Exercise 5-2
Your answer is correct.
Presented below are the captions of Faulk Company’s balance sheet. Indicate where each of the
following items would be classified.
Balance Sheet Accounts
1. Preferred stock.
2. Goodwill.
3. Salaries and wages payable
4. Accounts payable.
5. Buildings.
6. Equity investments (to be sold in the next year).
7. Current maturity of long-term debt.
8. Premium on bonds payable.
9. Allowance for doubtful accounts.
10. Accounts receivable.
11. Cash surrender value of life insurance.
12. Notes payable (due next year).
13. Supplies.
14. Common stock.
15. Land.
16. Bond sinking fund.
17. Inventory.
18. Prepaid insurance.
19. Bonds payable.
20. Income taxes payable.
Exercise 5-3
Your answer is correct.
Balance Sheet Classification
For Fielder Enterprises, indicate how each of the following usually should be classified. If an item
should appear in a note to the financial statements, select “Note to Financial Statement” to
indicate this fact. If an item needs to be reported on the balance sheet, select "Balance Sheet"
and if an item need not be reported at all, select “Not to be Reported.”
Transaction
s
1. Prepaid
insurance.
2. Stock owned
in affiliated
companies
3. Unearned
service
revenue.
4. Advances to
suppliers.
5. Unearned
rent revenue.
6. Preferred
stock.
7. Additional
paid-in
capital on
preferred
stock.
8. Copyrights.
9. Petty cash
fund.
10 Sales taxes
. payable.
11 Accrued
. interest on
notes
receivable.
12 Twenty-year
. issue of
bonds
payable that
will mature
within the
next year.
(No sinking
fund exists,
and
Reported in
Classification
refunding is
not planned.)
13 Machinery
. retired from
use and held
for sale.
14 Fully
. depreciated
machine still
in use.
15 Accrued
. interest on
bonds
payable.
16 Salaries that
. company
budget
shows will be
paid to
employees
within the
next year.
17 Discount on
. bonds
payable.
(Assume
related to
bonds
payable in
item 12.)
18 Accumulated
. DepreciationBuildings.
19 Noncontrollin
. g interest.
Problem 5-2
Your answer is correct.
Presented below are a number of balance sheet items for Teal, Inc., for the current year, 2017.
Goodwill
$ 128,190
Accumulated Depreciation-Equipment
Payroll Taxes Payable
180,781
Inventory
Bonds payable
303,190
Rent payable (short-term)
Discount on bonds payable
15,170
$ 292,170
242,990
48,190
Income taxes payable
101,552
Cash
363,190
Rent payable (long-term)
483,190
Land
483,190
Common stock, $1 par value
203,190
Notes receivable
448,890
Preferred stock, $10 par value
Notes payable (to banks)
268,190
Prepaid expenses
Accounts payable
493,190
Equipment
Retained earnings
Income taxes receivable
Notes payable (long-term)
?
100,820
1,603,190
153,190
91,110
1,473,190
Debt investments (trading)
124,190
Accumulated Depreciation-Buildings
270,370
Buildings
1,643,190
Prepare a classified balance sheet in good form. Common stock authorized was 400,000 shares,
and preferred stock authorized was 20,000 shares. Assume that notes receivable and notes
payable are short-term, unless stated otherwise. Cost and fair value of debt investments
(trading) are the same. (List Current Assets in the order of liquidity. List Property, Plant
and Equipment in order of Land, Building and Equipment.)
TEAL, INC.
Balance Sheet
Assets
$
$
$
:
:
$
Liabilities and Stockholders' Equity
$
$
$
:
$
Exercise 5-10
Your answer is correct.
Norma Smith is the controller of Stellar Corporation and is responsible for the preparation of the
year-end financial statements.
For each of the following transactions that occurred during the year, indicate the dollar amount to
be reported as a current liability as of December 31, 2017. (Enter 0 for amounts if no current
liability is to be reported. Do not leave any answer field blank.)
Reported as
(a) On December 20, 2017, a former
employee filed a legal action against
Stellar for $105,820 for wrongful
dismissal. Management believes the action
to be frivolous and without merit. The
likelihood of payment to the employee is
remote.
$
(b) Bonuses to key employees based on net
income for 2017 are estimated to be
$160,000.
$
(c) On December 1, 2017, the company
borrowed $888,000 at 8% per year.
Interest is paid quarterly.
$
(d) Accounts receivable at December 31,
2017, is $10,242,300. An aging analysis
indicates that Stellar’s expense provision
for doubtful accounts is estimated to be
3% of the receivables balance.
$
(e) On December 15, 2017, the company
declared a $2.90 per share dividend on
the 41,560 shares of common stock
outstanding, to be paid on January 5,
2018.
$
(f)
$
During the year, customer advances of
$200,800 were received; $60,300 of this
amount was earned by December 31,
2017.
Exercise 5-11
Your answer is correct.
Presented below is the adjusted trial balance of Teal Corporation at December 31, 2017.
Debit
Cash
$
Credit
?
Supplies
1,450
Prepaid Insurance
1,250
Equipment
48,250
Accumulated Depreciation-Equipment
Trademarks
Accounts Payable
$ 4,250
1,200
10,250
Salaries and Wages Payable
750
Unearned Service Revenue
2,250
Bonds Payable (due 2024)
9,250
Common Stock
10,250
Retained Earnings
25,250
Service Revenue
10,250
Salaries and Wages Expense
9,250
Insurance Expense
1,650
Rent Expense
1,450
Interest Expense
1,150
$
Total
?
$
?
Additional information:
1. Net loss for the year was $3,250.
2. No dividends were declared during 2017.
Prepare a classified balance sheet as of December 31, 2017. (List Current Assets in order of
liquidity.)
TEAL CORPORATION
Balance Sheet
Assets
$
$
:
$
Liabilities and Stockholders' Equity
$
$
$