Chapter 5: Q1P (page 248)

Question: P5-1 (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

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Answer

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

Step by step solution

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.

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