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Chapter 5: Q2E (page 240)

Question: E5-2 (L02,3) (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

Short Answer

Expert verified

Answer

The classified balance sheet reports all the assets and liabilities based on their liquidity.

Step by step solution

01

Definition of intangible assets

The business entity’s resources that do not have a physical existence but benefit the business entity are known as intangible assets. They include goodwill and patent.

02

Classification of line items

Line item

Classification

1. Preferred stock

(h) Capital stock

2. Goodwill

(d) Intangible assets

3. Salaries and wages payable

(f) Current liabilities

4. Account payable

(f) Current liabilities

5. Building

(c) Property, plant, and equipment

6. Equity Investment (trading)

(a) Current assets

7. Current maturity of long-term debt

(f) Current liabilities

8. Premium on bond payable

(g) Noncurrent liabilities

9. Allowance for doubtful accounts

(a) Current assets

10. Accounts receivable

(a) Current assets

11. Cash surrender value of life insurance

(e) Other assets

12. Note payable (due next year)

(f) Current liabilities

13. Supplies

(a) Current assets

14. Common stock

(h) Capital stock

15. Land

(c) Property, plant, and equipment

16. Bond sinking fund

(e) Other assets

17. Inventory

(a) Current assets

18. Prepaid insurance

(a) Current assets

19. Bond payable

(g) Noncurrent liabilities

20. Income tax payable

(f) Current liabilities

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Most popular questions from this chapter

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.

What types of contractual obligations must be disclosed in great detail in the notes to the balance sheet? Why do you think these detailed provisions should be disclosed?

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.)

4. Franco Company uses IFRS and owns property, plant, and equipment with a historical cost of \(5,000,000. At December 31, 2016, the company reported a valuation reserve of \)690,000. At December 31, 2017, the property, plant, and equipment was appraised at \(5,325,000. The valuation reserve will show what balance at December 31, 2017?

(a) \)365,000.

(b) \(325,000.

(c) \)690,000.

(d) $0.

Keyser Beverage Company reported the following items in the most recent year.

Net income $40,000

Dividends paid 5,000

Increase in accounts receivable 10,000

Increase in accounts payable 7,000

Purchase of equipment (capital expenditure) 8,000

Depreciation expense 4,000

Issue of notes payable 20,000

Compute net cash provided by operating activities, the net change in cash during the year, and free cash flow.
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