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Chapter 5: Q30Q. (page 238)
What is a 鈥淪ummary of Significant Accounting Policies鈥�?
The rules and regulations used for reporting accounting information are reflected in the summary of significant accounting policies.
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E5-6 (L02,3) (Corrections of a Balance Sheet) The bookkeeper for Geronimo Company has prepared the following balance sheet as of July 31, 2017.
GERONIMO COMPANY | |||
Balance Sheet | |||
As of July 31, 2017 | |||
Cash | \(69,000 | Notes and accounts payable | \)44,000 |
Account receivable (net) | 40,500 | Long-term liabilities | 75,000 |
Inventory | 60,000 | Stockholder鈥檚 equity | 155,500 |
Equipment (net) | 84,000 | ||
Patents | 21,000 | ||
\(274,500 | \)274,500 |
The following additional information is provided.
1. Cash includes \(1,200 in a petty cash fund and \)15,000 in a bond sinking fund.
2. The net accounts receivable balance is comprised of the following two items: (a) accounts receivable \(44,000 and (b) allowance for doubtful accounts \)3,500.
3. Inventory costing \(5,300 was shipped out on consignment on July 31, 2017. The ending inventory balance does not include the consigned goods. Receivables in the amount of \)5,300 were recognized on these consigned goods.
4. Equipment had a cost of \(112,000 and an accumulated depreciation balance of \)28,000.
5. Income taxes payable of $6,000 were accrued on July 31. Geronimo Company, however, had set up a cash fund to meet this obligation. This cash fund was not included in the cash balance but was offset against the income taxes payable amount.
Instructions
Prepare a corrected classified balance sheet as of July 31, 2017, from the available information, adjusting the account balances using the additional information.
(Reporting the Financial Effects of Varied Transactions) In an examination of Arenes Corporation as of 31 Dec, 2017, you have learned that the following situations exist. No entries have been made in the accounting records for these items.
1. The corporation erected its present factory building in 2001. Depreciation was calculated by the straight-line method, using an estimated life of 35 years. Early in 2017, the board of directors conducted a careful survey and estimated that the factory building had a remaining useful life of 25 years as of 1 Jan, 2017.
2. An additional assessment of 2016 income taxes was levied and paid in 2017.
3. When calculating the accrual for officers鈥� salaries at 31 Dec, 2017, it was discovered that the accrual for officers鈥� salaries for 31 Dec, 2016, had been overstated.
4. On 15 Dec, 2017, Arenes Corporation declared a cash dividend on its common stock outstanding, payable 1 Feb, 2018, to the common stockholders of record 31 Dec, 2017.
Instructions
Describe fully how each of the items above should be reported in the financial statements of Arenes Corporation for the year 2017.
Hawthorn Corporation鈥檚 adjusted trial balance contained the following accounts at December 31, 2017: Retained Earnings \(120,000, Common Stock \)750,000, Bonds Payable \(100,000, Paid-in Capital in Excess of Par鈥擟ommon Stock \)200,000, Goodwill \(55,000, Accumulated Other Comprehensive Loss \)150,000, and Noncontrolling Interest $35,000. Prepare the stockholders鈥� equity section of the balance sheet.
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.
Question: E5-3 (L02,3) (Classification of Balance Sheet Accounts) Assume that Fielder Enterprises uses the following headings on its balance sheet.
(a) Current assets | (g) Long-term liabilities |
(b) Investments | (h) Capital stock |
(c) Property, plant, and equipment | (i) Equity attribute to non-controlling interest |
(d) Intangible assets | (i) paid-in-capital in excess of par |
(e) Other assets | (k) Retained earnings |
(f) Current liabilities |
Instructions
Indicate by letter how each of the following usually should be classified. If an item should appear in a note to the financial statements, use the letter 鈥淣鈥� to indicate this fact. If an item need not be reported at all on the balance sheet, use the letter 鈥淴.鈥�
1. Prepaid insurance.
2. Stock owned in affiliated companies.
3. Unearned service revenue.
4. Advances to suppliers.
5. Unearned rent revenue.
6. Preferred stock.
7. Additional paid-in capital on preferred stock.
8. Copyrights.
9. Petty cash fund.
10. Sales taxes payable.
11. Accrued interest on notes receivable.
12. Twenty-year issue of bonds payable that will mature within the next year. (No sinking fund exists, and refunding is not planned.)
13. Machinery retired from use and held for sale.
14. Fully depreciated machine still in use.
15. Accrued interest on bonds payable.
16. Salaries that company budget shows will be paid to employees within the next year.
17. Discount on bonds payable. (Assume related to bonds payable in item 12.)
18. Accumulated depreciation鈥攂uildings.
19. Shares held by non-controlling stockholders.
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