Prepare the current assets section of the balance sheet


Brief Exercise 1

Koch Corporation's adjusted trial balance contained the following asset accounts at December 31, 2014: Cash $7,000; Land $40,000; Patents $12,500; Accounts Receivable $90,000; Prepaid Insurance $5,200; Inventory $30,000; Allowance for Doubtful Accounts $4,000; Equity Investments (trading) $11,000.

Prepare the current assets section of the balance sheet. (List Current Assets in order of liquidity.)

Brief Exercise 2

Patrick Corporation's adjusted trial balance contained the following asset accounts at December 31, 2014: Prepaid Rent $12,000; Goodwill $50,000; Franchise Fees Receivable $2,000; Franchises $47,000; Patents $33,000; Trademarks $10,000.

Prepare the intangible assets section of the balance sheet.

Exercise 3

Presented below are a number of balance sheet accounts of Deep Blue Something, Inc. For each of the accounts below, indicate the proper balance sheet classification.

 

Balance Sheet Accounts

Balance Sheet Classification

(a)

Investment in Preferred Stock.

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(b)

Treasury Stock.

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(c)

Common Stock.

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(d)

Dividends Payable.

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(e)

Accumulated Depreciation-Equipment.

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(f)(1)

Construction in Process (Constructed for another party).

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(f)(2)

Construction in Process (Constructed for the use of Deep Blue Something, Inc.).

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(g)

Petty Cash.

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(h)

Interest Payable.

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(i)

Deficit.

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(j)

Equity Investments (trading).

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(k)

Income Taxes Payable.

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(l)

Unearned Subscription Revenue.

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(m)

Work in Process.

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(n)

Salaries and Wages Payable.

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Exercise 4

Assume that Denis Savard Inc. has the following accounts at the end of the current year.

1.

Common Stock

14.

Accumulated Depreciation-Buildings.

2.

Discount on Bonds Payable.

15.

Cash Restricted for Plant Expansion.

3.

Treasury Stock (at cost).

16.

Land Held for Future Plant Site.

4.

Notes Payable (short-term).

17.

Allowance for Doubtful Accounts.

5.

Raw Materials

18.

Retained Earnings.

6.

Preferred Stock (Equity) Investments (long-term).

19.

Paid-in Capital in Excess of Par-Common Stock.

7.

Unearned Rent Revenue.

20.

Unearned Subscriptions Revenue.

8.

Work in Process.

21.

Receivables-Officers (due in one year).

9.

Copyrights.

22.

Inventory (finished goods).

10.

Buildings.

23.

Accounts Receivable.

11.

Notes Receivable (short-term).

24.

Bonds Payable (due in 4 years).

12.

Cash.

25.

Noncontrolling Interest.

13.

Salaries and Wages Payable.


 

Prepare a classified balance sheet in good form. (List Current Assets in order of liquidity. For Land, Treasury Stock, Notes Payable, Preferred Stock Investments, Notes Receivable, Receivables-Officers, Inventory, Bonds Payable, and Restricted Cash, enter the account name only and do not provide the descriptive information provided in the question.)

Exercise 5

Presented below are selected accounts of Yasunari Kawabata Company at December 31, 2014.

Inventory (finished goods)

$ 52,000

Cost of Goods Sold

$2,100,000

Unearned Service Revenue

90,000

Notes Receivable

40,000

Equipment

253,000

Accounts Receivable

161,000

Inventory (work in process)

34,000

Inventory (raw materials)

207,000

Cash

37,000

Supplies Expense

60,000

Equity Investments (short-term)

31,000

Allowance for Doubtful Accounts

12,000

Customer Advances

36,000

Licenses

18,000

Restricted Cash for Plant Expansion

50,000

Additional Paid-in Capital

88,000

 


Treasury Stock

22,000

The following additional information is available.

1. Inventories are valued at lower-of-cost-or-market using LIFO.
2. Equipment is recorded at cost. Accumulated depreciation, computed on a straight-line basis, is $50,600.
3. The short-term investments have a fair value of $29,000. (Assume they are trading securities.)
4. The notes receivable are due April 30, 2016, with interest receivable every April 30. The notes bear interest at 6%. (Hint: Accrued interest due on December 31, 2014.)
5. The allowance for doubtful accounts applies to the accounts receivable. Accounts receivable of $50,000 are pledged as collateral on a bank loan.
6. Licenses are recorded net of accumulated amortization of $14,000.
7. Treasury stock is recorded at cost.

