of E5-2
(Classification Statement of Financial Position Accounts)
Presented below are the captions of Nikos Company's balance sheet.
(a) Non-current assets.
(c)
Equity.
(1)
(2)
Investments.
Non-current
liabilities.
Current
liabilities.
(d)
Property, plant,
(e)
and equipment.
Intangible assets.
Other assets.
(3)
(4)
(b) Current assets.
Indicate by letter where each of the following items would be classified.
1. Share capital-preference.
c
2.
Goodwill.
a3
3.
Wages payable.
e
4.
Trade accounts payable.
e
5.
Buildings.
a2
6.
Trading securities.
b
7.
Current portion of long-term debt.
e
8.
Patent.
a3
9.
Allowance for doubtful accounts.
b
10. Accounts receivable.
b
11. Accumulated other comprehensive income.
c
12. Notes payable (due next year).
e
13. Office supplies.
b
14. Share capital-ordinary.
c
15. Land.
a2
16. Bond sinking fund.
a1
17. Merchandise inventory.
b
18. Prepaid insurance.
b
19. Bonds payable.
d
20. Taxes payable.
e
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********
E5-4
(Preparation of a Classified Statement of Financial Position)
Assume that Gulistan Inc. has the following accounts at the end of the current year.
1. Share Capital-Ordinary.
14. Accumulated DepreciationBuildings.
2.
Long-Term Note Payable.
15. Cash Restricted for Plant Expansion.
3.
Treasury Stock (at cost).
16. Land Held for Future Plant Site.
4.
Note Payable, short-term.
17. Allowance for Doubtful Accounts-
5.
Raw Materials.
6.
18. Retained Earnings.
7.
Long-Term Investment in Preference
Shares.
Unearned Rent Revenue.
8.
Work in Process.
20. Unearned Subscriptions Revenue.
9.
Copyrights.
21. ReceivablesOfficers (due in one year).
Accounts Receivable.
19. Share Premium-Ordinary.
10. Buildings.
22. Finished Goods.
11. Notes Receivable (short-term).
23. Accounts Receivable.
12. Cash.
24. Bonds Payable (due in 4 years).
13. Accrued Salaries Payable.
Prepare a classified statement of financial position in good form. (No monetary amounts are
necessary. List current assets in reverse order of liquidity and current liabilities in
alphabetical order, with notes first.)
GULISTAN INC.
Statement of Financial Position
December 31
Assets
Non-current assets
Long-term investments
Long-term investment in preference shares
$XXX
Land held for future plant site
XXX
Cash restricted for plant expansion
XXX
Total long-term investments
$XXX
Property, plant, and equipment
Buildings
Less: Accumulated depreciation-buildings
XXX
XXX
XXX
Intangible assets
Copyrights
XXX
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********
E5-5
(Preparation of a Corrected Statement of Financial Position)
Bruno Company has decided to expand its operations. The bookkeeper recently completed the
balance sheet presented below in order to obtain additional funds for expansion.
BRUNO COMPANY
Statement of Financial Position
December 31, 2010
Current assets
Cash
$260,000
Accounts receivable (net)
340,000
Inventories at lower-of-average-cost-or-net realizable value
401,000
Trading securities-at cost (fair value $120,000)
140,000
Property, plant, and equipment
Building (net)
570,000
Office equipment (net)
160,000
Land held for future use
175,000
Intangible assets
Goodwill
80,000
Other identifiable assets
90,000
Prepaid expenses
12,000
Current liabilities
Accounts payable
135,000
Notes payable (due next year)
125,000
Pension obligation
82,000
Rent payable
49,000
Premium on bonds payable
53,000
Non-current liabilities
Bonds payable
500,000
Equity
Share capital-ordinary, $1.00 par, authorized
400,000 shares, issued 290,000
Share premium-ordinary
Retained earnings
290,000
180,000
?
Prepare a revised statement of financial position given the available information. Assume that the
accumulated depreciation balance for the buildings is $160,000 and for the office equipment,
$105,000. The allowance for doubtful accounts has a balance of $17,000. The pension obligation
is considered a non-current liability. (List current assets in reverse order of liquidity. List
*****************************************************************************
********
E5-6
(Corrections of a Statement of Financial Position)
The bookkeeper for Garfield Company has prepared the following statement of financial position
as of July 31, 2010.
GARFIELD COMPANY
Statement of Financial Position
As of July 31, 2010
Equipment (net)
$84,000
Equity
$155,500
Patents
21,000
Non-current liabilities
75,000
Inventories
60,000
Notes and accounts payable
44,000
Accounts receivable (net)
40,500
Cash
69,000
$274,500
$274,500
The following additional information is provided.
