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Chapter 5: E5-4 (page 241)

(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鈥擝uildings.

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鈥擟ommon Stock.

20. Unearned Subscriptions Revenue.

21. Receivables鈥擮fficers (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.)

Short Answer

Expert verified

The assets and liabilities are classified based on their due date and when they will benefit the business entity.

Step by step solution

01

Definition of Unearned Revenue

The revenue of the business entity, which is considered a liability, is known as unearned revenue. It is considered a liability because it is theadvance payment made by the customer for which the business entity is liable to provide service and products in the future.

02

Classified Balance-Sheet

Particular

Amount $

Amount $

Assets

Current assets:

Cash

Less: Restricted cash for plant expansion

Account receivable

Less: Allowance for doubtful accounts

Note receivable (short term)

Receivables 鈥� Officer (Due in one year)

Inventory:

Raw material

Work-in-progress

Finished goods

Long-Term investment

Preferred stock investment

Land held for the future plant site

Property, plant and equipment

Building

Less: Accumulated depreciation - building

Intangible assets

Copyrights

Total assets

Liabilities

Current liabilities:

Salaries and wages payable

Unearned rent revenue

Note payable (short-term)

Unearned subscription revenue

Total current liabilities

Non-Current liabilities

Bond payable (in 4 years)

Less: Discount on bonds payable

Non-controlling interest

Total non-current liabilities

Total liabilities

Stockholder鈥檚 equity

Common stock

Paid-in capital over par - common stock

Total paid-in capital

Retained earnings

Total paid-in capital and retained earnings

Less: Treasury stock

Total stockholder鈥檚 equity

Total liabilities and stockholder鈥檚 equity

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Most popular questions from this chapter

What is working capital? How does working capital relate to the operating cycle?

What is meant by liquidity? Rank the following assets from one to five in order of liquidity.

(a) Goodwill.

(b) Inventory.

(c) Buildings.

(d) Short-term investments.

(e) Accounts receivable.

A recent financial magazine indicated that the airline industry has poor financial flexibility. What is meant by financial flexibility, and why is it important?

E5-9 (L02,3) (Current Assets and Current Liabilities) The current assets and current liabilities sections of the balance sheet of Allessandro Scarlatti Company appear as follows.

ALLESSANDRO SCARLATTI COMPANY

BALANCE SHEET PARTIAL

December 31, 2017

Cash

\(40,000

Account payable

\)61,000

Accounts receivables

\(89,000

Note payable

67,000

Less: Allowance for doubtful accounts

(7,000)

82,000

\)128,000

Inventory

171,000

Prepaid expenses

9,000

\(302,000

The following errors in the corporation鈥檚 accounting have been discovered:

1. January 2018 cash disbursements entered as of December 2017 included payments of accounts payable in the amount of \)39,000, on which a cash discount of 2% was taken.

2. The inventory included \(27,000 of merchandise that had been received at December 31 but for which no purchase invoices had been received or entered. Of this amount, \)12,000 had been received on consignment; the remainder was purchased f.o.b. destination, terms 2/10, n/30.

3. Sales for the first four days in January 2018 in the amount of \(30,000 were entered in the sales journal as of December 31, 2017. Of these, \)21,500 were sales on account and the remainder were cash sales.

4. Cash, not including cash sales, collected in January 2018 and entered as of December 31, 2017, totaled \(35,324. Of this amount, \)23,324 was received on account after cash discounts of 2% had been deducted; the remainder represented the proceeds of a bank loan.

Instructions

(a) Restate the current assets and current liabilities sections of the balance sheet in accordance with good accounting practice. (Assume that both accounts receivable and accounts payable are recorded gross.)

(b) State the net effect of your adjustments on Allessandro Scarlatti Company鈥檚 retained earnings balance.

How does separating current assets from property, plant, and equipment in the balance sheet help analysts?
See all solutions

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