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Chapter 5: Q3E (page 240)

Question: E5-3 (L02,3) (Classification of Balance Sheet Accounts) Assume that Fielder Enterprises uses the following headings on its balance sheet.

(a) Current assets

(g) Long-term liabilities

(b) Investments

(h) Capital stock

(c) Property, plant, and equipment

(i) Equity attribute to non-controlling interest

(d) Intangible assets

(i) paid-in-capital in excess of par

(e) Other assets

(k) Retained earnings

(f) Current liabilities

Instructions

Indicate by letter how each of the following usually should be classified. If an item should appear in a note to the financial statements, use the letter “N” to indicate this fact. If an item need not be reported at all on the balance sheet, use the letter “X.”

1. Prepaid insurance.

2. Stock owned in affiliated companies.

3. Unearned service revenue.

4. Advances to suppliers.

5. Unearned rent revenue.

6. Preferred stock.

7. Additional paid-in capital on preferred stock.

8. Copyrights.

9. Petty cash fund.

10. Sales taxes payable.

11. Accrued interest on notes receivable.

12. Twenty-year issue of bonds payable that will mature within the next year. (No sinking fund exists, and refunding is not planned.)

13. Machinery retired from use and held for sale.

14. Fully depreciated machine still in use.

15. Accrued interest on bonds payable.

16. Salaries that company budget shows will be paid to employees within the next year.

17. Discount on bonds payable. (Assume related to bonds payable in item 12.)

18. Accumulated depreciation—buildings.

19. Shares held by non-controlling stockholders.

Short Answer

Expert verified

Answer

The investment will include the resources or assets acquired by the business entity or individual to gain financial advantages due to a change in their fair value

Step by step solution

01

Definition of Retained earnings

Business entities keep some earnings for future prospectuses, such as paying dividends to the investors and re-investment. Such portion of earnings is known as retained earnings.

02

Classification of Line Items

1. Prepaid insurance:(a) Current assets.

2. Stock owned in affiliated companies:(b) Investments.

3. Unearned service revenue:(f) Current liabilities

4. Advances to suppliers:(a) Current assets.

5. Unearned rent revenue:(f) Current liabilities

6. Preferred stock: (h) Capital stock

7. Additional paid-in capital on preferred stock:(i) Additional paid-in capital.

8. Copyrights:(d) Intangible assets.

9. Petty cash fund:(a) Current assets.

10. Sales taxes payable:(f) Current liabilities

11. Accrued interest on notes receivable:(a) Current assets.

12. Twenty-year issue of bonds payable that will mature within the next year. (No sinking fund exists, and refunding is not planned.):(f) Current liabilities

13. Machinery retired from use and held for sale:(e) Other assets.

14. Fully depreciated machine still in use:(c) Property, plant, and equipment.

15. Accrued interest on bonds payable:(f) Current liabilities

16. Salaries that the company budget shows will be paid to employees within the next year:(f) Current liabilities

17. Discount on bonds payable. (Assume related to bonds payable in item 12.):(f) Current liabilities

18. Accumulated depreciation—buildings:(c) Property, plant, and equipment.

19. Shares held by non-controlling stockholders: (i) Equity attributed to non-controlling interest

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Most popular questions from this chapter

EXCEL (Current Assets Section of the Balance Sheet) Presented below are selected accounts of Yasunari Kawabata Company at December 31, 2017.

Inventory

\(52,000

Cost of goods sold

2,100,000

Unearned service revenue

90,000

Note receivable

40,000

Equipment

253,000

Account receivable

161,000

Inventory (Work-in-process)

34,000

Inventory (raw material)

207,000

Cash

37,000

Supplies Expenses

60,000

Debt investment (Short-term)

31,000

Allowance for doubtful accounts

12,000

Customer advances

36,000

License

18,000

Restricted cash for plant expansion

50,000

Additional paid-in-capital

88,000

Treasury stock

22,000

The following additional information is available.

1. Inventories are valued at lower-of-cost or market using LIFO.

2. Equipment is recorded at cost. Accumulated depreciation, computed on a straight-line basis, is \)50,600.

3. The short-term investments have a fair value of \(29,000. (Assume they are trading securities.)

4. The notes receivable are due April 30, 2019, with interest receivable every April 30. The notes bear interest at 6%. (Hint: Accrue interest due on December 31, 2017.)

5. The allowance for doubtful accounts applies to the accounts receivable. Accounts receivable of \)50,000 are pledged as collateral on a bank loan.

6. Licenses are recorded net of accumulated amortisation of $14,000.

7. Treasury stock is recorded at cost.

Instructions

Prepare the current assets section of Yasunari Kawabata Company’s December 31, 2017, balance sheet, with appropriate disclosures.

What are some of the techniques of disclosure for the balance sheet?

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?

Net income for the year for Carrie, Inc. was \(750,000, but the statement of cash flows reports that net cash provided by operating activities was \)860,000. What might account for the difference?

(Preparation of a Classified Balance Sheet) Assume that Denis Savard Inc. has the following accounts at the end of the current year.

1. Common Stock.

2. Discount on Bonds Payable.

3. Treasury Stock (at cost).

4. Notes Payable (short-term).

5. Raw Materials.

6. Preferred Stock Investments (long-term).

7. Unearned Rent Revenue.

8. Work in Process.

9. Copyrights.

10. Buildings.

11. Notes Receivable (short-term).

12. Cash.

13. Salaries and Wages Payable.

14. Accumulated Depreciation—Buildings.

15. Restricted Cash for Plant Expansion.

16. Land Held for Future Plant Site.

17. Allowance for Doubtful Accounts.

18. Retained Earnings.

19. Paid-in Capital over Par—Common Stock.

20. Unearned Subscriptions Revenue.

21. Receivables—Officers (due in one year).

22. Inventory (finished goods).

23. Accounts Receivable.

24. Bonds Payable (due in 4 years).

25. Noncontrolling Interest.

Instructions

Prepare a classified balance sheet in good form. (No monetary amounts are necessary.)
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