1. Cash includes $1,200 in a petty cash fund and $12,000 in a bond sinking fund.
2. The net accounts receivable balance is comprised of the following three items: (a)
accounts receivabledebit balances $52,000; (b) accounts receivablecredit balances
$8,000; (c) allowance for doubtful accounts $3,500.
3. Merchandise inventory costing $5,300 was shipped out on consignment on July 31, 2010.
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. Taxes payable of $9,000 were accrued on July 31. Garfield 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 taxes payable amount.
Prepare a corrected classified balance sheet as of July 31, 2010, from the available information,
adjusting the account balances using the additional information. (List current liabilities from
largest to smallest amounts, e.g. 10, 5, 3. Enter all amounts as positive amounts and subtract
where necessary.)
GARFIELD COMPANY
Statement of Financial Position
July 31, 2010
Assets
Non-current assets
Long-term investments
Bond sinking fund
$12,000
Property, plant, and equipment
Equipment
Less: Acc. dep.-Equipment
112,000
28,000
84,000
E5-6
GARFIELD COMPANY
Statement of Financial Position
July 31, 2010
Assets
Non-current assets
Long-term investments
Bond sinking fund
$12,000
Property, plant, and equipment
Equipment
$112,000
28,000
Less: Acc. dep.-Equipment
84,000
Intangible assets
21,000
Patents
Total on-current assets
$117,000
Current assets
Inventories
*65,300
Accounts receivable
Less: Allowance for doubtful
accounts
Cash
**46,700
3,500
43,200
***66,000
Total current assets
174,500
Total assets
$291,500
Equity and Liabilities
$155,500
Equity
Non-current liabilities
$75,000
Current liabilities
Notes and accounts payable
Taxes payable
Total current liabilities
****$52,000
9,000
61,000
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********
E5-7
(Current Assets Section of the Statement of Financial Position)
Presented below are selected accounts of Aramis Company at December 31, 2010.
Finished goods
52,000 Cost of goods sold
Revenue received in advance
Equipment
90,000
253,000
Notes receivable
2,100,000
40,000
Accounts receivable
161,000
187,000
Work-in-process
34,000
Raw materials
Cash
42,000
60,000
Trading securities
31,000
Customer advances
Cash restricted for plant
expansion
36,000
Supplies expense
Allowance for doubtful
accounts
Licenses
50,000
Share premium-ordinary
88,000
Treasury shares
22,000
12,000
18,000
The following additional information is available.
1. Inventories are valued at lower-of-cost-or-market using FIFO.
2. Equipment is recorded at cost. Accumulated depreciation, computed on a straight-line
basis, is 50,600.
3. The trading securities have a fair value of 29,000.
4. The notes receivable are due April 30, 2012, with interest receivable every April 30. The
notes bear interest at 6%. (Hint: Accrue interest due on December 31, 2010.)
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 Aramis Company's December 31, 2010, statement of
financial position, with appropriate disclosures. (List current assets in reverse order of liquidity.
Enter all amounts as positive amounts and subtract where necessary.)
Current assets
Inventories at lower of cost (determined
using FIFO) or net-realizable-value
Finished goods
52,000
Work-in-process
Raw materials
34,000
187,000
273,000
Accounts receivable
Less: Allowance for doubtful accounts
161,000
12,000
Interest receivable
149,000
1,600
Trading securities at fair value
29,000
Cash
92,000
Less: Cash restricted for plant expansion
50,000
Total current assets
42,000
494,600
E5-7
Current assets
Inventories at lower of cost (determined using FIFO) or net-realizablevalue
Finished goods
52,000
Work-in-process
34,000
187,000
Raw materials
Accounts receivable (of which 50,000 is pledged
as collateral on a bank loan)
161,000
12,000
Less: Allowance for doubtful debts
Interest receivable [(40,000 6%) 8/12]
Trading securities at fair value (cost, 31,000)
Cash
*92,000
50,000
Less: Cash restricted for plant expansion
Total current assets
* An acceptable alternative is to report cash at 42,000 and simply report the cash restricted for
plant expansion in the investments section.
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********
E5-8
(Current vs. Non-current Liabilities)
Pascal Corporation is preparing its December 31, 2010, statement of financial position. The
following items may be reported as either a current or non-current liability.
1. On December 15, 2010, Pascal declared a cash dividend of $2.00 per share to
shareholders of record on December 31. The dividend is payable on January 15, 2011.
