EXERCISES
E5-1 (L02,3) (Balance Sheet Classifications) Presented below are a number of balance sheet accounts of Deep Blue Something, Inc.
(a) Debt Investments. (h) Interest Payable.
(b) Treasury Stock. (i) Deficit.
(c) Common Stock. (j) Equity Investments (ownership stake of less than 20%).
(d) Dividends Payable. (k) Income Taxes Payable.
(e) Accumulated Depreciation—Equipment. (l) Unearned Subscriptions Revenue.
(f) Construction in Process. (m) Work in Process.
(g) Petty Cash. (n) Salaries and Wages Payable.
Instructions
For each of the accounts above, indicate the proper balance sheet classification. In the case of borderline items, indicate the additional information that would be required to determine the proper classification.
E5-2 (L02,3) (Classification of Balance Sheet Accounts) Presented below are the captions of Faulk Company’s balance sheet.
(a) Current assets. (f) Current liabilities.
(b) Investments. (g) Noncurrent liabilities.
(c) Property, plant, and equipment. (h) Capital stock.
(d) Intangible assets. (i) Additional paid-in capital.
(e) Other assets. (j) Retained earnings.
Instructions
Indicate by letter where each of the following items would be classified.
1. Preferred stock. 11. Cash surrender value of life insurance.
2. Goodwill. 12. Notes payable (due next year).
3. Salaries and wages payable. 13. Supplies.
4. Accounts payable. 14. Common stock.
5. Buildings. 15. Land.
6. Equity investments (trading). 16. Bond sinking fund.
7. Current maturity of long-term debt. 17. Inventory.
8. Premium on bonds payable. 18. Prepaid insurance.
9. Allowance for doubtful accounts. 19. Bonds payable.
10. Accounts receivable. 20. Income taxes payable.
E5-3 (L02,3) (Classification of Balance Sheet Accounts) Assume that Fielder Enterprises uses the following headings on its balance sheet.
(a) Current assets. (g) Long-term liabilities.
(b) Investments. (h) Capital stock.
(c) Property, plant, and equipment. (i) Equity attributed to noncontrolling interest.
(d) Intangible assets. (j) Paid-in capital in excess of par.
(e) Other assets. (k) Retained earnings.
(f) Current liabilities.
Instructions
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 balance sheet, use the letter “X.”
E5-4 (L02,3) (Preparation of a Classified Balance Sheet) Assume that Denis Savard Inc. has the following accounts at the end of the current year.
Instructions
Prepare a classified balance sheet in good form. (No monetary amounts are necessary.)
E5-5 (L03) (Preparation of a Corrected Balance Sheet) Uhura Company has decided to expand its operations. The bookkeeper recently completed the balance sheet presented below in order to obtain additional funds for expansion.
Instructions
Prepare a revised balance sheet given the available information.
E5-6 (L02,3) (Corrections of a Balance Sheet) The bookkeeper for Geronimo Company has prepared the following balance sheet as of July 31, 2017.
Instructions
Prepare a corrected classified balance sheet as of July 31, 2017, from the available information, adjusting the account balances using the additional information.
E5-7 (L03) EXCEL (Current Assets Section of the Balance Sheet) Presented below are selected accounts of Yasunari
Kawabata Company at December 31, 2017.
Instructions
Prepare the current assets section of Yasunari Kawabata Company’s December 31, 2017, balance sheet, with appropriate disclosures.
E5-8 (L02) (Current vs. Long-term Liabilities) Frederic Chopin Corporation is preparing its December 31, 2017, balance sheet. The following items may be reported as either a current or long-term liability.
1. On December 15, 2017, Chopin declared a cash dividend of $2.50 per share to stockholders of record on December 31. The dividend is payable on January 15, 2018. Chopin has issued 1,000,000 shares of common stock, of which 50,000 shares are held in treasury.
2. At December 31, bonds payable of $100,000,000 are outstanding. The bonds pay 12% interest every September 30 and mature in installments of $25,000,000 every September 30, beginning September 30, 2018.
