Вы находитесь на странице: 1из 19

E5-7 (LO 3) Current Assets Section of the Balance Sheet

Presented below are selected accounts of Yasunari Kawabata Company at December 31, 2017.

Inventory (finished goods) $ 52,000 Cost of Goods Sold $ 2,100,000


Unearned Service Revenue 90,000 Notes Receivable 40,000
Equipment 253,000 Accounts Receivable 161,000
Inventory (work in process) 34,000 Inventory (raw materials) 207,000
Cash 37,000 Supplies Expense 60,000
Debt Investments (short-term) 31,000 Allow. for Doubtful Accounts 12,000
Customer Advances 36,000 Licenses 18,000
Restricted Cash for Plant Expansion 50,000 Additional Paid-in Capital 88,000
Treasury Stock 22,000

The following additional information is available.


1. Inventories are valued at lower-of-cost-or-market using LIFO.
2. Equipment is recorded at cost. Accumulated depreciation, computed on a
straight-line basis, is $50,600.
3. The short-term investments have a fair value of $29,000. (Assume they are trading
securities.)
4. The notes receivable are due April 30, 2019, with interest receivable every April 30.
The notes bear interest at 6%. (Hint: Accrue interest due on December 31, 2017.)
5. The allowance for doubtful accounts applies to the accounts receivable. Accounts
receivable of $50,000 are pledged as collateral on a bank loan.
6. Licenses are recorded net of accumulated amortization of $14,000.
7. Treasury stock is recorded at cost.

Instructions
Prepare the current assets section of Yasunari Kawabata Company’s December 31, 2017,
balance sheet, with appropriate disclosures.
Current Assets Section of the Balance Sheet
Current assets

###
Solution: E5-7 (LO 3) Current Assets Section of the Balance Sheet
Presented below are selected accounts of Yasunari Kawabata Company at December 31, 2017.

Inventory (finished goods) $ 52,000 Cost of Goods Sold $ 2,100,000


Unearned Service Revenue 90,000 Notes Receivable 40,000
Equipment 253,000 Accounts Receivable 161,000
Inventory (work in process) 34,000 Inventory (raw materials) 207,000
Cash 37,000 Supplies Expense 60,000
Debt Investments (short-term) 31,000 Allow. for Doubtful Accounts 12,000
Customer Advances 36,000 Licenses 18,000
Restricted Cash for Plant Expansion 50,000 Additional Paid-in Capital 88,000
Treasury Stock 22,000

The following additional information is available.


1. Inventories are valued at lower-of-cost-or-market using LIFO.
2. Equipment is recorded at cost. Accumulated depreciation, computed on a
straight-line basis, is $50,600.
3. The short-term investments have a fair value of $29,000. (Assume they are trading
securities.)
4. The notes receivable are due April 30, 2019, with interest receivable every April 30.
The notes bear interest at 6%. (Hint: Accrue interest due on December 31, 2017.)
5. The allowance for doubtful accounts applies to the accounts receivable. Accounts
receivable of $50,000 are pledged as collateral on a bank loan.
6. Licenses are recorded net of accumulated amortization of $14,000.
7. Treasury stock is recorded at cost.

Instructions
Prepare the current assets section of Yasunari Kawabata Company’s December 31, 2017,
balance sheet, with appropriate disclosures.

Current Assets Section of the Balance Sheet


Current assets
Cash $ 87,000
Less: Restricted cash (plant expansion) 50,000 $ 37,000
Trading securities at fair value (cost, $31,000) 29,000
Accounts receivable (of which $50,000 is pledged as collateral
on a bank loan) 161,000
Less: Allowance for doubtful accounts 12,000 149,000
Interest receivable 1,600
Inventories at lower of cost (determined using LIFO) or market)
Finished goods 52,000
Work in process 34,000
Raw materials 207,000 293,000
Total current assets ### $ 509,600
An acceptable alternative is to report cash at $37,000 and simply report the restricted cash (plant
expansion) in the investments section.
E-5-11 (LO 3) Balance Sheet Preparation
Presented below is the adjusted trial balance of Kelly Corporation at December 31, 2017.

Kelly Corporation
Trial Balance
December 31, 2017
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 Expense 9,000
Insurance Expense 1,400
Rent Expense 1,200
Interest Expense 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.

Calculation of cash balance:


Kelly Corporation
Balance Sheet
December 31, 2017
Assets

Liabilities and Stockholders’ Equity


Solution: E-5-11 (LO 3) Balance Sheet Preparation
Presented below is the adjusted trial balance of Kelly Corporation at December 31, 2017.

Kelly Corporation
Trial Balance
December 31, 2017
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 Expense 9,000
Insurance Expense 1,400
Rent Expense 1,200
Interest Expense 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.