Pascal has issued 1,000,000 ordinary shares of which 50,000 shares are held in treasury.
2. At December 31, bonds payable of $100,000,000 are outstanding. The bonds pay 8%
interest every September 30 and mature in installments of $25,000,000 every September
30, beginning September 30, 2011.
3. At December 31, 2009, customer advances were $12,000,000. During 2010, Pascal
collected $30,000,000 of customer advances, and advances of $25,000,000 were earned.
For each item above, indicate the dollar amounts to be reported as a current liability and as a
non-current liability. (If the items does not have a current or non-current amount put 0 in the
box. All boxes must be filled to be correct .)
Current
Non-current liability
1. Dividends payable
$1,900,000
0
2. Bonds payable
$25,000,000
75,000,000
Interest payable
$2,000,000
0
3. Customer advances
$17,000,000
0
E5-8
1. Dividends payable of $1,900,000 will be reported as a current liability [(1,000,000 50,000) $2.00].
2. Bonds payable of $25,000,000 and interest payable of $2,000,000 ($100,000,000 8%
3/12) will be reported as a current liability. Bonds payable of $75,000,000 will be
reported as a non-current liability.
3. Customer advances of $17,000,000 will be reported as a current liability ($12,000,000 +
$30,000,000 - $25,000,000).
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********
E5-9
(Current Assets and Current Liabilities)
The current assets and liabilities sections of the statement of financial position of Agincourt
Company appear as follows.
AGINCOURT COMPANY
Statement of Financial Position (Partial)
December 31, 2010
Inventories
$171,000 Notes payable
$67,000
61,000
Accounts receivable
$89,000
Accounts payable
Less: Allowance for doubtful
$128,000
7,000
82,000
accounts
Prepaid expenses
9,000
40,000
Cash
$302,000
The following errors in the corporation's accounting have been discovered:
1. January 2011 cash disbursements entered as of December 2010 included payments of
accounts payable in the amount of $35,000, on which a cash discount of 2% was taken.
2. The inventory included $27,000 of merchandise that had been received at December 31
but for which no purchase invoices had been received or entered. Of this amount,
$10,000 had been received on consignment; the remainder was purchased f.o.b.
destination, terms 2/10, n/30.
3. Sales for the first four days in January 2011 in the amount of $30,000 were entered in the
sales book as of December 31, 2010. Of these, $21,500 were sales on account and the
remainder were cash sales.
4. Cash, not including cash sales, collected in January 2011 and entered as of December 31,
2010, totaled $35,324. Of this amount, $23,324 was received on account after cash
discounts of 2% had been deducted; the remainder represented the proceeds of a bank
loan.
(a) Restate the current assets and liabilities sections of the statement of financial position in
accordance with good accounting practice. (Assume that both accounts receivable and
accounts payable are recorded gross.) (List current assets in reverse order of liquidity
and current liabilities with notes payable first. Enter all amounts as positive amounts
and subtract where necessary.)
AGINCOURT COMPANY
Partial Statement of Financial Position
As of December 31, 2010
Current assets
Inventories
$161,000
Accounts receivable
$91,300
7,000
Less: Allowance for doubtful accounts
84,300
Prepaid expenses
9,000
30,476
Cash
Total current assets
$284,776
Current liabilities
Notes payable
$55,000
113,000
Accounts payable
$168,000
Total current liabilities
(b) State the net effect of your adjustments on Agincourt Company's retained earnings balance.
(For negative numbers use either a negative sign preceding the number, e.g. -45 or
parenthesis, e.g. (45).)
Change increase (decrease) to retained earnings
$(57,224)
*
Multiple correct answers are possible for this question; please rollover the answer field to see all
possible answers
E5-9
(a)
AGINCOURT COMPANY
Statement of Financial Position (Partial)
As of December 31, 2010
Current assets
Inventories
Accounts receivable
Less: Allowance for doubtful
accounts
Prepaid expenses
Cash
*161,000
**$91,300
7,000
9,000
***$30,476
$284,776
Total current assets
*
Current liabilities
Notes payable
Accounts payable
Total current liabilities
Inventories
Less: Inventory received on consignment
Adjustment to inventory
** Accounts receivable balance
Add: Accounts deducted from January
collection
($23,324 98%)
Deduct: Accounts receivable in January
Adjusted accounts receivable
*** Cash balance
Add: Cash disbursement after discount
($35,000 98%)
Less: Cash sales in January ($30,000 $21,500)
Cash collected on account
Bank loan proceeds ($35,324 - $23,324)
Adjusted cash
84,300
a
55,000
$113,000
$168,000
b
$171,000
10,000
$161,000
$89,000
23,800
112,800
(21,500)
$91,300
$40,000
34,300
74,300
(8,500)
(23,324)
(12,000)
$30,476
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********
E5-11
(Statement of Financial Position Preparation)
Presented below is the adjusted trial balance of Abbey Corporation at December 31, 2010.
