Log out Go to App
Go to App

Learning Materials

Features

Discover

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

Expert verified

Answer

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

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

(L02,3) (Balance Sheet Classifications) Presented below are a number of balance sheet accounts of Deep Blue Something, Inc.

(a) Debt Investments.

(h)Interest Payable.

(b) Treasury Stock.

(i) Deficit.

(c) Common Stock.

(j) Equity Investments(ownership stake of less than 20%).

(d) Dividends Payable.

(k) Income Taxes Payable.

(e) Accumulated Depreciation—Equipment.

(l) Unearned Subscriptionsrevenue.

(f) Construction in Process.

(m) Work in Process.

(g) Petty Cash.

(n) Salaries and WagesPayable.

Instructions For each of the accounts above, indicate the proper balance sheet classification. In the case of borderline items, indicate the additional information that would be required to determine the proper classification.

(Balance Sheet Adjustment and Preparation) The adjusted trial balance of Eastwood Company and other related information for the year 2017 are presented as follows.

EASTWOOD COMPANY

Adjusted Trial Balance

December 31, 2017

Debit

Credit

Cash

\(41,000

Accounts receivables

163,500

Allowance for doubtful account

\)8,700

Prepaid Insurance

5,900

Inventory

208,500

Equity Investment (long-term)

339,000

Land

85,000

Construction in the process (building)

124,000

Patent

36,000

Equipment

400,000

Accumulated depreciation – Equipment

240,000

Discount on bonds payable

20,000

Account payable

148,000

Accrued liabilities

49,200

Notes payable

94,000

Bond payable

200,000

Common stock

500,000

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

45,000

Retained earnings

138,000

Total

\(1,422,900

\)1,422,900

Additional information:

1. The LIFO method of inventory value is used.

2. The cost and fair value of the long-term investments that consist of stocks (with ownership less than 20% of total shares) are the same.

3. The amount of the Construction in Progress account represents the costs expended to date on a building in the process of construction. (The company rents factory space at the present time.) The land on which the building is being constructed costs \(85,000, as shown in the trial balance.

4. The patents were purchased by the company at a cost of \)40,000 and are being amortized on a straight-line basis.

5. Of the discount on bonds payable, \(2,000 will be amortized in 2018.

6. The notes payable represent bank loans that are secured by long-term investments carried at \)120,000. These bank loans are due in 2018.

7. The bonds payable bear interest at 8% payable every December 31, and are due January 1, 2028.

8. 600,000 shares of common stock of a par value of $1 were authorized, of which 500,000 shares were issued and outstanding.

Instructions

Prepare a balance sheet as of December 31, 2017, so that all-important information is fully disclosed.

(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.

What is the purpose of a statement of cash flows? How does it differ from a balance sheet and an income statement?

Using the information in BE5-14, determine Martinez’s free cash flow, assuming that it reported net cash provided by operating activities of \(400,000.

BE5-14 (L05) Martinez Corporation engaged in the following cash transactions during 2017.

Sale of land and building \)191,000

Purchase of treasury stock 40,000

Purchase of land 37,000

Payment of cash dividend 95,000

Purchase of equipment 53,000

Issuance of common stock 147,000

Retirement of bonds 100,000

Compute the net cash provided (used) by investing activities.
See all solutions

Recommended explanations on Business Studies Textbooks

Business Development

Read Explanation

Organizational Behavior

Read Explanation

Change Management

Read Explanation

Business Case Studies

Read Explanation

Influences On Business

Read Explanation

Managerial Economics

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free