EXERCISE 5-1 (15–20 minutes)
(a)
If the equity investment (preferred stock) is readily marketable
and held primarily for sale in the near term to generate income
on short-term price differences, then the account should appear
as a current asset and be included with trading securities. If, on
the other hand, the preferred stock is not a trading security, it
should be classified as available-for-sale. Available-for-sale
securities are classified as current or noncurrent depending
upon the circumstances.
(b)
If the company accounts for the treasury stock on the cost
basis, the account should properly be shown as a reduction of
total stockholders’ equity.
(c)
Stockholders’ equity.
(d)
Current liability.
(e)
Property, plant, and equipment (as a deduction).
(f)
If the warehouse in process of construction is being constructed
for another party, it is properly classified as an inventory
account in the current assets section. This account will be
shown net of any billings on the contract. On the other hand, if
the warehouse is being constructed for the use of this particular
company, it should be classified as a separate item in the
property, plant, and equipment section.
(g)
Current asset.
(h)
Current liability.
(i)
Retained earnings.
EXERCISE 5-1 (Continued)
(j)
Current asset.
(k)
Current liability.
(l)
Current liability.
(m)
Current asset (inventory).
(n)
Current liability.
EXERCISE 5-2 (15–20 minutes)
1.
h.
11.
b.
2.
d.
12.
f.
3.
f.
13.
a.
4.
f.
14.
h.
5
c.
15.
c.
6.
a.
16.
b.
7.
f.
17.
a.
8.
g.
18.
a.
9.
a.
19.
g.
10.
a.
20.
f.
EXERCISE 5-3 (15–20 minutes)
1.
a.
10.
f.
2.
b.
11.
a.
3.
f.
12.
f.
4.
a.
13.
a. or e. (preferably a.)
5
f.
14.
c. and N.
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- Spring '14
- Balance Sheet, ........., Generally Accepted Accounting Principles
