Intermediate Accounting
Intermediate Accounting
9th Edition
ISBN: 9781259722660
Author: J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher: McGraw-Hill Education
bartleby

Concept explainers

bartleby

Videos

Textbook Question
Chapter 3, Problem 3.5P

Balance sheet preparation

• LO3–2, LO3–3

The following is the ending balances of accounts at June 30, 2018 for Excell Company.

Account Title Debits Credits
Cash $ 83,000  
Short-term investments 65,000  
Accounts receivable 280,000  
Prepaid expenses (for the next 12 months) 32,000  
Land 75,000  
Buildings 320,000  
Accumulated depreciation—buildings   $ 160,000
Equipment 265,000  
Accumulated depreciation—equipment   120,000
Accounts payable   173,000
Accrued expenses   45,000
Notes payable   100,000
Mortgage payable   250,000
Common stock   100,000
Retained earnings   172,000
Totals $1,120,000 $1,120,000

Additional Information:

1. The short-term investments account includes $18,000 in U.S. treasury bills purchased in May. The bills mature in July.

2. The accounts receivable account consists of the following:

a. Amounts owed by customers $225,000
b. Allowance for uncollectible accounts—trade customers (15,000)
c. Nontrade note receivable (due in three years) 65,000
d. Interest receivable on note (due in four months) 5,000
Total $280,000

3. The notes payable account consists of two notes of $50,000 each. One note is due on September 30, 2018, and the other is due on November 30, 2019.

4. The mortgage payable is payable in semiannual installments of $5,000 each plus interest. The next payment is due on October 31, 2018. Interest has been properly accrued and is included in accrued expenses.

5. Five hundred thousand shares of no par common stock are authorized, of which 200,000 shares have been issued and are outstanding.

6. The land account includes $50,000 representing the cost of the land on which the company’s office building resides. The remaining $25,000 is the cost of land that the company is holding for investment purposes.

Required:

Prepare a classified balance sheet for the Excell Company at June 30, 2018.

Expert Solution & Answer
Check Mark
To determine

Balance sheet:

Balance sheet is the statement which is prepared to report the financial position of the business. The balance sheet contains the various assets, liabilities and shareholders' equities of the business as on a given date.

To Prepare: A classified balance sheet for the company E at June 30, 2018.

Explanation of Solution

Classified balance sheet:

Classified balance sheet is the financial statement of a company which shows the grouping of similar assets and liabilities under subheadings.

Prepare a classified balance sheet for the company E at June 30, 2018 is as follows:

COMPANY E
Balance Sheet
At June 30, 2018
Particulars Amount($) Amount($)
Assets
Current assets:
     Cash and cash equivalents(1) 101,000
     Short-term investments (2) 47,000
     Accounts receivable (3) 210,000
     Interest receivable  5,000
     Prepaid expenses  32,000
               Total current assets  395,000
Investments:
     Note receivable  65,000
     Land held for sale(6) 25,000 90,000
Property, plant, and equipment:
     Land(5) 50,000
     Buildings  320,000
     Equipment  265,000
635,000
     Less: Accumulated depreciation-buildings  (160,000
     Less: Accumulated depreciation-equipment  (120,000)
               Net property, plant, and equipment  355,000
Total assets  840,000
Liabilities and Shareholders' Equity
Current liabilities:
     Accounts payable  173,000
     Accrued expenses  45,000
     Note payable  50,000
     Current maturities of long-term debt  10,000
               Total current liabilities  278,000
Long-term liabilities:
     Note payable  50,000
     Mortgage payable(4) 240,000
               Total long-term liabilities  290,000
                                                                      Total liabilities  568,000
Shareholders’ equity:
     Common stock  100,000
     Retained earnings  172,000
               Total shareholders’ equity  272,000
       Total liabilities and shareholders’ equity  840,000

Table (1)

Explanation:

Cash and cash equivalents:

Cash and cash equivalents are the highly liquid investments with the maturity period of less than three months from the date of purchase. It includes money market funds, treasury bills and commercial papers.

Working note:

Calculate cash and cash equivalents:

Cash and cash equivalents=(cash as per trial balance+amount of U.S Treasury bill)=$83,000+$18000=$101,000 (1)

Calculate the amount of short-term investment:

short-term investment=(short-term investment as per trial balanceamount of U.S treasury bill)=$65,0000$18,000=$47,000(2)

Calculate the amount of notes receivable, net of allowance for uncollectible accounts.

Notes receivable, net of allowance for uncollectible accounts)=(Amount owned by customers– Allowance for uncollectible accounts)=$225,000$15,000=$210,000(3)

Calculate the amount of mortgage payable.

