1 B PROBLEMS P5-1B (Preparation of a Classified Balance Sheet, Periodic Inventory) Presented below is a list of accounts in alphabetical order. Accounts Receivable Accumulated Depreciation Buildings Accumulated Depreciation Equipment Advances to Employees Advertising Expense Allowance for Doubtful Accounts Bond Sinking Fund Bonds Payable Buildings Cash in Bank Cash on Hand Cash Surrender Value of Life Insurance Commission Expense Common Stock Debt Investments (trading) Discount on Bonds Payable Dividends Payable Equipment Freight-in Gain from Condemnation Interest Receivable Inventory Beginning Inventory Ending Land Land for Future Plant Site Loss on Sale of Equipment Non-controlling Interest Notes Payable (due next year) Patents Payroll Taxes Payable Pension Obligations Petty Cash Preferred Stock Paid-in Capital in Excess of Par Common Stock Prepaid Rent Purchases Purchase Returns and Allowances Rent Revenue Retained Earnings Sales Sales Discounts Salaries and Wages Expense (sales) Salaries and Wages Payable Trademarks Treasury Stock (at cost) Unearned Rent Revenue Prepare a classified balance sheet in good form. (No monetary amounts are to be shown.) P5-2B (Balance Sheet Preparation) Presented below are a number of balance sheet items for Roma, Inc., for the current year, Goodwill $ 210,000 Accumulated depreciation equipment $ 467,000 Payroll taxes payable 65,00 Inventory 98,600 Bonds payable 500,000 Rent payable (short-term) 40,000 Discount on bonds payable 5,000 Income tax payable 110,800 Cash 61,000 Rent payable (long-term) 80,000 Land 51,000 Common stock, $1 par value 250,000 Notes receivable 160,500 Preferred stock, $25 par value 1,250,000 Notes payable (to banks) 264,900 Prepaid expenses 68,760 Accounts payable 47,000 Equipment 1,86,000 Retained earnings? Equity investments (trading) 75,000 Income taxes receivable 45,600 Accumulated depreciation buildings 61,200 Unsecured notes payable (long-term) 1,00,000 Buildings 2,800,000 Prepare a classified balance sheet in good form. Common stock authorized was 1,000,000 shares, and preferred stock authorized was 50,000 shares. Assume that notes receivable and notes payable are short-term, unless stated otherwise. Cost and fair value of equity investments (trading) are the same. 1
2 2 Chapter 5 Balance Sheet and Statement of Cash Flows P5-B (Balance Sheet Adjustment and Preparation) The adjusted trial balance of Black and Blue Company and other related information for the year 2014 are presented on the next page. BLACK AND BLUE COMPANY ADJUSTED TRIAL BALANCE DECEMBER 1, 2014 Debits Credits Cash $ 26,500 Accounts Receivable 270,600 Allowance for Doubtful Accounts $ 17,700 Prepaid Insurance 6,200 Inventory 241,00 Equity Investments (long-term) 11,000 Land 65,000 Construction in Process (building) 285,000 Patents 76,000 Equipment 25,000 Accumulated Depreciation Equipment 160,000 Discount on Bonds Payable,000 Accounts Payable 187,000 Accrued Expenses 61,200 Notes Payable 10,000 Bonds Payable 00,000 Common Stock 250,000 Paid-in Capital in Excess of Par Common Stock 186,000 Retained Earnings 167,700 $1,459,600 $1,459,600 Additional information: 1. The FIFO method of inventory value is used. 2. The cost and fair value of the long-term equity investments is the same.. 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 cost $65,000, as shown in the trial balance. 4. The patents were purchased by the company at a cost of $100,000 and are being amortized on a straight-line basis. 5. Of the discount on bonds payable, $,000 will be amortized in The notes payable represent bank loans that are secured by long-term equity investments carried at $11,000. These bank loans are due in The bonds payable bear interest at 6% payable every December 1, and are due January 1, ,000 shares of common stock of a par value of $1 were authorized, of which 250,000 shares were issued and outstanding. Prepare a balance sheet as of December 1, 2014, so that all important information is fully disclosed.
