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Chapter 5: 12Q (page 237)
What is the relationship between current assets and current liabilities?
Current liabilities are liquidated using thecurrent assets as they both get due or provide benefit within one year.
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E5-11 (L03) EXCEL (Balance Sheet Preparation) Presented below is the adjusted trial balance of Kelly Corporation at December 31, 2017.
Particular | Debit | Credit |
Cash | \(? | |
Supplies | 1,200 | |
Prepaid insurance | 1,000 | |
Equipment | 48,000 | |
Accumulated depreciation 鈥� Equipment | \)4,000 | |
Trademarks | 950 | |
Accounts payable | 10,000 | |
Salaries and wages payable | 500 | |
Unearned service revenue | 2,000 | |
Bonds payable (due 2024) | 9,000 | |
Common stock | 10,000 | |
Retained earnings | 25,000 | |
Service revenue | 10,000 | |
Salaries and wages expenses | 9,000 | |
Insurance expenses | 1,400 | |
Rent expenses | 1,200 | |
Interest expenses | 900 | |
Total | \(? | \)? |
Additional information:
1. Net loss for the year was $2,500.
2. No dividends were declared during 2017.
Instructions
Prepare a classified balance sheet as of December 31, 2017.
1. Which of the following statements about IFRS and GAAP accounting and reporting requirements for the balance sheet is not correct?
(a) Both IFRS and GAAP distinguish between current and non-current assets and liabilities.
(b) The presentation formats required by IFRS and GAAP for the balance sheet are similar.
(c) Both IFRS and GAAP require that comparative information be reported.
(d) One difference between the reporting requirements under IFRS and those of the GAAP balance sheet is that an IFRS balance sheet may list long-term assets first.
Use the information presented in BE5-14 for Martinez Corporation to compute the net cash used (provided) by financing activities.
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.
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.
Discuss at least two situations in which estimates could affect the usefulness of the information in the balance sheet.
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