5thA_ch05_HWSolutionsPlus

5thA_ch05_HWSolutionsPlus - CHAPTER 5 Balance Sheet and...

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CHAPTER 5 Balance Sheet and Statement of Cash Flows SOLUTIONS TO EXERCISES EXERCISE 5-1 (a) If the investment in 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 pre- ferred stock is not a trading security, it should be classified as available for sale. Available for sale securities are classified as current or non- current 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 stock- holders’ 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 asset section. This account will be shown net of any billings on the contract. On the other hand, if the warehouse is being con- structed 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. (j) Current asset. (k) Current liability. (l) Current liability. (m) Current asset (inventory). (n) Current liability.
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EXERCISE 5-2 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 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. 6. h. 15. f. 7. i. 16. X. 8. d. 17. f. 9. a. 18. c.
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EXERCISE 5-5 BRUNO COMPANY Balance Sheet December 31, 2010 Assets Current assets Cash. ....................................................... $260,000 Trading securities—at fair value. ........ 120,000 Accounts receivable. ............................ $357,000 Less: Allowance for doubtful accounts. .............................. 17,000 340,000 Inventories, at lower of average cost or market. ................................... 401,000 Prepaid expenses. ................................. 12,000 Total current assets. ....................... $1,133,000 Long-term investments Land held for future use. ...................... 175,000 Cash surrender value of life insurance. ........................................... 90,000 265,000 Property, plant, and equipment Building. ................................................. $730,000 Less: Accum. depr.—building. ..... 160,000 570,000 Office equipment. .................................. 265,000 Less: Accum. depr.—office equipment. ........................... 105,000 160,000 730,000 Intangible assets Goodwill. ................................................ 80,000 Total assets. ................................... $2,208,000
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EXERCISE 5-5 (Continued) Liabilities and Stockholders’ Equity Current liabilities Accounts payable. ................................ $135,000
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This note was uploaded on 04/14/2010 for the course TOBIN 615 taught by Professor Alan during the Spring '10 term at Adams State University.

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5thA_ch05_HWSolutionsPlus - CHAPTER 5 Balance Sheet and...

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