Calculation of cash balance:


Total assets $ 54,000
Less:
Trademark (950)
Equipment, net (44,000)
Supplies (1,200)
Prepaid insurance (1,000)
Cash balance at December 31, 2017 $ 6,850
Kelly Corporation
Balance Sheet
December 31, 2017
Assets
Current assets
Cash $ 6,850
Supplies 1,200
Prepaid insurance 1,000
Total current assets $ 9,050
Equipment 48,000
Less: Accumulated depreciation—equipment 4,000 44,000
Trademark 950
Total assets $ 54,000

Liabilities and Stockholders’ Equity


Current liabilities
Accounts payable $ 10,000
Salaries and wages payable 500
Unearned service revenue 2,000
Total current liabilities $ 12,500
Long-term liabilities
Bonds payable 9,000
Total liabilities 21,500
Stockholders’ equity
Common stock 10,000
Retained earnings ($25,000 – $2,500**) 22,500
Total stockholders’ equity 32,500
Total liabilities and stockholders’ equity $ 54,000
P5-2 (LO 3) 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 - equi $ 292,000


Payroll taxes payable 177,591 Inventory 239,800
Bonds payable 300,000 Rent payable (short-term) 45,000
Discount on bonds payable 15,000 Income taxes 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
Notes payable (to banks) 265,000 Prepaid expenses 87,920
Accounts payable 490,000 Equipment 1,470,000
Retained earnings ? Debt investments (trading) 121,000
Income taxes receivable 97,630 Accumulated depreciation—buildi 270,200
Notes payable (long-term) 1,600,000 Building 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. Cost and fair value of debt
investments (trading) are the same.

MONTOYA, INC.
Balance Sheet
December 31, 2017
Assets
Current assets

Property, plant, and equipment


Intangible assets

Liabilities and Stockholders’ Equity


Current liabilities

Long-term liabilities

Stockholders’ equity
Solution: P5-2 (LO 3) 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 taxes payable 177,591 Inventory 239,800
Bonds payable 300,000 Rent payable (short-term) 45,000
Discount on bonds payable 15,000 Income taxes 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
Notes payable (to banks) 265,000 Prepaid expenses 87,920
Accounts payable 490,000 Equipment 1,470,000
Retained earnings ? Debt investments (trading) 121,000
Income taxes receivable 97,630 Accumulated depreciation—buildings 270,200
Notes payable (long-term) 1,600,000 Building 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. Cost and fair value of debt investments
(trading) are the same.

MONTOYA, INC.
Balance Sheet
December 31, 2017
Assets
Current assets
Cash $ 360,000
Debt investments (trading) 121,000
Notes receivable 445,700
Income taxes receivable 97,630
Inventory 239,800
Prepaid expenses 87,920
Total current assets $ 1,352,050

Property, plant, and equipment


Land 480,000
Buildings $ 1,640,000
Less: Accumulated depreciation-buildings 270,200 1,369,800
Equipment 1,470,000
Less: Accumulated depreciation-equipment 292,000 1,178,000 3,027,800
Intangible assets
Goodwill 125,000
Total assets $ 4,504,850
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable $ 490,000
Notes payable (to banks) 265,000
Payroll taxes payable 177,591
Income taxes payable 98,362
Rent payable 45,000
Total current liabilities $ 1,075,953
Long-term liabilities
Notes payable (long-term) 1,600,000
Bonds payable $ 300,000
Less: Discount on bonds payable 15,000 285,000
Rent payable (long-term) 480,000 2,365,000
Total liabilities 3,440,953
Stockholders’ equity
Capital stock
Preferred stock, $10 par; 20,000 shares authorized, 150,000
15,000 shares issued
Common stock, $1 par; 400,000 shares authorized,
200,000 issued 200,000 350,000
Retained earnings 713,897
Total stockholders’ equity 1,063,897
Total liabilities and stockholders’ equity $ 4,504,850
P5-6 (LO Inc.
Lansbury 3,5,6) Preparation
had of a Statement of Cash Flows and a Balance Sheet
the following
balance sheet at December 31, 2016.

Landsbury Inc.
Balance Sheet
December 31, 2016
Assets Liabilities and Stockholders’ Equity
Cash $ 20,000 Accounts payable $ 30,000
Accounts receivable 21,200 Notes payable (long-term) 41,000
Investments 32,000 Common stock 100,000
Plant assets (net) 81,000 Retained earnings 23,200
Land 40,000 $ 194,200
$ 194,200

During 2017, the following occurred.

1. Lansbury Inc. sold part of its debt investment portfolio for $15,000. This transaction
resulted in a gain of $3,400 for the firm. The company classifies its investments as
available-for-sale.
2. A tract of land was purchased for $13,000 cash.
3. Long-term notes payable in the amount of $16,000 were retired before maturity by
paying $16,000 cash.
4. An additional $20,000 in common stock was issued at par.
5. Dividends of $8,200 were declared and paid to stockholders.
6. Net income for 2017 was $32,000 after allowing for depreciation of $11,000.
7. Land was purchased through the issuance of $35,000 in bonds.
8. At December 31, 2017, Cash was $32,000, Accounts Receivable was $41,600, and
Accounts Payable remained at $30,000.