3. At December 31, 2016, customer advances were $12,000,000. During 2017, Chopin collected $30,000,000 of customer advances; advances of $25,000,000 should be recognized in income.
Instructions
For each item above, indicate the dollar amounts to be reported as a current liability and as a long-term liability, if any.
E5-9 (L02,3) (Current Assets and Current Liabilities) The current assets and current liabilities sections of the balance sheet of Allessandro Scarlatti Company appear as follows.
Instructions
(a) Restate the current assets and current liabilities sections of the balance sheet in accordance with good accounting practice. (Assume that both accounts receivable and accounts payable are recorded gross.)
(b) State the net effect of your adjustments on Allessandro Scarlatti Company’s retained earnings balance.
E5-10 (L02,3) (Current Liabilities) Norma Smith is the controller of Baylor Corporation and is responsible for the preparation of the year-end financial statements. The following transactions occurred during the year.
Instructions
For each item above, indicate the dollar amount to be reported as a current liability. If a liability is not reported, explain why.
E5-11 (L03) EXCEL (Balance Sheet Preparation) Presented below is the adjusted trial balance of Kelly Corporation at December 31, 2017.
Instructions
Prepare a classified balance sheet as of December 31, 2017.
E5-12 (L03) (Preparation of a Balance Sheet) Presented below is the trial balance of Scott Butler Corporation at December 31, 2017.
Instructions
Prepare a balance sheet at December 31, 2017, for Scott Butler Corporation. (Ignore income taxes.)
E5-13 (L04) (Statement of Cash Flows—Classifications) 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:
…
Instructions
Prepare a statement of cash flows for the year 2017.
E5-14 (L05) (Preparation of a Statement of Cash Flows) The comparative balance sheets of Constantine Cavamanlis Inc. at the beginning and the end of the year 2017 are as follows.
Instructions
Prepare
a statement of cash flows for the year 2017.Prepare a statement of cash flows for the year 2017.
E5-14 (L05) (Preparation of a Statement of Cash Flows) The comparative balance sheets of Constantine Cavamanlis Inc. at the beginning and the end of the year 2017 are as follows.
Instructions
E5-15 (L05,6) (Preparation of a Statement of Cash Flows) Presented below is a condensed version of the comparative balance sheets for Zubin Mehta Corporation for the last two years at December 31.
Instructions
(a) Prepare a statement of cash flows for 2017 for Zubin Mehta Corporation.
(b) Determine Zubin Mehta Corporation’s free cash flow.
E5-16 (L05,6) (Preparation of a Statement of Cash Flows) A comparative balance sheet for Shabbona Corporation is presented below.
Additional information:
1. Net income for 2017 was $125,000. No gains or losses were recorded in 2017.
2. Cash dividends of $60,000 were declared and paid.
3. Bonds payable amounting to $50,000 were retired through issuance of common stock.
Instructions
(a) Prepare a statement of cash flows for 2017 for Shabbona Corporation.
(b) Determine Shabbona Corporation’s current cash debt coverage, cash debt coverage, and free cash flow. Comment on its liquidity and financial flexibility.
E5-17 (L03,5) (Preparation of a Statement of Cash Flows and a Balance Sheet) Grant Wood Corporation’s balance sheet at the end of 2016 included the following items…
Instructions
(Show only totals for current assets and current liabilities.)
(a) Prepare a statement of cash flows for 2017.
(b) Prepare a balance sheet at December 31, 2017.
E5-18 (L05,6) (Preparation of a Statement of Cash Flows, Analysis) The comparative balance sheets of Madrasah Corporation at the beginning and end of the year 2017 appear below…
Instructions
(a) Prepare a statement of cash flows for the year 2017.
(b) Compute the current ratio (current assets ÷ current liabilities) as of January 1, 2017, and December 31, 2017, and compute free cash flow for the year 2017.
(c) In light of the analysis in (b), comment on Madrasah’s liquidity and financial flexibility.
