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Chapter 5: 2 (page 240)

(Classification of Balance Sheet Accounts) Presented below are the captions of Faulk Company鈥檚 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

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鈥檚 resources that do not have any physical existence, although they benefit the business entity, are known as intangible assets. It includes 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

(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.

(L02,3) (Balance Sheet Classifications) Presented below are a number of balance sheet accounts of Deep Blue Something, Inc.

(a) Debt Investments.

(h)Interest Payable.

(b) Treasury Stock.

(i) Deficit.

(c) Common Stock.

(j) Equity Investments(ownership stake of less than 20%).

(d) Dividends Payable.

(k) Income Taxes Payable.

(e) Accumulated Depreciation鈥擡quipment.

(l) Unearned Subscriptionsrevenue.

(f) Construction in Process.

(m) Work in Process.

(g) Petty Cash.

(n) Salaries and WagesPayable.

Instructions For each of the accounts above, indicate the proper balance sheet classification. In the case of borderline items, indicate the additional information that would be required to determine the proper classification.

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.

Perez Company reported an increase in inventories in the past year. Discuss the effect of this change on the current ratio (current assets 梅 current liabilities). What does this tell a statement user about Perez Company鈥檚 liquidity?

(Preparation of a Corrected Balance Sheet) Uhura Company has decided to expand its operations. The bookkeeper recently completed the balance sheet presented below in order to obtain additional funds for expansion.

UHURA Company

Balance Sheet

For the year ended 2017

Current assets

Cash

\(230,000

Accounts receivables (Net)

340,000

Inventory (Lower of average cost or market)

401,000

Equity investment (Trading)

140,000

Property, Plant and Equipment

Building (net)

570,000

Equipment (net)

160,000

Land held for future use

175,000

Intangible assets

Goodwill

80,000

Cash surrender value of life insurance

90,000

Prepaid expenses

12,000

Current liabilities

Account payable

135,000

Note payable

125,000

Pension obligation

82,000

Rent payable

49,000

Premium on bond payable

53,000

Long-term Liabilities

Bond payable

500,000

Stockholders equity

Common stock \)1 par, authorized 400,000 shares, issued 290,000

290,000

Additional paid in capital

160,000

Retained earnings

Instructions

Prepare a revised balance sheet given the available information. Assume that the accumulated depreciation balance for the buildings is \(160,000 and for the equipment, \)105,000. The allowance for doubtful accounts has a balance of $17,000. The pension obligation is considered a long-term liability.
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