Mortgage payable=(Mortgage payable as per trial balance– Semiannual installment plus interest)=$250,000$10,000=$240,000(4)

Calculate the land value:

Total cost of land is given as $75000 in the trial balance. In total cost, $50,000(5) is considered as the property because where office buildings are resided. Remaining $25,000(6) of land is being held by the company for sale so it is considered as the investment.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Chapter 3 Solutions

Intermediate Accounting

Ch. 3 - Disclosure notes are an integral part of the...Ch. 3 - A summary of the companys significant accounting...Ch. 3 - Define a subsequent event.Ch. 3 - Prob. 3.14QCh. 3 - Prob. 3.15QCh. 3 - Prob. 3.16QCh. 3 - Prob. 3.17QCh. 3 - Show the calculation of the following solvency...Ch. 3 - Prob. 3.19QCh. 3 - Prob. 3.20QCh. 3 - (Based on Appendix 3) Segment reporting...Ch. 3 - Prob. 3.22QCh. 3 - Prob. 3.23QCh. 3 - Current versus long-term classification LO32,...Ch. 3 - Balance sheet classification LO32, LO33 The trial...Ch. 3 - Prob. 3.3BECh. 3 - Balance sheet classification LO32, LO33 Refer to...Ch. 3 - Balance sheet classification LO32, LO33 The...Ch. 3 - Balance sheet classification LO32, LO33 You have...Ch. 3 - Balance sheet preparation; missing elements LO32,...Ch. 3 - Financial statement disclosures LO34 For each of...Ch. 3 - Calculating ratios LO38 Refer to the trial...Ch. 3 - Prob. 3.10BECh. 3 - Calculating ratios; solving for unknowns LO38 The...Ch. 3 - Balance sheet; missing elements LO32, LO33, LO38...Ch. 3 - Balance sheet classification LO32, LO33 The...Ch. 3 - Balance sheet classification LO32, LO33 The...Ch. 3 - Balance sheet preparation LO32, LO33 The...Ch. 3 - Balance sheet preparation LO32, LO33 The...Ch. 3 - Balance sheet; Current versus long-term...Ch. 3 - Prob. 3.7ECh. 3 - Prob. 3.8ECh. 3 - Balance sheet preparation LO32, LO33 The...Ch. 3 - Financial statement disclosures LO34 The...Ch. 3 - Prob. 3.11ECh. 3 - Prob. 3.12ECh. 3 - Prob. 3.13ECh. 3 - FASB codification research LO32, LO34 Access the...Ch. 3 - Prob. 3.15ECh. 3 - Prob. 3.16ECh. 3 - Prob. 3.17ECh. 3 - Calculating ratios; solve for unknowns LO38 The...Ch. 3 - Prob. 3.19ECh. 3 - Effect of management decisions on ratios LO38...Ch. 3 - Prob. 3.21ECh. 3 - Prob. 3.22ECh. 3 - Balance sheet preparation LO32, LO33 Presented...Ch. 3 - Balance sheet preparation; missing elements LO32,...Ch. 3 - Balance sheet preparation LO32, LO33 The...Ch. 3 - Balance sheet preparation LO32, LO33 The...Ch. 3 - Balance sheet preparation LO32, LO33 The...Ch. 3 - Prob. 3.6PCh. 3 - Balance sheet preparation; errors LO32, LO33 The...Ch. 3 - Balance sheet; errors; missing amounts LO32, LO33...Ch. 3 - Balance sheet preparation LO32 , LO33 Presented...Ch. 3 - Prob. 3.10PCh. 3 - Communication Case 31 Current versus long-term...Ch. 3 - Analysis Case 32 Current versus long- term...Ch. 3 - Prob. 3.4BYPCh. 3 - Judgment Case 35 Balance sheet; errors LO32...Ch. 3 - Prob. 3.6BYPCh. 3 - Real World Case 37 Balance sheet and significant...Ch. 3 - Judgment Case 38 Post fiscal year-end e vents ...Ch. 3 - Prob. 3.9BYPCh. 3 - Prob. 3.10BYPCh. 3 - Prob. 3.11BYPCh. 3 - Analysis Case 314 Balance sheet information LO32...Ch. 3 - Prob. 3.15BYPCh. 3 - Ethics Case 316 Segment reporting Appendix 3 You...Ch. 3 - Prob. 1CCTC
Knowledge Booster
Accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • Working capital and current ratio Current assets and current liabilities for Brimstone Company follow: 2019 2018 Current assets 1,586,250 1,210,000 Current liabilities 705,000 550,000 a.Determine the working capital and current ratio for 2019 and 2018. b.Does the change in the current ratio from 2018 to 2019 indicate a favorable or an unfavorable change?
    Financial statements The assets and liabilities of Wilderness Travel Service on April 30, 20Y7, and its revenue and expenses for the year are as follows: Accounts payable 75,000 Accounts receivable 210,000 Cash 156,000 Common stock 35,000 fees earned 875,000 Miscellaneous expense 15,000 Rent expense 75,000 Supplies 9,000 Supplies expense 12,000 Taxes expense 10,000 Utilities expense 38,000 Wages expense 525,000 Common stock was 25,000 and retained earnings was 155,000 as of May 1, 20Y6. During the year, additional common stock of 10,000 was issued for cash, and dividends of 40,000 were paid. Instructions 1. Prepare an income statement for the year ended April 30, 20Y7. 2. Prepare a statement of stockholders equity for the year ended April 30, 20Y7. 3. Prepare a balance sheet as of April 30, 20Y7. 4. What item appears on both the income statement and statement of stockholders equity?
