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Chapter 5: Question 9Q (page 237)
How does separating current assets from property, plant, and equipment in the balance sheet help analysts?
Classification of assets helps the analyst by simplifying the process ofratio analysis and financial statement analysis.
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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.
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.
(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.)
Stowe Company鈥檚 December 31, 2017, trial balance includes the following accounts: Investment in Common Stock \(70,000, Retained Earnings \)114,000, Trademarks \(31,000, Preferred Stock \)152,000, Common Stock \(55,000, Deferred Income Taxes \)88,000, Paid-in Capital in Excess of Par鈥擟ommon Stock \(174,000, and Noncontrolling Interest \)63,000. Prepare the stockholders鈥� equity section of the balance sheet.
Lansbury Inc. had the following balance sheet on December 31, 2016.
LANSBURY INC. | |||
BALANCE SHEET | |||
DECEMBER 31, 2016 | |||
Cash | \(20,000 | Account payable | \)30,000 |
Accounts receivables | 21,200 | Note payable | 41,000 |
Investment | 32,000 | Common stock | 100,000 |
Plant assets (net) | 81,000 | Retained earnings | 23,200 |
Land | 40,000 | ||
\(194,200 | \)194,200 |
During 2017, the following occurred.
1. Lansbury Inc. sold part of its debt investment portfolio for \(15,000. This transaction resulted in a gain of \)3,400 for the firm. The company classifies these investments as available for sale.
2. A tract of land was purchased for \(13,000 cash.
3. Long-term notes payable in the amount of \)16,000 were retired before maturity by paying \(16,000 cash.
4. An additional \)20,000 in common stock was issued at par.
5. Dividends of \(8,200 were declared and paid to stockholders.
6. Net income for 2017 was \)32,000 after allowing for depreciation of \(11,000.
7. Land was purchased through the issuance of \)35,000 in bonds.
8. At December 31, 2017, Cash was \(37,000, Accounts Receivable was \)41,600, and Accounts Payable remained at $30,000.
Instructions
(a) Prepare a statement of cash flows for 2017.
(b) Prepare an unclassified balance sheet as it would appear at December 31, 2017.
(c) How might the statement of cash flows help the user of the financial statements? Compute two cash flow ratios.
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