Debits
Credits
Cash
?
Office supplies
1,200
Prepaid insurance
1,000
Equipment
48,000
Accumulated depreciation-Equipment
9,000
Trademarks
950
Accounts payable
10,000
Wages payable
500
Unearned service revenue
2,000
Bonds payable, due 2017
9,000
Share capital-ordinary
10,000
Retained earnings
20,000
Service revenue
10,000
Wages expense
9,000
Insurance expense
1,400
Rent expense
1,200
900
Interest expense
?
?
Total
Additional information:
1. Net loss for the year was 2,500.
2. No dividends were declared during 2010.
Prepare a classified statement of financial position as of December 31, 2010. (List current assets
in reverse order of liquidity. List multiple entries for current liabilities from largest to smallest
amounts, e.g. 10, 5, 3. Enter all amounts as positive amounts and subtract where necessary.)
ABBEY CORPORATION
Statement of Financial Position
December 31, 2010
Assets
Property, plant, and equipment
Equipment
48,000
9,000
Less: Accumulated depreciation
Total property, plant, and equipment
39,000
Intangible assets
Trademarks
Current assets
950
E5-11
Retained earnings: (20,000 - 2,500*)
*[10,000 - (9,000 + 1,400 + 1,200 + 900)]
Cash [49,000 39,000 950 1,200 1,000]
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********
E5-13
(Statement of Cash FlowsClassifications)
The major classifications of activities reported in the statement of cash flows are operating,
investing, and financing. Classify each of the transactions listed below as:
1. Operating activityadd to net income.
2. Operating activitydeduct from net income.
3. Investing activity.
4. Financing activity.
5. Reported as significant no-cash activity in the notes to the financial statements.
The transactions are as follows.
(a) Issuance of ordinary shares.
4
(b) Purchase of land and building.
3
(c) Redemption of bonds.
4
(d) Sale of equipment.
3
(e) Depreciation of machinery.
1
(f) Amortization of patent.
1
(g) Issuance of bonds for plant assets.
5
(h) Payment of cash dividends.
4
(i) Exchange of furniture for office equipment.
5
(j) Purchase of treasury shares.
4
(k) Loss on sale of equipment.
Increase in accounts receivable during the
(l)
year.
(m) Decrease in accounts payable during the year.
1
2
2
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********
E5-15
(Preparation of a Statement of Cash Flows)
Presented below is a condensed version of the comparative statements of financial position for
Yoon Corporation for the last two years at December 31 (000,000 omitted.).
2010
2009
52,000
74,000
298,000
240,000
(106,000)
(89,000)
Accounts receivable
180,000
185,000
Cash
157,000
78,000
Share capital-ordinary
160,000
160,000
Retained earnings
287,000
177,000
Investments
Equipment
Less: Accumulated depreciation
Current liabilities
134,000
151,000
Additional information:
Investments were sold at a loss of 7,000; no equipment was sold; cash dividends paid were
50,000 and net income was 160,000.
(a)
Prepare a statement of cash flows for 2010 for Yoon Corporation. (List multiple entries from the larges
least negative amount, e.g. 15, 14, 10, -17, -5, -1. For negative numbers use either a negative sign pre
YOON CORPORATION
Statement of Cash Flows
For the Year Ended December 31,
Cash flows from operating activities
Net income
Adjustm
ents to
reconcile
net
income
to net
cash
provided by operating activities:
Depreciation expense
Loss on sale of investments
Decrease in accounts receivable
Decrease in current liabilities
Net cash provided by operating activities
Cash flows from investing activities
E5-15
Net cash provided by operating activities
Less: Purchase of equipment
Dividends
Free cash flow
172,000
(58,000)
(50,000)
64,000
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********
E5-16 (a,b)
(Preparation of a Statement of Cash Flows)
A comparative statement of financial position for Orozco Corporation is presented below.
