INTERMEDIATE ACCOUNTING
INTERMEDIATE ACCOUNTING
8th Edition
ISBN: 9780078025839
Author: J. David Spiceland
Publisher: McGraw-Hill Education
bartleby

Videos

Question
Book Icon
Chapter 3, Problem 3.6P

Requirement 1:

To determine

Balance sheet:

 This financial statement reports a company’s resources (assets) and claims of creditors (liabilities) and stockholders (stockholders’ equity) over those resources. The resources of the company are assets which include money contributed by stockholders and creditors. Hence, the components of balance sheet are assets, liabilities and shareholders’ equity.

Financial disclosure:

 Financial disclosure is an important tool which discloses the financial statements of an entity to its investors for investment decision making.

To determine: classified balance sheet and identifying items that would require additional disclosure.

Requirement 1:

Expert Solution
Check Mark

Explanation of Solution

Classified balance sheet:

  “A balance sheet with classification of assets and liabilities based on their current and noncurrent status and grouped under separate headings and sub-headings for its enhanced usefulness is known as classified balance sheet”.

Following is the classified balance sheet of Corporation VE on December 31, 2016

Corporation VE
Balance Sheet
At December 31, 2016
Assets Amount Amount
Current assets:    
Cash and cash equivalents(1) $117,000  
Marketable securities(2) $132,000  
Accounts receivable (net of allowance for   (uncollectible  accounts of $8,000)  (3)

$115,000

Loans to employees $40,000  
Interest receivable  $12,000  
Note receivable—current portion $50,000  
Inventories  $215,000  
Prepaid expenses  $16,000  
Total current assets    $697,000
     
Investments:    
Marketable securities $35,000  
Note receivable  $200,000  
Total investments    $235,000
     
Property, plant, and equipment:    
Land $280,000  
Buildings  $1,550,000  
Machinery and equipment  $637,000  
  $2,467,000  
Less: Accumulated depreciation-buildings  -$620,000  
Less: Accumulated depreciation-equipment  -$210,000  
Net property, plant, and equipment    $1,637,000
     
Intangible assets:    
Patent  $152,000  
Franchise  $40,000  
Total intangible assets    $192,000
Total assets    $2,761,000
Liabilities and Shareholders' Equity Amount Amount
Current liabilities:    
Accounts payable  $189,000  
Dividends payable  $10,000  
Interest payable  $16,000  
Taxes payable  $40,000  
Deferred revenue(4) $48,000  
Total current liabilities    $303,000
     
Long-term liabilities:    
Notes payable  $300,000  
Deferred revenue(4) $12,000  
Total long-term liabilities    $312,000
Total liabilities  =$   $615,000
     
Shareholders’ equity:    

Common stock, no par value; 1,000,000 shares

 authorized; 500,000 shares issued and outstanding

$2,000,000

 
Retained earnings $146,000  
Total shareholders’ equity    $2,146,000
Total liabilities and shareholder equity    $2,761,000

Working notes:

1. Calculate cash and cash equivalents.

Cash and cash equivalents = (Cash as per trial balance +Amount of U.S treasury bill)=$67,000+$50,000=$117,000 (1)

2. Calculate the amount of short-term investment.

Short term investment =(Short term investments as per trial balance Amount of U.S treasury bill)=$67,000+$50,000=$117,000 (2)

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

Notes receivable, net of allowance for uncollectible accounts} = (Accounts receivables as per trial balancesAllowance for uncollectible accounts)=$123,000$8,000=$115,000 (3)

4. Calculate the amount of deferred revenue

Deferred revenu-current portion = Total deferred revenue×80%=$60,000×80100=$48,000

Deferred revenu-long term portion = Total deferred revenue×80%=$60,000×20100=$12,000 (4)

Requirement 2:

To determine

The following are the items that would require additional disclosure on the face of balance sheet

Requirement 2:

Expert Solution
Check Mark

Explanation of Solution

Allowance for uncollectible accounts – It should be disclosed on the face of the balance sheet.

Property, plant, and equipment – The original cost of each category of property, plant, and equipment assets along with accumulated depreciation should be disclosed on the face of the balance sheet

The following are the items that would require the additional disclosure in a disclosure note:

Cash equivalents – The items consider being cash equivalent should be disclosed in a note.

Investments – The information about the types of investments and the accounting method used to value the investments should be disclosed in a note.

Inventories – The method used for inventories should be disclosed in accounting policies note. Also, the information about the breakout of inventory into raw materials, work-in process, and finished goods are disclosed in a note.

Depreciation – The method used to calculate depreciation should be disclosed in the accounting policies note.

Long-term liabilities – The information about various debt instruments, their payment terms, interest rates, and collateral pledged as security for the debt should be disclosed in a note.

Conclusion

Hence, the total assets and the total liabilities and share holders’ equity agrees to the amount of $2,761,000

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 - Prob. 3.2BECh. 3 - Prob. 3.3BECh. 3 - Prob. 3.4BECh. 3 - Prob. 3.5BECh. 3 - Prob. 3.6BECh. 3 - Balance sheet preparation; missing elements LO32,...Ch. 3 - Financial statement disclosures LO34 For each of...Ch. 3 - Prob. 3.9BECh. 3 - Prob. 3.10BECh. 3 - Calculating ratios; solving for unknowns LO38 The...Ch. 3 - Prob. 3.1ECh. 3 - Prob. 3.2ECh. 3 - Prob. 3.3ECh. 3 - Prob. 3.4ECh. 3 - Prob. 3.5ECh. 3 - Prob. 3.6ECh. 3 - Prob. 3.7ECh. 3 - Prob. 3.8ECh. 3 - Prob. 3.9ECh. 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 - Prob. 3.18ECh. 3 - Prob. 3.19ECh. 3 - Effect of management decisions on ratios LO38...Ch. 3 - Prob. 3.21ECh. 3 - Prob. 3.22ECh. 3 - Prob. 1CPACh. 3 - Prob. 2CPACh. 3 - Prob. 3CPACh. 3 - Prob. 4CPACh. 3 - Prob. 5CPACh. 3 - Prob. 6CPACh. 3 - Prob. 7CPACh. 3 - Prob. 8CPACh. 3 - Prob. 1CMACh. 3 - Prob. 2CMACh. 3 - Prob. 3CMACh. 3 - Balance sheet preparation LO32, LO33 Presented...Ch. 3 - Prob. 3.2PCh. 3 - Prob. 3.3PCh. 3 - Prob. 3.4PCh. 3 - Prob. 3.5PCh. 3 - Prob. 3.6PCh. 3 - Prob. 3.7PCh. 3 - Prob. 3.8PCh. 3 - Prob. 3.9PCh. 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 - Prob. 3.5BYPCh. 3 - Prob. 3.6BYPCh. 3 - Prob. 3.7BYPCh. 3 - Prob. 3.8BYPCh. 3 - Prob. 3.9BYPCh. 3 - Prob. 3.11BYPCh. 3 - Analysis Case 3–14 Balance sheet information LO3–2...Ch. 3 - Prob. 3.15BYPCh. 3 - Ethics Case 316 Segment reporting Appendix 3 You...
Knowledge Booster
Background pattern image
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.
Recommended textbooks for you
Text book image
FINANCIAL ACCOUNTING
Accounting
ISBN:9781259964947
Author:Libby
Publisher:MCG
Text book image
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Text book image
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Text book image
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Text book image
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Text book image
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
Financial ratio analysis; Author: The Finance Storyteller;https://www.youtube.com/watch?v=MTq7HuvoGck;License: Standard Youtube License