WEEK 3 EXERCISES
Brief Exercise 5-2 Koch Corporation’s
Exercise 5-1 Deep Blue Something, Inc
Exercise 5-4 Denis Savard Inc
Exercise 5-7 Yasunari Kawabata Company
Exercise 5-12 Scott Butler Corporation
Exercise 24-2 For each of the following subsequent
Exercise 24-3 Carlton Company
Exercise 24-4 As loan analyst for Utrillo Bank
Brief Exercise 5-2
Koch Corporation’s adjusted trial balance contained the following asset accounts at December 31, 2014: 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; Equity Investments (trading) $11,000.
Prepare the current assets section of the balance sheet. (List Current Assets in order of liquidity.)
Brief Exercise 5-6
Patrick Corporation’s adjusted trial balance contained the following asset accounts at December 31, 2014: Prepaid Rent $12,000; Goodwill $50,000; Franchise Fees Receivable $2,000; Franchises $47,000; Patents $33,000; Trademarks $10,000.
Prepare the intangible assets section of the balance sheet
Exercise 5-1
Presented below are a number of balance sheet accounts of Deep Blue Something, Inc. For each of the accounts below, indicate the proper balance sheet classification.
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Balance Sheet Accounts
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Balance Sheet Classification
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(a)
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Investment in Preferred Stock.
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(b)
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Treasury Stock.
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(c)
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Common Stock.
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(d)
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Dividends Payable.
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(e)
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Accumulated Depreciation-Equipment.
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(f)(1)
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Construction in Process (Constructed for another party).
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(f)(2)
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Construction in Process (Constructed for the use of Deep Blue Something, Inc.).
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(g)
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Petty Cash.
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(h)
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Interest Payable.
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(i)
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Deficit.
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(j)
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Equity Investments (trading).
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(k)
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Income Taxes Payable.
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(l)
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Unearned Subscription Revenue.
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(m)
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Work in Process.
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(n)
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Salaries and Wages Payable.
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Exercise 5-4
Assume that Denis Savard Inc. has the following accounts at the end of the current year.
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1.
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Common Stock
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14.
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Accumulated Depreciation-Buildings.
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2.
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Discount on Bonds Payable.
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15.
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Cash Restricted for Plant Expansion.
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3.
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Treasury Stock (at cost).
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16.
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Land Held for Future Plant Site.
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4.
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Notes Payable (short-term).
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17.
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Allowance for Doubtful Accounts.
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5.
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Raw Materials
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18.
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Retained Earnings.
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6.
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Preferred Stock (Equity) Investments (long-term).
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19.
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Paid-in Capital in Excess of Par-Common Stock.
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7.
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Unearned Rent Revenue.
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20.
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Unearned Subscriptions Revenue.
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8.
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Work in Process.
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21.
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Receivables-Officers (due in one year).
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9.
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Copyrights.
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22.
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Inventory (finished goods).
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10.
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Buildings.
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23.
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Accounts Receivable.
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11.
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Notes Receivable (short-term).
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24.
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Bonds Payable (due in 4 years).
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12.
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Cash.
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25.
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Noncontrolling Interest.
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13.
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Salaries and Wages Payable.
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Prepare a classified balance sheet in good form. (List Current Assets in order of liquidity. For Land, Treasury Stock, Notes Payable, Preferred Stock Investments, Notes Receivable, Receivables-Officers, Inventory, Bonds Payable, and Restricted Cash, enter the account name only and do not provide the descriptive information provided in the question.)
Exercise 5-7
Presented below are selected accounts of Yasunari Kawabata Company at December 31, 2014.
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Inventory (finished goods)
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$ 52,000
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Cost of Goods Sold
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$2,100,000
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Unearned Service Revenue
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90,000
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Notes Receivable
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40,000
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Equipment
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253,000
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Accounts Receivable
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161,000
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Inventory (work in process)
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34,000
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Inventory (raw materials)
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207,000
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Cash
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37,000
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Supplies Expense
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60,000
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Equity Investments (short-term)
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31,000
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Allowance for Doubtful Accounts
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12,000
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Customer Advances
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36,000
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Licenses
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18,000
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Restricted Cash for Plant Expansion
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50,000
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Additional Paid-in Capital
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88,000
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Treasury Stock
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22,000
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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, 2016, with interest receivable every April 30. The notes bear interest at 6%. (Hint: Accrued interest due on December 31, 2014.)
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 $14,000.
7. Treasury stock is recorded at cost..
Prepare the current assets section of Yasunari Kawabata Company’s December 31, 2014, balance sheet, with appropriate disclosures. (List Current Assets in order of liquidity. Enter account name only and do not provide the descriptive information provided in the question.)