December depreciation-equipment
(69,000)
(42,000)
Inventories
180,000
189,000
Accounts 31
Assets
2010
2009
Land
$71,000
$110,000
Equipment
270,000
200,000
Accumulated receivable
82,000
66,000
Cash
63,000
22,000
$597,000
$545,000
Total
Equity and Liabilities
Share capital-ordinary ($1 par)
$214,000
$164,000
Retained earnings
199,000
134,000
Bonds payable
150,000
200,000
Accounts payable
34,000
47,000
$597,000
$545,000
Total
Additional information:
1. Net income for 2010 was $105,000.
2. Cash dividends of $40,000 were declared and paid.
3. Bonds payable amounting to $50,000 were retired through issuance of ordinary shares.
(a)
Prepare a statement of cash flows for 2010 for Orozco Corporation. (List multiple entries from the larg
least negative amount, e.g. 15, 14, 10, -17, -5, -1. For negative numbers use either a negative sign pre
OROZCO CORPORATION
Statement of Cash Flows
For the Year Ended December 31,
Cash flows from operating activities
Net income
Adjustm
ents to
reconcile
net
income
to net
cash
provided by operating activities:
Depreciation expense
Decrease in inventory
E5-16 (a,b)
(a)
OROZCO CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 2010
Cash flows from
operating activities
Net income
Adjustments to reconcile net income to net cash
provided by
operating activities:
Depreciation
$27,000
expense
Decrease in
9,000
inventory
Increase in
(16,000)
accounts receivable
Decrease in
(13,000)
accounts payable
Net cash provided
by operating activities
Cash flows from
investing activities
Sale of land
39,000
Purchase of
(70,000)
equipment
Net cash used by
investing activities
Cash flows from
financing activities
Payment of cash
dividends
Net increase in cash
Cash at beginning of
year
Cash at end of year
Noncash investing
and financing
activities
Issued common stock to retire $50,000 of bonds outstanding
Current cash debt coverage ratio =
(b)
=
Net cash provided by operating activities
Average current liabilities
$112,000
$105,000
7,000
112,000
(31,000)
(40,000)
41,000
22,000
$63,000
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********
E5-18 (a,b)
(Preparation of a Statement of Cash Flows, Analysis)
The comparative statements of financial position of Menachem Corporation at the beginning and
end of the year 2010 appear below.
Assets
Equipment
Less: Accumulated
depreciation
Accounts receivable
Cash
Total
MENACHEM CORPORATION
Statement of Financial Position
Dec. 31, 2010
Jan. 1, 2010
37,000
22,000
Inc./Dec.
15,000 Inc.
(17,000)
(11,000)
6,000 Inc.
106,000
22,000
148,000
88,000
13,000
112,000
18,000 Inc.
9,000 Inc.
Equity and Liabilities
Share capital100,000
80,000
20,000 Inc.
ordinary
Retained earnings
28,000
17,000
11,000 Inc.
Accounts payable
20,000
15,000
5,000 Inc.
148,000
112,000
Total
Net income of 34,000 was reported, and dividends of 23,000 were paid in 2010. New
equipment was purchased and none was sold.
(a)
Prepare a statement of cash flows for the year 2010. (List multiple entries from the largest positive to t
negative amount, e.g. 15, 14, 10, -17, -5, -1. For negative numbers use either a negative sign precedin
MENACHEM CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 20
Cash flows from operating activities
Net income
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation
Increase in accounts payable
Increase in accounts receivable
Net cash provided by operating activities
Cash flows from investing activities
Purchase of equipment
E5-18 (a,b)
Dec, 31, 2010
(b)
Current ratio
Jan, 1, 2010
128,000
20,000
= 6.40
Free Cash Flow Analysis
Net cash
provided by
operating
activities
Purchase
equipment
Pay dividends
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********
E5-1
Correct.
(Statement of Financial Position Classifications)
Presented below are a number of balance sheet accounts of Cunningham, Inc.
For each of the accounts below, indicate the proper balance sheet classification.
(a) Investment in Preference Shares (readily marketable and held for sale)
Current asset
(b) Treasury Shares
Equity
(c) Share Capital-Ordinary
Equity
(d) Cash Dividends Payable
Current liability
Property, plant, and
equipment
Property, plant, and
equipment
(e) Accumulated Depreciation
(f) Warehouse in Process of Construction (for use by this company)
(g) Petty Cash
Current asset
(h) Accrued Interest on Notes Payable
(i) Deficit
Current liability
Retained earnings
(j) Trading Securities
Current asset
(k) Income Taxes Payable
Current liability
(l) Unearned Subscription Revenue
Current liability
(m) Work in Process
Current asset
(n) Accrued Vacation Pay
Click here if you would like to Show Work for this question
Current liability
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********
E5-3
Correct.