Instructions
(a) Prepare a statement of cash flows for 2017.
LANSBURY INC.
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities

Cash flows from investing activities

Cash flows from financing activities

Noncash investing and financing activities

(b) Prepare an unclassified balance sheet as it would appear at December 31, 2017.

Calculation of balance sheet amounts:


Investments:
Plant assets:

Land:

Notes payable:

Bonds payable:

Common stock:

Retained earnings:

LANSBURY INC.
Balance Sheet
December 31, 2017
Assets Liabilities and Stockholders’ Equity
(c) How might the statement of cash flows help the user of the financial statements?
Solution: P5-6 (LO 3,5,6) Preparation of a Statement of Cash Flows and a Balance
Sheet
Lansbury Inc. had the following
balance sheet at December 31, 2016.

Landsbury Inc.
Balance Sheet
December 31, 2016
Assets Liabilities and Stockholders’ Equity
Cash $ 20,000 Accounts payable $ 30,000
Accounts receivable 21,200 Notes payable (long-term) 41,000
Investments 32,000 Common stock 100,000
Plant assets (net) 81,000 Retained earnings 23,200
Land 40,000 $ 194,200
$ 194,200

During 2017, the following occurred.

1. Lansbury Inc. sold part of its debt investment portfolio for $15,000. This transaction
resulted in a gain of $3,400 for the firm. The company classifies its investments as
available-for-sale.
2. A tract of land was purchased for $13,000 cash.
3. Long-term notes payable in the amount of $16,000 were retired before maturity by
paying $16,000 cash.
4. An additional $20,000 in common stock was issued at par.
5. Dividends of $8,200 were declared and paid to stockholders.
6. Net income for 2017 was $32,000 after allowing for depreciation of $11,000.
7. Land was purchased through the issuance of $35,000 in bonds.
8. At December 31, 2017, Cash was $32,000, Accounts Receivable was $41,600, and
Accounts Payable remained at $30,000.

Instructions
(a) Prepare a statement of cash flows for 2017.
LANSBURY INC.
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Net income $ 32,000
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation expense $ 11,000
Gain on sale of investments (3,400)
Increase in account receivable (20,400) (12,800)
Net cash provided by operating activities 19,200

Cash flows from investing activities


Sale of investments 15,000
Purchase of land (13,000)
Net cash used by investing activities 2,000

Cash flows from financing activities


Issuance of common stock 20,000
Retirement of notes payable (16,000)
Payment of cash dividends (8,200)
Net cash used by financing activities (4,200)

Net increase in cash 17,000


Cash at beginning of year 20,000
Cash at end of year $ 37,000

Noncash investing and financing activities


Land purchased through issuance of $35,000 of bonds

(b) Prepare an unclassified balance sheet as it would appear at December 31, 2017.

Calculation of balance sheet amounts:


Investments:
December 31, 2016 balance $ 32,000
Cash from sale of investments (15,000)
Gain on sale of investments 3,400
December 31, 2017 balance $ 20,400

Plant assets:
December 31, 2016 balance $ 81,000
Depreciation, current year (11,000)
December 31, 2017 balance $ 70,000
Land:
December 31, 2016 balance $ 40,000
Purchase of land 13,000
Purchase of land for bonds 35,000
December 31, 2017 balance $ 88,000

Notes payable:
December 31, 2016 balance $ 41,000
Retirement of notes (16,000)
December 31, 2017 balance $ 25,000

Bonds payable:
December 31, 2016 balance $ -
Issuance of bonds 35,000
December 31, 2017 balance $ 35,000

Common stock:
December 31, 2016 balance $ 100,000
Issuance of common stock at par 20,000
December 31, 2017 balance $ 120,000

Retained earnings:
December 31, 2016 balance $ 23,200
Net income 32,000
Dividends declared (8,200)
December 31, 2017 balance $ 47,000

LANSBURY INC.
Balance Sheet
December 31, 2017
Assets Liabilities and Stockholders’ Equity
Cash $ 37,000 Accounts payable $ 30,000
Accounts receivable 41,600 Notes payable (long-term) 25,000
Debt investments 20,400 Bonds payable 35,000
Plant assets (net) 70,000 Common stock 120,000
Land 88,000 Retained earnings 47,000
$ 257,000 $ 257,000
(c) How might the statement of cash flows help the user of the financial statements?

Cash flow information is useful for assessing the amount, timing, and uncertainty of future
cash flows. For example, by showing the specific inflows and outflows from operating
activities, investing activities, and financing activities, the user has a better understanding
of the liquidity and financial flexibility of the enterprise. Similarly, these reports are useful
in providing feedback about the flow of enterprise resources. This information should help
users make more accurate predictions of future cash flow. In addition, some individuals
have expressed concern about the quality of the earnings because the measurement of
the income depends on a number of accruals and estimates which may be somewhat
subjective. As a result, the higher the ratio of cash provided by operating activities to net
income, the more comfort some users have in the reliability of the earnings. In this
problem the ratio of cash provided by operating activities to net income is 60% ($19,200 ÷
$32,000).