    Analyze Under Armour The following year-end data were taken from recent balance sheets, of Under Armour, Inc. (UA) (in millions): December 31 Year 2 Year 1 Current assets 1,965.2 1,498.8 Current liabilities 685.8 478.8 a. Compute the working capital and die current ratio as of December 31, Year 2 and Year 1. Round to one decimal place. b. What conclusions concerning the companys ability to meet its short-term obligations can you draw from part (a)?
  • Investment reporting Teasdale Inc. manufactures and sells commercial and residential security equipment. The comparative unclassified balance sheets for December 31, Year 2 and Year 1 are provided below. Selected missing balances are shown by letters. Teasdale Inc. Balance Sheet December 31, Year 2 and Year 1 Dec. 31, Year 2 Dec. 31, Year 1 Cash 160,000 156,000 Accounts receivable (net) 11S.OOO 108,000 Available for-sale investments (at cost)Note 1 a. 91,200 Plus valuation allowance for available-for-sale investments b. 8,776 Available for-sale investments (fair value) c 99,976 Interest receivable d. Investment in Wright Co. stockNote 2 e. 69,200 Office equipment (net) 96,000 105,000 Total assets f. 5538,176 Accounts payable 91,000 72,000 Common stock 80,000 80,000 Excess of issue price over par 250,000 250,000 Retained earnings g 127,400 Unrealized gain (loss) on available for-sale investments h. 8,776 Total liabilities and stockholders' equity S i. 5538,176 Note 1. Investments are classified as available for sale. The investments at cost and fair value on December 31, Year 1, are as follows: No. of Shares Cost per Share Total Cost Total Fair Value Alvarez Inc stock 960 38,00 36,480 39,936 Hirsch Inc. stock 1,900 28,80 4,720 60,040 91,200 99,976 Note 2. The Investment in Wright Co. stack is an equity method investment representing 30% of the outstanding shares of Wright Co. The following selected investment transactions occurred during Year 2: Mar. 18. Purchased 800 shares of Richter Inc. at 40, including brokerage commission. Richter is classified as an available-for-sale security. July 12. Dividends of 12,000 art: received on the Wright Co. investment. Oct 1. Purchased 24,000 of Toon Co. 4%, 10-year bonds at 100. the bonds are classified as available for sale. The bonds pay interest on October 1 and April 1. December 31. Wright Co. reported a total net income of 80,000 for Year 2. Teasdale recorder equity earnings for its share of Wright Co. net income. 31. Accrued interest for three months on the Toon Co. bonds purchased on October 1. 31. Adjusted the available-for-sale investment portfolio to fair value, using the following fair value per-share amounts: Available for Sale Investments Fair Value Alvarez Inc. stock 41,50 per share Hirsch Inc stock 26,00 per share Richter Inc. stock 48,00 per share Toon Co. bonds 101 per 100 of face amount 31. Closed the Teasdale Inc. net income of 51,240. Teasdale Int. paid no dividends during the year. Instructions Determine the missing letters in the unclassified balance sheet. Provide appropriate supporting calculations.
    Recommended textbooks for you
  • Financial & Managerial Accounting
    Accounting
    ISBN:9781285866307
    Author:Carl Warren, James M. Reeve, Jonathan Duchac
    Publisher:Cengage Learning
    Cornerstones of Financial Accounting
    Accounting
    ISBN:9781337690881
    Author:Jay Rich, Jeff Jones
    Publisher:Cengage Learning
    Corporate Financial Accounting
    Accounting
    ISBN:9781337398169
    Author:Carl Warren, Jeff Jones
    Publisher:Cengage Learning
  • Corporate Financial Accounting
    Accounting
    ISBN:9781305653535
    Author:Carl Warren, James M. Reeve, Jonathan Duchac
    Publisher:Cengage Learning
    Accounting
    Accounting
    ISBN:9781337272094
    Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
    Publisher:Cengage Learning,
  • Financial & Managerial Accounting
    Accounting
    ISBN:9781285866307
    Author:Carl Warren, James M. Reeve, Jonathan Duchac
    Publisher:Cengage Learning
    Cornerstones of Financial Accounting
    Accounting
    ISBN:9781337690881
    Author:Jay Rich, Jeff Jones
    Publisher:Cengage Learning
    Corporate Financial Accounting
    Accounting
    ISBN:9781337398169
    Author:Carl Warren, Jeff Jones
    Publisher:Cengage Learning
    Corporate Financial Accounting
    Accounting
    ISBN:9781305653535
    Author:Carl Warren, James M. Reeve, Jonathan Duchac
    Publisher:Cengage Learning
    Accounting
    Accounting
    ISBN:9781337272094
    Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
    Publisher:Cengage Learning,
    The accounting cycle; Author: Alanis Business academy;https://www.youtube.com/watch?v=XTspj8CtzPk;License: Standard YouTube License, CC-BY