(Classification of Statement of Financial Position Accounts)
Assume that Masters Enterprises uses the following headings on its balance sheet.
(a) Investments.
(g) Current liabilities.
Property, plant, and
(b)
(h) Share capital
equipment.
(c) Intangible assets.
(i) Share premium
(d) Other assets.
(j) Retained earnings.
(e) Current assets.
(k) Accumulated other comprehensive income.
(f) Non-current liabilities.
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 "n" to indicate this fact. If an item need
not be reported at all on the statement of financial position, use the letter "x."
1. Unexpired insurance.
e
2. Share owned in associated companies.
a
3. Unearned subscriptions revenue.
g
4. Advances to suppliers.
e
5. Unearned rent revenue.
g
6. Share capital-preference
h
7. Share premium-preference
i
8. Copyrights.
c
9. Petty cash fund.
e
10. Sales tax payable.
g
11. Interest on notes receivable.
e
12. Twenty-year issue of bonds payable that will mature within
the next year. (No sinking fund exists, and refunding is not
g
planned.)
13. Accounts receivable
e
14. Unrealized gain on available-for-sale securities.
k
15. Interest on bonds payable.
g
16. Salaries that company budget shows will be paid to
x
employees within the next year.
17. Accumulated depreciation.
b
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E5-10
Correct.
(Current Liabilities)
Mary Pierce is the controller of Arnold Corporation and is responsible for the preparation of the
year-end financial statements. The following transactions occurred during the year.
(a) Bonuses to key employees based on net income for 2010 are estimated to be $150,000.
(b) On December 1, 2010, the company borrowed $900,000 at 8% per year. Interest is paid
quarterly. (Note is due in 2015.)
(c) Credit sales for the year amounted to $10,000,000. Arnold's expense provision for doubtful
accounts is estimated to be 2% of credit sales.
(d) On December 15, 2010, the company declared a $2.00 per share dividend on the 40,000
ordinary shares outstanding, to be paid on January 5, 2011.
(e) During the year, customer advances of $160,000 were received; $50,000 of this amount was
earned by December 31, 2010.
For each item above, indicate the dollar amount to be reported as a current liability. (If a liability
is not reported, enter 0.)
(a)
$ 150000
(b)
$ 6000
(c)
$0
(d)
$ 80000
(e)
$ 110000
E5-10
(a) A current liability of $150,000 should be recorded.
(b) A current liability for accrued interest of $6,000 ($900,000 8% 1/12) should be reported.
Also, the $900,000 note payable should be a current liability if payable in one year.
Otherwise, the $900,000 note payable would be a long-term liability.
(c) Although bad debts expense of $200,000 should be debited and the allowance or doubtful
accounts credited for $200,000, this does not result in a liability. The allowance for doubtful
accounts is a valuation account (contra asset) and is deducted from accounts receivable on
the balance sheet.
(d) A current liability of $80,000 should be reported. The liability is recorded on the date of
declaration.
(e) Customer advances of $110,000 ($160,000 - $50,000) will be reported as a current liability.
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E5-12
Correct.
(Preparation of a Statement of Financial Position)
Presented below is the trial balance of Vivaldi Corporation at December 31, 2010.
Debit
Credits
Cash
$197,000
Sales
$7,900,000
Trading securities (at cost, $145,000)
153,000
Cost of goods sold
4,800,000
Long-term investments in bonds
299,000
Long-term investments in share capital277,000
ordinary
Short-term notes payable
90,000
Accounts payable
Selling expenses
Investment revenue
Land
Buildings
Dividends payable
Accrued liabilities
Accounts receivable
Accumulated depreciation-Buildings
Allowance for doubtful accounts
Administrative expenses
Interest expense
Inventories
Provision for pensions (long-term)
Long-term notes payable
Equipment
Bonds payable
Accumulated depreciation-Equipment
Franchise
Share capital-ordinary ($5 par)
Treasury shares
Patent
Retained earnings
Accumulated other comprehensive income
455,000
2,000,000
63,000
260,000
1,040,000
136,000
96,000
435,000
352,000
25,000
900,000
211,000
597,000
80,000
900,000
600,000
1,000,000
60,000
160,000
1,000,000
191,000
195,000
78,000
80,000
$12,315,000 $12,315,000
Prepare a statement of financial position at December 31, 2010, for Vivaldi Corporation. Ignore
income taxes. (List liabilities, long-term investments, and intangible assets from largest to
smallest amount, e.g. 10, 5, 3. List current assets in reverse order of liquidity. Enter all
amounts as positive amounts and subtract where necessary.)
