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Chapter 5: Q18Q. (page 238)
Refer to the definition of assets on page 204. Discuss how a leased building might qualify as an asset of the lessee (tenant) under this definition.
A lease transaction is a past event that willgenerate benefits for the lessee in a future period through assets.
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3. Companies that use IFRS:
(a) may report all their assets on the statement of financial position at fair value.
(b) are not allowed to net assets (assets 鈭� liabilities) on their statement of financial positions.
(c) may report non-current assets before current assets on the statement of financial position.
(d) do not have any guidelines as to what should be reported on the statement of financial position.
(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.
Patrick Corporation鈥檚 adjusted trial balance contained the following asset accounts at December 31, 2017: Prepaid Rent \(12,000, Goodwill \)50,000, Franchise Fees Receivable \(2,000, Franchises \)47,000, Patents \(33,000, and Trademarks \)10,000. Prepare the intangible assets section of the balance sheet.
E5-8 (L02) (Current vs. Long-term Liabilities) Frederic Chopin Corporation is preparing its December 31, 2017, balance sheet. The following items may be reported as either a current or long-term liability.
1. On December 15, 2017, Chopin declared a cash dividend of \(2.50 per share to stockholders of record on December 31. The dividend is payable on January 15, 2018. Chopin has issued 1,000,000 shares of common stock, of which 50,000 shares are held in treasury.
2. At December 31, bonds payable of \)100,000,000 are outstanding. The bonds pay 12% interest every September 30 and mature in installments of \(25,000,000 every September 30, beginning September 30, 2018.
3. At December 31, 2016, customer advances were \)12,000,000. During 2017, Chopin collected \(30,000,000 of customer advances; advances of \)25,000,000 should be recognized in income.
Instructions For each item above, indicate the dollar amounts to be reported as a current liability and as a long-term liability if any.
Sergey Co. has net cash provided by operating activities of \(1,200,000. Its average current liabilities for the period are \)1,000,000, and its average total liabilities are $1,500,000. Comment on the company鈥檚 liquidity and financial flexibility, given this information.
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