Exercise 5-12
Presented below is the trial balance of Scott Butler Corporation at December 31, 2014.
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Debit
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Credit
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Cash
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$ 197,000
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Sales
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$ 8,100,000
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Debt Investments (trading) (cost, $145,000)
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153,000
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Cost of Goods Sold
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4,800,000
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Debt Investments (long-term)
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299,000
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Equity Investments (long-term)
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277,000
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Notes Payable (short-term)
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90,000
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Accounts Payable
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455,000
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Selling Expenses
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2,000,000
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Investment Revenue
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63,000
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Land
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260,000
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Buildings
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1,040,000
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Dividends Payable
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136,000
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Accrued Liabilities
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96,000
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Accounts Receivable
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435,000
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Accumulated Depreciation-Buildings
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152,000
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Allowance for Doubtful Accounts
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25,000
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Administrative Expenses
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900,000
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Interest Expense
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211,000
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Inventory
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597,000
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Gain (extraordinary)
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80,000
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Notes Payable (long-term)
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900,000
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Equipment
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600,000
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Bonds Payable
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1,000,000
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Accumulated Depreciation-Equipment
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60,000
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Franchises
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160,000
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Common Stock ($5 par)
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1,000,000
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Treasury Stock
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191,000
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Patents
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195,000
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Retained Earnings
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78,000
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Paid-in Capital in Excess of Par
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80,000
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Totals
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$12,315,000
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$12,315,000
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Prepare a balance sheet at December 31, 2014, for Scott Butler Corporation. (Ignore income taxes). (List Current Assets in order of liquidity. List Property, Plant and Equipment in order of Land, Building and Equipment. Enter account name only and do not provide the descriptive information provided in the question.)
Exercise 24-2
For each of the following subsequent (post-balance-sheet) events, indicate whether a company should (a) adjust the financial statements, (b) disclose in notes to the financial statements, or (c) neither adjust nor disclose.
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Sr. No.
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Subsequent (Post-Balance-Sheet) Events
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1.
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Settlement of federal tax case at a cost considerably in excess of the amount expected at year-end.
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2.
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Introduction of a new product line.
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3.
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Loss of assembly plant due to fire.
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4.
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Sale of a significant portion of the company’s assets.
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5.
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Retirement of the company president.
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6.
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Prolonged employee strike.
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7.
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Loss of a significant customer.
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8.
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Issuance of a significant number of shares of common stock.
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9.
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Material loss on a year-end receivable because of a customer’s bankruptcy.
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10.
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Hiring of a new president.
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11.
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Settlement of prior year’s litigation against the company (no loss was accrued).
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12.
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Merger with another company of comparable size.
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Exercise 24-3
Carlton Company is involved in four separate industries. The following information is available for each of the four industries.
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Operating Segment
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Total Revenue
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Operating Profit (Loss)
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Identifiable Assets
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W
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$60,000
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$15,000
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$167,000
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X
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10,000
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3,000
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83,000
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Y
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23,000
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(2,000)
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21,000
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Z
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9,000
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1,000
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19,000
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$102,000
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$17,000
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$290,000
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Determine which of the operating segments are reportable based on the:
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Reportable Segments
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(a)
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Revenue test.
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(b)
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Operating profit (loss) test.
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(c)
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Identifiable assets test.
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Exercise 24-4
As loan analyst for Utrillo Bank, you have been presented the following information.
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Toulouse Co.
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Lautrec Co.
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Assets
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Cash
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$120,000
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$320,000
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Receivables
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220,000
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302,000
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Inventories
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570,000
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518,000
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Total current assets
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910,000
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1,140,000
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Other assets
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500,000
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612,000
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Total assets
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$1,410,000
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$1,752,000
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Liabilities and Stockholders’ Equity
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Current liabilities
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$305,000
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$350,000
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Long-term liabilities
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400,000
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500,000
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Capital stock and retained earnings
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705,000
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902,000
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Total liabilities and stockholders’ equity
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$1,410,000
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$1,752,000
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Annual sales
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$930,000
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$1,500,000
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Rate of gross profit on sales
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30
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%
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40
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%
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Each of these companies has requested a loan of $50,000 for 6 months with no collateral offered. Because your bank has reached its quota for loans of this type, only one of these requests is to be granted.
Compute the various ratios for each company. (Round answer to 2 decimal places, e.g. 2.25.)
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Toulouse Co.
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Lautrec Co.
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Current ratio
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: 1
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: 1
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Acid-test ratio
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: 1
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: 1
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Accounts receivable turnover
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times
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times
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Inventory turnover
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times
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times
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Cash to current liabilities
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: 1
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: 1
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