VIVALDI CORPORATION
Statement of Financial Position
December 31, 2010
Assets
Non-current assets
Long-term investments
Investment in bonds
$ 299000
Investments in capital shares
277000
Total long-term investments
$ 576000
Property, plant, and equipment
Land
Buildings
Less: Accumulated depreciationbuildings
Equipment
260000
$ 1040000
352000
600000
688000
Less: Accumulated depreciationequipment
Total property, plant, and equipment
60000
1488000
Intangible assets
Patent
Franchise
Total non-current assets
Current assets
Inventories
Accounts receivable
Less: Allowance for doubtful
accounts
Trading securities
Cash
Total current assets
540000
195000
160000
597000
435000
25000
410000
153000
197000
1357000
$ 3776000
Total assets
Equity and Liabilities
Equity
Share capital-ordinary
Retained earnings
Accumulated other comprehensive
income
Less: Treasury shares
Total equity
Non-current liabilities
Bonds payable
Long-term notes payable
Provision for pensions
Total non-current liabilities
Current liabilities
Accounts payable
Dividends payable
Accrued liabilities
Short-term notes payable
Total current liabilities
Total liabilities
Total equity and liabilities
355000
2419000
$ 1000000
130000
80000
191000
$ 1019000
$ 1000000
900000
80000
1980000
455000
136000
96000
90000
777000
2757000
$ 3776000
Click here if you would like to Show Work for this question
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E5-14
Correct.
(Preparation of a Statement of Cash Flows)
The comparative statements of financial position of Connecticut Inc. at the beginning and the
end of the year 2010 appear below.
Assets
Equipment
Less: Accumulated
depreciation
Accounts receivable
Cash
Total
CONNECTICUT INC.
Statements of Financial Position
Dec. 31, 2010
Jan. 1, 2010
$39,000
$22,000
Inc./Dec.
$17,000 Inc.
(17,000)
(11,000)
6,000 Inc.
91,000
45,000
$158,000
88,000
13,000
$112,000
3,000 Inc.
32,000 Inc.
Equity and Liabilities
Share capital-ordinary
$100,000
$80,000
20,000 Inc.
Retained earnings
38,000
17,000
21,000 Inc.
20,000
15,000
Accounts payable
5,000 Inc.
$158,000
$112,000
Total
Net income of $34,000 was reported, and dividends of $13,000 were paid in 2010. New
equipment was purchased and none was sold.
Prepare a statement of cash flows for the year 2010. (List multiple entries from the largest
positive to the smallest positive amount followed by the most negative to the least negative
amount, e.g. 15, 14, 10, -17, -5, -1. For negative numbers use either a negative sign preceding
the number, e.g. -45 or parenthesis, e.g. (45).)
CONNECTICUT INC.
Statement of Cash Flows
For the Year Ended December 31, 2010
Cash flows from operating activities
Net income
$ 34000
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation expense
$ 6000
Increase in accounts payable
5000
-3000
8000
Increase in accounts receivable
Net cash provided by operating activities
42000
Cash flows from investing activities
Purchase of equipment
-17000
Cash flows from financing activities
Issuance of common stock
20000
-13000
Payment of cash dividends
7000
Net cash provided by financing activities
Net increase in cash
32000
13000
Cash at beginning of year
$ 45000
Cash at end of year
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E5-17
Correct.
(Preparation of a Statement of Cash Flows and a Statement of Financial Position)
Chekov Corporation's statement of financial position at the end of 2009 included the following
items.
Land
$ 30,000 Bonds payable
$100,000
Building
120,000 Current liabilities
150,000
Equipment
90,000 Share captial-ordinary
180,000
44,000
Accum. depr.-building
(30,000) Retained earnings
$474,000
Accum. depr.-equipment
(11,000) Total
Patents
40,000
235,000
Current assets
$474,000
Total
The following information is available for 2010.
1. Net income was $55,000.
2. Equipment (cost $20,000 and accumulated depreciation $8,000) was sold for $9,000.
3. Depreciation expense was $4,000 on the building and $9,000 on equipment.
4. Patent amortization was $2,500.
5. Current assets other than cash increased by $25,000. Current liabilities increased by
$13,000.
