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Chapter 5: Question 9Q (page 237)
How does separating current assets from property, plant, and equipment in the balance sheet help analysts?
Classification of assets helps the analyst by simplifying the process ofratio analysis and financial statement analysis.
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Each of the following items must be considered in preparing a statement of cash flows. Indicate where each item is to be reported in the statement, if at all. Assume that net income is reported as \(90,000.
(a) Accounts receivable increased from \)34,000 to \(39,000 from the beginning to the end of the year.
(b) During the year, 10,000 shares of preferred stock with a par value of \)100 per share were issued at \(115 per share.
(c) Depreciation expense amounted to \)14,000, and bond premium amortization amounted to \(5,000.
(d) Land increased from \)10,000 to $30,000.
IFRS5-1 Where can authoritative IFRS guidance be found related to the statement of financial position (balance sheet) and the statement of cash flows?
E5-6 (L02,3) (Corrections of a Balance Sheet) The bookkeeper for Geronimo Company has prepared the following balance sheet as of July 31, 2017.
GERONIMO COMPANY | |||
Balance Sheet | |||
As of July 31, 2017 | |||
Cash | \(69,000 | Notes and accounts payable | \)44,000 |
Account receivable (net) | 40,500 | Long-term liabilities | 75,000 |
Inventory | 60,000 | Stockholder’s equity | 155,500 |
Equipment (net) | 84,000 | ||
Patents | 21,000 | ||
\(274,500 | \)274,500 |
The following additional information is provided.
1. Cash includes \(1,200 in a petty cash fund and \)15,000 in a bond sinking fund.
2. The net accounts receivable balance is comprised of the following two items: (a) accounts receivable \(44,000 and (b) allowance for doubtful accounts \)3,500.
3. Inventory costing \(5,300 was shipped out on consignment on July 31, 2017. The ending inventory balance does not include the consigned goods. Receivables in the amount of \)5,300 were recognized on these consigned goods.
4. Equipment had a cost of \(112,000 and an accumulated depreciation balance of \)28,000.
5. Income taxes payable of $6,000 were accrued on July 31. Geronimo Company, however, had set up a cash fund to meet this obligation. This cash fund was not included in the cash balance but was offset against the income taxes payable amount.
Instructions
Prepare a corrected classified balance sheet as of July 31, 2017, from the available information, adjusting the account balances using the additional information.
The net income for the year for Genesis, Inc. is \(750,000, but the statement of cash flows reports that the net cash provided by operating activities is \)640,000. What might account for the difference?
According to generally accepted accounting principles, what is the balance sheet valuation of each of the following assets?
(a) Trade accounts receivable.
(b) Land.
(c) Inventories.
(d) Trading securities (common stock of other companies).
(e) Prepaid expenses.
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