Prepare the current assets section of Yasunari Kawabata Company's December 31, 2014, balance sheet, with appropriate disclosures. (List Current Assets in order of liquidity. Enter account name only and do not provide the descriptive information provided in the question.)

Exercise 6

Presented below is the trial balance of Scott Butler Corporation at December 31, 2014.

 

Debit

Credit

Cash

$   197,000


Sales


$ 8,100,000

Debt Investments (trading) (cost, $145,000)

153,000


Cost of Goods Sold

4,800,000


Debt Investments (long-term)

299,000


Equity Investments (long-term)

277,000


Notes Payable (short-term)


90,000

Accounts Payable


455,000

Selling Expenses

2,000,000


Investment Revenue


63,000

Land

260,000


Buildings

1,040,000


Dividends Payable


136,000

Accrued Liabilities


96,000

Accounts Receivable

435,000


Accumulated Depreciation-Buildings


152,000

Allowance for Doubtful Accounts


25,000

Administrative Expenses

900,000


Interest Expense

211,000


Inventory

597,000


Gain (extraordinary)


80,000

Notes Payable (long-term)


900,000

Equipment

600,000


Bonds Payable


1,000,000

Accumulated Depreciation-Equipment


60,000

Franchises

160,000


Common Stock ($5 par)


1,000,000

Treasury Stock

191,000


Patents

195,000


Retained Earnings


78,000

Paid-in Capital in Excess of Par


80,000

        Totals

$12,315,000

$12,315,000

Prepare a balance sheet at December 31, 2014, for Scott Butler Corporation. (Ignore income taxes). (List Current Assets in order of liquidity. List Property, Plant and Equipment in order of Land, Building and Equipment. Enter account name only and do not provide the descriptive information provided in the question.)

Exercise 7

For each of the following subsequent (post-balance-sheet) events, indicate whether a company should (a) adjust the financial statements, (b) disclose in notes to the financial statements, or (c) neither adjust nor disclose.

Sr. No.

Subsequent (Post-Balance-Sheet) Events


1.

Settlement of federal tax case at a cost considerably in excess of the amount expected at year-end.

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2.

Introduction of a new product line.

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3.

Loss of assembly plant due to fire.

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4.

Sale of a significant portion of the company's assets.

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5.

Retirement of the company president.

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6.

Prolonged employee strike.

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7.

Loss of a significant customer.

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8.

Issuance of a significant number of shares of common stock.

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9.

Material loss on a year-end receivable because of a customer's bankruptcy.

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10.

Hiring of a new president.

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11.

Settlement of prior year's litigation against the company (no loss was accrued).

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12.

Merger with another company of comparable size.

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Exercise 8

Carlton Company is involved in four separate industries. The following information is available for each of the four industries.

Operating Segment

Total Revenue

Operating Profit (Loss)

Identifiable Assets

W

$60,000

$15,000

$167,000

X

10,000

3,000

83,000

Y

23,000

(2,000)

21,000

Z

9,000

1,000

19,000


$102,000

$17,000

$290,000

Determine which of the operating segments are reportable based on the:

 

 

Reportable Segments

(a)

Revenue test.

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(b)

Operating profit (loss) test.

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(c)

Identifiable assets test.

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Exercise 9

As loan analyst for Utrillo Bank, you have been presented the following information.

 

Toulouse Co.

Lautrec Co.

Assets



Cash

$120,000

$320,000

Receivables

220,000

302,000

Inventories

570,000

518,000

   Total current assets

910,000

1,140,000

Other assets

500,000

612,000

   Total assets

$1,410,000

$1,752,000

Liabilities and Stockholders' Equity



Current liabilities

$305,000

$350,000

Long-term liabilities

400,000

500,000

Capital stock and retained earnings

705,000

902,000

   Total liabilities and stockholders' equity

$1,410,000

$1,752,000

Annual sales

$930,000

$1,500,000

Rate of gross profit on sales

30 %

40

Each of these companies has requested a loan of $50,000 for 6 months with no collateral offered. Because your bank has reached its quota for loans of this type, only one of these requests is to be granted.

Compute the various ratios for each company. (Round answer to 2 decimal places, e.g. 2.25.)

 

Toulouse Co.

Lautrec Co.

Current ratio

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 : 1

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 : 1

Acid-test ratio

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 : 1

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 : 1

Accounts receivable turnover

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 times

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 times

Inventory turnover

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 times

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 times

Cash to current liabilities

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 : 1

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 : 1

Attachment:- Brief Exercise.rar

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Financial Accounting: Prepare the current assets section of the balance sheet
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