6. An addition to the building was completed at a cost of $27,000.
7. A long-term investment in debt securites was purchased for $16,000.
8. Bonds payable of $50,000 were issued.
9. Cash dividends of $25,000 were declared and paid.
10. Treasury shares was purchased at a cost of $11,000.
(a)
Prepare a statement of cash flows for 2010. (List multiple entries from the largest positive to the small
e.g. 15, 14, 10, -17, -5, -1. For negative numbers use either a negative sign preceding the number, e.g
CHEKOV CORPORATION
Statement of Cash Flows
For the Year Ended December 31,
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation expense
Increase in current liabilities
Loss on sale of equipment
Patent amortization
Increase in current assets
Net cash provided by operating activities
Cash flows from investing activities
Sale of equipment
Addition to building
Investment in debt securities
Net cash used by investing activities
Cash flows from financing activities
Issuance of bonds
Payment of dividends
Purchase of treasury shares
Net cash provided by financing activities
Net increase in cash
(b) Prepare a balance sheet at December 31, 2010.(Enter all amounts as positive amounts and
subtract where necessary.)
CHEKOV CORPORATION
Statement of Financial Position
December 31, 2010
Assets
Non-current assets
Long-term investments
Long-term investments
$ 16000
Property, plant, and equipment
Land
Building
Less: Accum. depr.-building
Equipment
Less: Accum. depr.-equipment
Total property, plant, and equipment
$ 30000
$ 147000
34000
70000
12000
113000
58000
201000
Intangible assets
Patents
Total non-current assets
37500
254500
Current assets
301500
$ 556000
Total assets
Equity and Liabilities
Equity
Share capital-ordinary
Retained earnings
Treasury shares
Total shareholders' equity
Non-current liabilities
Bonds payable
Current liabilities
Total liabilities
$ 180000
74000
11000
$ 243000
150000
163000
Total equity and liabilities
Click here if you would like to Show Work for this question
313000
$ 556000
E5-17
(a)
CHEKOV CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 2010
Cash flows from operating activities
Net income
Adjustments to
reconcile net income
to net cash provided
by operating activities:
Depreciation expense
$13,000
Increase in current liabilities
13,000
Loss on sale of equipment
*3,000
Patent amortization
2,500
(25,000)
Increase in current assets (other than cash)
Net cash provided by operating activities
$55,000
6,500
61,500
Cash flows from investing activities
Sale of equipment
Addition to building
Investment in debt securities
Net cash used by investing activities
9,000
(27,000)
(16,000)
(34,000)
Cash flows from financing activities
Issuance of bonds
50,000
Payment of dividends
(25,000)
(11,000)
Purchase of Treasury shares
14,000
Net cash provided by financing activities
a
$41,500
Net increase in cash
* [$9,000 - ($20,000 - $8,000)]
a
An additional proof to arrive at the increase in cash is provided as follows:
Total current assets-end of period
$301,500 [from part (b)]
(235,000)
Total current assets-beginning of period
Increase in current assets during the period
66,500
(25,000)
Increase in current assets other than cash
$41,500
Increase in cash during year
(b)
CHEKOV CORPORATION
Statement of Financial Position
December 31, 2010
Assets
Non-current assets
Long-term investments
Property, Plant, and equipment
Land
$30,000
Building ($120,000 + $27,000)
$147,000
34,000
Less: Accum. depr. ($30,000 + $4,000)
113,000
Equipment ($90,000 - $20,000)
70,000
12,000
58,000
Less: Accum. depr. ($11,000 - $8,000 + $9,000)
Total property, plant, and equipment
Intangible assetsPatents ($40,000 - $2,500)
Total non-current assets
Current assets
Total assets
Equity and Liabilities
Equity
Share capital-ordinary
Retained earnings ($44,000 + $55,000 - $25,000)
$180,000
74,000
$16,000
201,000
254,500
301,500
$556,000
b
Less: Treasury shares
Total shareholders' equity
11,000
$243,000
Non-current liabilities
Bonds payable ($100,000 + $50,000)
150,000
Current liabilities($150,000 + $13,000)
163,000
Total liabilities
313,000
$556,000
Total equity and liabilities
b
The amount determined for current assets could be computed last and then is a plug figure.
That is, total liabilities and stockholders' equity is computed because information is available to
determine this amount. Because the total assets amount is the same as total liabilities and
stockholders' equity amount, the amount of total assets is determined. Information is available to
compute all the asset amounts except current assets and therefore current assets can be
determined by deducting the total of all the other asset balances from the total asset balance (e.g.,
$556,000 - $37,500 - $201,000 - $16,000). Another way to compute this amount, given the
information, is that beginning current assets plus the $25,000 increase in current assets other than
cash plus the $41,500 increase in cash equals $301,500.
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