Chapter 5: Q30Q. (page 238)
What is a “Summary of Significant Accounting Policies”?
The rules and regulations used for reporting accounting information are reflected in the summary of significant accounting policies.
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IFRS5-2 Briefly describe some of the similarities and differences between GAAP and IFRS with respect to statement of financial position (balance sheet) reporting.
Discuss at least two situations in which estimates could affect the usefulness of the information in the balance sheet.
BE5-5 (L03) Crane Corporation has the following accounts included in its December 31, 2017, trial balance: Equity Investments (trading) \(21,000, Goodwill \)150,000, Prepaid Insurance \(12,000, Patents \)220,000, and Franchises $130,000. Prepare the intangible assets section of the balance sheet.
What is working capital? How does working capital relate to the operating cycle?
(Balance Sheet Adjustment and Preparation) The adjusted trial balance of Eastwood Company and other related information for the year 2017 are presented as follows.
EASTWOOD COMPANY | ||
Adjusted Trial Balance | ||
December 31, 2017 | ||
Debit | Credit | |
Cash | \(41,000 | |
Accounts receivables | 163,500 | |
Allowance for doubtful account | \)8,700 | |
Prepaid Insurance | 5,900 | |
Inventory | 208,500 | |
Equity Investment (long-term) | 339,000 | |
Land | 85,000 | |
Construction in the process (building) | 124,000 | |
Patent | 36,000 | |
Equipment | 400,000 | |
Accumulated depreciation – Equipment | 240,000 | |
Discount on bonds payable | 20,000 | |
Account payable | 148,000 | |
Accrued liabilities | 49,200 | |
Notes payable | 94,000 | |
Bond payable | 200,000 | |
Common stock | 500,000 | |
Paid-in-capital in Excess of par – Common stock | 45,000 | |
Retained earnings | 138,000 | |
Total | \(1,422,900 | \)1,422,900 |
Additional information:
1. The LIFO method of inventory value is used.
2. The cost and fair value of the long-term investments that consist of stocks (with ownership less than 20% of total shares) are the same.
3. The amount of the Construction in Progress account represents the costs expended to date on a building in the process of construction. (The company rents factory space at the present time.) The land on which the building is being constructed costs \(85,000, as shown in the trial balance.
4. The patents were purchased by the company at a cost of \)40,000 and are being amortized on a straight-line basis.
5. Of the discount on bonds payable, \(2,000 will be amortized in 2018.
6. The notes payable represent bank loans that are secured by long-term investments carried at \)120,000. These bank loans are due in 2018.
7. The bonds payable bear interest at 8% payable every December 31, and are due January 1, 2028.
8. 600,000 shares of common stock of a par value of $1 were authorized, of which 500,000 shares were issued and outstanding.
Instructions
Prepare a balance sheet as of December 31, 2017, so that all-important information is fully disclosed.
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