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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

(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.

What is the relationship between current assets and current liabilities?

Where should the following items be shown on the balance sheet, if shown at all?

(a) Allowance for doubtful accounts.

(b) Merchandise held on consignment.

(c) Advances received on sales contract.

(d) Cash surrender value of life insurance.

(e) Land.

(f) Merchandise out on consignment.

(g) Franchises.

(h) Accumulated depreciation of equipment.

(i) Materials in transit鈥攑urchased f.o.b. destination.

E5-10 (L02,3) (Current Liabilities) Norma Smith is the controller of Baylor Corporation and is responsible for the preparation of the year-end financial statements. The following transactions occurred during the year.

(a) On December 20, 2017, a former employee filed a legal action against Baylor for \(100,000 for wrongful dismissal. Management believes the action to be frivolous and without merit. The likelihood of payment to the employee is remote.

(b) Bonuses to key employees based on net income for 2017 are estimated to be \)150,000.

(c) On December 1, 2017, the company borrowed \(600,000 at 8% per year. Interest is paid quarterly.

(d) Accounts receivable at December 31, 2017, is \)10,000,000. An aging analysis indicates that Baylor鈥檚 expense provision for doubtful accounts is estimated to be 3% of the receivables balance.

(e) On December 15, 2017, the company declared a \(2.00 per share dividend on the 40,000 shares of common stock outstanding, to be paid on January 5, 2018.

(f) During the year, customer advances of \)160,000 were received; $50,000 of this amount was earned by December 31, 2017.

Instructions For each item above, indicate the dollar amount to be reported as a current liability. If a liability is not reported, explain why.

Crane Corporation has the following accounts included in its December 31, 2017, trial balance: Equity Investments (trading) \(21,000, Goodwill \)150,000, Prepaid Insurance \(12,000, Patents \)220,000, and Franchises $130,000. Prepare the intangible assets section of the balance sheet.
See all solutions

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