were declared and paid.

3. Bonds payable amounting to \)50,000 were retired through issuance of common stock.

Instructions

(a) Prepare a statement of cash flows for 2017 for Shabbona Corporation.

(b) Determine Shabbona Corporation’s current cash debt coverage, cash debt coverage, and free cash flow. Comment on its liquidity and financial flexibility.

(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.

E5-12 (L03) (Preparation of a Balance Sheet) Presented below is the trial balance of Scott Butler Corporation at December 31, 2017.

Particular

Debit

Credit

Cash

\(197,000

Sales Revenue

\)8,100,000

Debt investment (trading) (at cost \(145,000)

153,000

Cost of goods sold

4,800,000

Debt investment (long-term)

299,000

Equity Investment (long-term)

277,000

Notes payable (Short-term)

90,000

Account payable

455,000

Selling expenses

2,000,000

Investment revenue

63,000

Land

260,000

Buildings

1,040,000

Dividend payable

136,000

Accrued Liabilities

96,000

Accounts Receivable

435,000

Accumulated depreciation – Building

152,000

Allowance for doubtful accounts

25,000

Administrative expenses

900,000

Interest expenses

211,000

Inventory

597,000

Gain

80,000

Notes payable

900,000

Equipment

600,000

Bonds payable

1,000,000

Accumulated depreciation – Equipment

60,000

Franchises

160,000

Common stock

1,000,000

Treasury stock

191,000

Patents

195,000

Retained Earnings

78,000

Paid-in-capital in excess of par

80,0000

Total

\)12,315,000

$12,315,000

Instructions Prepare a balance sheet at December 31, 2017, for Scott Butler Corporation. (Ignore income taxes.)
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