3 B Problems P5-4B (Preparation of a Corrected Balance Sheet) Presented below is the balance sheet of Maple Corporation as of December 1, MAPLE CORPORATION DECEMBER 1, 2014 Assets Goodwill (Note 2) $ 200,000 Buildings (Note 1) 2,260,000 Inventory 216,500 Land 687,000 Accounts receivable 296,000 Treasury stock (6,000 shares) 68,500 Cash on hand 14,600 Assets allocated to trustee for plant expansion Cash in bank 50,000 Equity investments (trading) 16,000 $4,048,600 Equities Notes payable (Note ) $ 800,000 Common stock, authorized and issued, 100,000 shares, no par 650,000 Non-controlling Interest 68,000 Retained earnings 1,276,600 Appreciation capital (Note 1) 425,000 Income tax payable 119,000 Reserve for depreciation recorded to date on the building 710,000 $4,048,600 Note 1: Buildings are stated at cost, except for one building that was recorded at appraised value. The excess of appraisal value over cost was $425,000. Depreciation has been recorded based on cost. Note 2: : Goodwill in the amount of $200,000 was recognized because the company believed that book value was not an accurate representation of the fair value of the company. The gain of $200,000 was credited to Retained Earnings. Note : Notes payable are long-term except for the current installment due of $125,000. Prepare a corrected classified balance sheet in good form. The notes above are for information only. P5-5B (Balance Sheet Adjustment and Preparation) Presented below is the balance sheet of Barbie Corporation for the current year, BARBIE CORPORATION DECEMBER 1, 2014 Current assets $ 865,000 Current liabilities $ 685,000 Investments 520,000 Long-term liabilities 1,500,000 Property, plant, and equipment 1,650,000 Stockholders equity 1,604,000 Intangible assets 754,000 $,789,000 $,789,000 The following information is presented. 1. The current assets section includes: cash $71,000, accounts receivable $6,000 less $21,000 for allowance for doubtful accounts, inventories $488,000, and unearned revenue $6,000. Inventories are stated on the lower-of-average-cost-or-market. 2. The investments section includes: the cash surrender value of a life insurance contract $120,000; investments in common stock, short-term (trading) $210,000 and long-term (available-for-sale) $90,000; and bond sinking fund $100,000. The cost and fair value of investments in common stock are the same.
4 4 Chapter 5 Balance Sheet and Statement of Cash Flows. Property, plant, and equipment includes: buildings $1,060,000 less accumulated depreciation $460,000; equipment $810,000 less accumulated depreciation $420,000; land $500,000; and land held for future use $160, Intangible assets include: a patent $464,000; goodwill $200,000; and discount on bonds payable $90, Current liabilities include: accounts payable $240,000; notes payable short-term $160,000 and longterm $240,000; and taxes payable $45, Long-term liabilities are composed solely of 5% bonds payable due Stockholders equity has: preferred stock, $100 par value, authorized 100,000 shares, issued 5,000 shares for $500,000; and common stock, $1.00 par value, authorized 1,000,000 shares, issued 200,000 shares at an average price of $4.52. In addition, the corporation has retained earnings of $205,000. Prepare a balance sheet in good form, adjusting the amounts in each balance sheet classification as affected by the information given above. 6 7 P5-6B (Preparation of a Statement of Cash Flows and a Balance Sheet) Maroon Six Inc. had the balance sheet shown below at December 1, 201. MAROON SIX INC. DECEMBER 1, 201 Cash $ 1,000 Accounts payable $ 61,000 Accounts receivable 56,800 Notes payable (long-term) 76,000 Investments 86,000 Common stock 200,000 Plant assets (net) 18,500 Retained earnings 41,00 Land 66,000 $78,00 $78,00 During 2014, the following occurred. 1. Maroon Six Inc. sold part of its investment portfolio for $20,000. This transaction resulted in a loss of $2,100 for the firm. The company classifies its investments as available-for-sale. 2. A tract of land was purchased for $25,000 cash.. Long-term notes payable in the amount of $0,000 were retired before maturity by paying $0,000 cash. 4. An additional $4,000 in common stock was issued at par. 5. Dividends of $20,000 were declared and paid to stockholders. 6. Net income for 2014 was $21,000 after allowing for depreciation of $16, Land was purchased through the issuance of $61,000 in notes payable. 8. At December 1, 2014, Cash was $46,100, Accounts Receivable was $61,800, and Accounts Payable remained at $61,000. (a) Prepare a statement of cash flows for (b) Prepare an unclassified balance sheet as it would appear at December 1, (c) How might the statement of cash flows help the user of the financial statements? Compute two cash flow ratios.
5 B Problems P5-7B (Preparation of a Statement of Cash Flows and Balance Sheet) Ficus Inc. had the following balance sheet at December 1, 201. FICUS INC. DECEMBER 1, 201 Cash $ 1,000 Accounts payable $ 61,000 Accounts receivable 56,800 Notes payable (long-term) 76,000 Investments 86,000 Common stock 200,000 Plant assets (net) 18,500 Retained earnings 41,00 Land 66,000 $78,00 $78,00 During 2014, the following occurred. 1. Ficus liquidated its available-for-sale investment portfolio at a gain of $15, A tract of land was purchased for $61,000 cash.. An additional $15,200 in common stock was issued at par. 4. Dividends totaling $41,000 were declared and paid to stockholders. 5. Net income for 2014 was $46,000, including $8,000 in depreciation expense. 6. Land was purchased through the issuance of $195,000 in additional notes payable. 7. At December 1, 2014, Cash was $68,000, Accounts Receivable was $84,000, and Accounts Payable was $72,000. (a) Prepare a statement of cash flows for the year 2014 for Ficus. (b) Prepare the balance sheet as it would appear at December 1, (c) Compute Ficus free cash flow and the current cash debt coverage ratio for (d) Use the analysis of Ficus to illustrate how information in the balance sheet and statement of cash flows helps the user of the financial statements.