CHAPTER 4 – The Balance Sheet and Disclosure Notes
Student Solutions
Assignment 4-8 (WEB)
Altar Paving Corporation
Balance Sheet
31 December 20x5
Assets
Current Assets:
Cash ..............................................................................
Marketable securities ....................................................... $XXX
Less: allowance for decline in marketable securities (XXX)
Accounts receivable ......................................................... XXX
Less: allowance for doubtful accounts ....................... (XXX)
Prepaid expense ...............................................................
Inventories
Raw materials............................................................. XXX
Work in process ......................................................... XXX
Finished goods ........................................................... XXX
Total current assets ..............................................
Investments and Funds:
Investment in common shares, not intended for resale ....
Bond sinking fund ............................................................
Restricted cash .................................................................
Total investments and funds ................................
Property, Plant, and Equipment:
Land ..............................................................................
Buildings ..........................................................................
Equipment ........................................................................
Less accumulated depreciation ........................................
Total property, plant, and equipment ...................
Intangible Assets:
Goodwill ..........................................................................
Licenses............................................................................
Patents ..............................................................................
Less accumulated amortization ........................................
Total intangible assets ..........................................
Total assets ...........................................................
$XXX
XXX
XXX
XXX
XXX
$XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
(XXX)
XXX
XXX
XXX
XXX
XXX
(XXX)
XXX
$XXX
Copyright 2008 McGraw-Hill Ryerson Ltd. All rights reserved
Intermediate Accounting, 4th edition - Beechy/Conrod
Liabilities and Shareholders’ Equity
Current Liabilities:
Accounts payable .............................................................
Accrued expenses.............................................................
Income tax payable ..........................................................
Interest payable ................................................................
Dividends payable ............................................................
Wages payable .................................................................
Total current liabilities ...............................................
$XXX
XXX
XXX
XXX
XXX
XXX
$XXX
Long-term Liabilities:
Bonds payable .................................................................. $XXX
Less: discount on bonds payable..................................... (XXX)
Future income tax liability ...............................................
Total long-term liabilities ................................................
Total liabilities ...........................................................
Shareholders’ Equity
Contributed Capital:
Common shares ................................................................ $XXX
Contributed capital from share retirement ....................... XXX
Total contributed capital ............................................
Retained earnings .............................................................
Total shareholders’ equity..........................................
Total liabilities and shareholders’ equity .........................
XXX
XXX
XXX
XXX
XXX
XXX
XXX
$XXX
Note: Other variations are permissible. The instructor will need to use judgement.
Assignment 4-9 (WEB)
Requirement 1
a)
b)
c)
d)
e)
$9,648
$6,261
$377,919
$156,782
$8,319
f)
g)
h)
i)
j)
k)
$46,203
$314,106
$14,281
$126,916
$141,197
$661,774
Requirement 2
Account title:
Cash & cash equivalents
Marketable securities
Accounts receivable
i
Type of note disclosure
ii
iii
iv
v
vi
X
X
X
X
X*
X*
X
X
X
X
X
X
vii
X
X
X
Copyright 2008 McGraw-Hill Ryerson Ltd. All rights reserved
Intermediate Accounting, 4th edition - Beechy/Conrod
Inventories
X
X
Prepaids
Capital assets (all)
X
X(amortization, etc.)
Investments
X
X*
X*
X*
X
X(revenue rec.)
Other assets
X
X*
Accounts & notes payable X
X*
X
Other current liabilities
X
Long-term debt
X
X
X
X
X
Future income tax
X
Non-controlling interest
X(cons. policy)
Share capital
X
X
Retained earnings
X
*if applicable; note that marketable securities should be valued at market value
Note disclosures:
i. Financial instruments; disclosure of terms and conditions.
ii. Financial instruments; disclosure of interest rates, including effective rate.
iii. Financial instruments; disclosure of credit risk.
iv. Financial instruments; disclosure of fair value by class.
v. Breakdown of accounts aggregated to arrive at a balance sheet total.
vi. Disclosure of accounting policy.
vii. Details of changes during the period.
Assignment 4-13 (WEB)
Requirement 1
Vantage Electronics Corporation
Balance Sheet
31 December 20x5
Assets
Current assets:
Cash..........................................................................
Accounts receivable (trade) .....................................
$12,400
Less: Allowance for doubtful accounts
($12,400 × 5%) ................................................
620
Merchandise inventory ($17,000 – $1,000 – $500) .
Office supplies inventory .........................................
Total current assets ................................
Investments and funds:
Advance on purchase of land ...................................
Capital assets:
Land ($6,400 – $1,000) ............................................
5,400
Equipment ($22,400  4 = $5,600) × 10 .................. $56,000
Less: Accumulated amortization
($56,000 × 6/10) .............................................. 33,600 22,400
Building ($7,600  19 = $400) × 25 ........................ 10,000
Less: Accumulated amortization
$15,000
11,780
15,500
500
42,780
1,000
Copyright 2008 McGraw-Hill Ryerson Ltd. All rights reserved
Intermediate Accounting, 4th edition - Beechy/Conrod
($10,000 × 6/25) ..............................................
Total capital assets .................................
Deferred charges ............................................................
