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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem
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Classified balance sheet

The following accounts appear in an adjusted trial balance of Kangaroo Consulting. Indicate whether each account would be reported in the (a) current asset; (b) property, plant, and equipment; (c) current liability; (d) long-term liability; or (e) owner’s equity section of the December 31, 2015, balance sheet of Kangaroo Consulting.

1. Accounts Payable

2. Accounts Receivable

3. Accumulated Depreciation—Building

4. Cash

5. Lea Gabel, Capital

6. Note Payable (due in ten years)

7. Supplies

8. Wages Payable

To determine

Classified balance sheet

Classified Balance Sheet: In order to improve the ease of understanding, a classified balance sheet is used. Classified balance sheet categorizes each item of assets, liabilities, and stockholders ‘equity into a specific category.

A classified balance sheet is prepared under the following heading:

Assets Liabilities
Current assets: Current liabilities:
Cash Accounts payable
Marketable securities Interest payable
Accounts receivable Unearned revenues
Inventories Notes payable
Prepaid expenses Current maturities of long-term debt
Office supplies Total current liabilities
Total current assets
Investments: Long-term liabilities:
Marketable securities Bonds payable
Land held for investment Notes payable
Total investments Mortgage payable
Total long-term liabilities
Property, plant and equipment:
Land Owners’ equity:
Building Capital
Equipment Total Liabilities and Shareholders’ Equity
Less: Accumulated depreciation
Net property, plant and equipment
Intangibles:
Copyrights
Total Assets

Table (1)

To Indicate: The category in which the account would appear on a classified balance sheet.

Explanation

Accounts Payable – Current liabilities

Current liabilities refer to the liabilities of a business, which are supposed to be paid within a year or a period of twelve months. As the due amount is to be paid within one year out of the current assets. Therefore, it comes under the category of current liabilities.

Accounts Receivable – Current assets

Current assets refer to the assets of a business, which are kept in reserve for converting them into cash, in a short time period, or within twelve months.

As the accounts, receivable would be collected as cash once the amount given by the customer (within a short period). Therefore, it comes under the category of current assets.

Accumulated depreciation – Property, plant and equipment.

Property, plant, and equipment, known as operating assets and is used to provide services in the operational activities of the business. As the accumulated depreciation - building records the past depreciation. Therefore, it comes under the category of property, plant, and equipment.

LG Capital –Owners’ equity section

Capital is a component of owners’ equity, as it is invested/contributed by the shareholders or stockholders for the future use of the company...

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