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Chapter 5: Question 9BE (page 239)

BE5-9 (L03) Use the information presented in BE5-8 for Adams Company to prepare the long-term liabilities section of the balance sheet.

BE 8: Included in Adams Company’s December 31, 2017, trial balance are the following accounts: Accounts Payable \(220,000, Pension Liability \)375,000, Discount on Bonds Payable \(29,000, Unearned Rent Revenue \)41,000, Bonds Payable \(400,000, Salaries and Wages Payable \)27,000, Interest Payable \(12,000, and Income Taxes Payable \)29,000. Prepare the current liabilities section of the balance sheet.

Short Answer

Expert verified

The long-term liabilities of the business entity total$746,000.

Step by step solution

01

Definition of Pension Liability

The account that reports the amount of money to be paid as pension in a future period is known as pension liability. Such liability is classified as non-current in nature.

02

Long-Term Liabilities Section

Particular

Amount $

Amount $

Pension Liability

$375,000

Bonds payable

$400,000

Less: Discount on bonds payable

(29,000)

371,000

Total long-term liabilities

$746,000

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Most popular questions from this chapter

Lansbury Inc. had the following balance sheet on December 31, 2016.

LANSBURY INC.

BALANCE SHEET

DECEMBER 31, 2016

Cash

\(20,000

Account payable

\)30,000

Accounts receivables

21,200

Note payable

41,000

Investment

32,000

Common stock

100,000

Plant assets (net)

81,000

Retained earnings

23,200

Land

40,000

\(194,200

\)194,200

During 2017, the following occurred.

1. Lansbury Inc. sold part of its debt investment portfolio for \(15,000. This transaction resulted in a gain of \)3,400 for the firm. The company classifies these investments as available for sale.

2. A tract of land was purchased for \(13,000 cash.

3. Long-term notes payable in the amount of \)16,000 were retired before maturity by paying \(16,000 cash.

4. An additional \)20,000 in common stock was issued at par.

5. Dividends of \(8,200 were declared and paid to stockholders.

6. Net income for 2017 was \)32,000 after allowing for depreciation of \(11,000.

7. Land was purchased through the issuance of \)35,000 in bonds.

8. At December 31, 2017, Cash was \(37,000, Accounts Receivable was \)41,600, and Accounts Payable remained at $30,000.

Instructions

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

(b) Prepare an unclassified balance sheet as it would appear at December 31, 2017.

(c) How might the statement of cash flows help the user of the financial statements? Compute two cash flow ratios.

BE5-1 (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.

P5-4 (L03) GROUPWORK (Preparation of a Corrected Balance Sheet) The balance sheet of Kishwaukee Corporation as of December 31, 2017, is as follows.

KISHWAUKEE CORPORATION

Balance Sheet

December 31, 2017

Assets

Goodwill (Note 2)

\(120,000

Building (Note 1)

1,640,000

Inventory

312,100

Land

950,000

Accounts receivable

170,000

Treasury Stock (50,000 shares)

87,000

Cash on hand

175,900

Assets allocated to trustee for plant expansion

Cash in bank

70,000

Debt investment (held to maturity)

138,000

\)3,663,000

Equities

Note payable (Note 3)

\(600,000

Common stock authorized and issue, 1,000,000 shares no par

1,150,000

Retained earnings

103,000

Non-controlling Interest

55,000

Appreciation capital (Note 1)

570,000

Income tax payable

75,000

Reserve for depreciation recorded to the date of building

410,000

\)3,663,000

Note 1: Buildings are stated at cost, except for one building that was recorded at appraised value. The excess of appraisal value over cost was \(570,000. Depreciation has been recorded based on cost.

Note 2: Goodwill in the amount of \)120,000 was recognized because the company believed that book value was not an accurate representation of the fair value of the company. The gain of \(120,000 was credited to Retained Earnings.

Note 3: Notes payable are long-term except for the current installment due of \)100,000.

Instructions

Prepare a corrected classified balance sheet in good form. The notes above are for information only

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.)

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.
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