Chapter 5: Question 11Q (page 237)
11. Should available-for-sale securities always be reported as a current asset? Explain.
No, reporting available for sale securities as current assets depends uponthe business entity's expectations to generate cash within the operating period.
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E5-11 (L03) EXCEL (Balance Sheet Preparation) Presented below is the adjusted trial balance of Kelly Corporation at December 31, 2017.
Particular | Debit | Credit |
Cash | \(? | |
Supplies | 1,200 | |
Prepaid insurance | 1,000 | |
Equipment | 48,000 | |
Accumulated depreciation – Equipment | \)4,000 | |
Trademarks | 950 | |
Accounts payable | 10,000 | |
Salaries and wages payable | 500 | |
Unearned service revenue | 2,000 | |
Bonds payable (due 2024) | 9,000 | |
Common stock | 10,000 | |
Retained earnings | 25,000 | |
Service revenue | 10,000 | |
Salaries and wages expenses | 9,000 | |
Insurance expenses | 1,400 | |
Rent expenses | 1,200 | |
Interest expenses | 900 | |
Total | \(? | \)? |
Additional information:
1. Net loss for the year was $2,500.
2. No dividends were declared during 2017.
Instructions
Prepare a classified balance sheet as of December 31, 2017.
EXCEL (Balance Sheet Preparation) Presented below are a number of balance sheet items for Montoya, Inc., for the current year, 2017.
Goodwill | \(125,000 | Accumulated depreciation - equipment | \)292,000 |
Payroll tax payable | 177,591 | Inventory | 239,800 |
Bond payable | 300,000 | Rent payable (short-term) | 45,000 |
Discount on bond payable | 15,000 | Income tax payable | 98,362 |
Cash | 360,000 | Rent payable (long-term) | 480,000 |
Land | 480,000 | Common stock, \(1 par value | 200,000 |
Notes receivable | 445,700 | Preferred stock, \)10 par value | 150,000 |
Note payable | 265,000 | Prepaid expenses | 87,920 |
Account payable | 490,000 | Equipment | 1,470,000 |
Retained earnings | Debt investment (trading) | 121,000 | |
Income tax receivable | 97,630 | Accumulated depreciation – building | 270,200 |
Note payable (Long-term) | 1,600,000 | Buildings | 1,640,000 |
Instructions
Prepare a classified balance sheet in good form. Common stock authorized was 400,000 shares, and preferred stock authorized was 20,000 shares. Assume that notes receivable and notes payable are short-term unless stated otherwise. The cost and fair value of equity investments (trading) are the same.
Perez Company reported an increase in inventories in the past year. Discuss the effect of this change on the current ratio (current assets ÷ current liabilities). What does this tell a statement user about Perez Company’s liquidity?
BE5-2 (L03) Koch Corporation’s adjusted trial balance contained the following asset accounts at December 31, 2017: Cash \(7,000, Land \)40,000, Patents \(12,500, Accounts Receivable \)90,000, Prepaid Insurance \(5,200, Inventory \)30,000, Allowance for Doubtful Accounts \(4,000, and Equity Investments (trading) \)11,000. Prepare the current assets section of the balance sheet, listing the accounts in proper sequence.
Refer to the definition of assets on page 204. Discuss how a leased building might qualify as an asset of the lessee (tenant) under this definition.
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