Other assets:
Due from officers ($15,000 – $12,400) ...................
Total assets .............................................
2,400
7,600
35,400
1,100
2,600
$82,880
Liabilities
Current liabilities:
Accounts payable (trade) .........................................
Interest payable ($8,000 × 10% × 9/12) ..................
Notes payable, 10% interest .....................................
Total current liabilities ...........................
Shareholders’ Equity
Contributed capital:
Common shares, no-par, 2,500 shares outstanding..
Retained earnings* .........................................................
Total shareholders’ equity............................
Total liabilities and shareholders’ equity.
$ 5,500
600
8,000
14,100
$38,500
30,280
68,780
$82,880
Copyright 2008 McGraw-Hill Ryerson Ltd. All rights reserved
Intermediate Accounting, 4th edition - Beechy/Conrod
* Computation of retained earnings:
$32,500
(1,000)
(620)
(600)
$30,280
balance given
reduction for inventory overstatement
reduction for bad debt expense (allowance for doubtful accounts)
reduction for interest expense
corrected balance
Requirement 2
The balance sheet would have a total for assets minus liabilities if the net asset approach
were used: $82,880 – $14,100 = $68,780. This amount represents the net assets of the
company, or the shareholders’ equity.
The balance sheet would list assets on the left and liabilities and equities on the right if it
were an account form balance sheet.
Assignment 4-17 (WEB)
Requirement 1
1. The date in the heading should be “(At) 31 December 20x5”.
2. The caption “Current” should be “Current assets”.
3. The allowance for doubtful accounts should be shown as a deduction from accounts
receivable, rather than as a liability.
4. “Merchandise” should be “Merchandise inventory”.
5. “Supplies” should be “Supplies inventory”.
6. Shares of an investee company should be reported under the caption “investments
and funds”unless held as short-term investments.
7. There should be a caption “Total current assets”.
8. The “Loan to shareholder” is an investment or an “other asset.”
9. The caption “Tangible” should be “Land, building and equipment,” “Capital assets”
or “Property, plant and equipment.”
10. Because land is not subject to depreciation, it should be reported separately.
11. “Reserve for depreciation” should be titled “Accumulated amortization”.
12. Prepaid expenses are not deferred charges. Prepaid expenses are a current asset.
13. The caption should be “Total assets” rather than “Total”.
14. The major equity captions should be “Liabilities and Shareholders’ Equity”; not
“Debt and Capital”.
15. The caption “Current” should be “Current liabilities”.
16. “Reserve for future, deferred income tax” should be “Future (deferred) income tax
liability”. It is a liability.
17. “Customers’ accounts with credit balances” can be included in accounts receivable
(net) only because the amount ($100) is immaterial.
18. “Fixed” should be “Long-term liabilities”. Do not need to include that interest was
paid at year’s end.
Copyright 2008 McGraw-Hill Ryerson Ltd. All rights reserved
Intermediate Accounting, 4th edition - Beechy/Conrod
19. Maturity date for mortgage note payable should be shown.
20. “Mortgage” is an inadequate title; it should be “Mortgage note payable”.
21. Reserve for bad debts should be called “Allowance for doubtful accounts”. Also see
3. above; Allowance for doubtful accounts is a contra to accounts receivable.
22. “Total liabilities” (caption and amount) should be shown. A caption “Shareholders’
Equity” is needed instead of “Capital”.
23. The caption “Contributed capital” should be used.
24. Preferred shares represent an obligation to pay out cash; they should be shown as a
long-term liability.
25. The number of common shares authorized, issued, and outstanding should be shown.
26. Donated capital should be titled “Contributed capital” and should be included in the
contributed capital section of shareholders’ equity.
27. “Total contributed capital” (caption and amount) should be shown.
28. “Earned surplus” should be “Retained earnings”.
29. A final caption is needed for “Total liabilities and shareholders’ equity”.
Requirement 2
Blackstone Tire Corporation
Balance Sheet
31 December 20x5
Assets
Current assets:
Cash..............................................................................................
$ 23,000
Short-term investments ................................................................
10,000
Accounts receivable (trade)* ....................................................... $14,900
Less: Allowance for doubtful accounts.................................
900
14,000
Merchandise inventory.................................................................
31,000
Supplies inventory .......................................................................
5,000
Prepaid expenses ..........................................................................
5,000
Total current assets ................................................................
88,000
Investments and funds:
Shares of Wilmont Company, at cost ..........................................
17,000
Capital assets:
Land ............................................................................................. 10,000
Building...................................................................... $76,000
Less: Accumulated amortization......................... 40,000
36,000
Equipment .................................................................. 20,000
Less: Accumulated amortization......................... 15,000
5,000
Total land, building, and equipment ...............................
51,000
Other assets:
Loan to shareholder......................................................................
82,500
Total assets .............................................................................
$238,500
Copyright 2008 McGraw-Hill Ryerson Ltd. All rights reserved
Intermediate Accounting, 4th edition - Beechy/Conrod
Liabilities
Current liabilities:
Accounts payable (trade) .............................................................
Long-term liabilities:
Bonds payable, due 20x9, 8.5% ...................................................
Mortgage note payable, due date**, 11% ....................................
Preferred shares with guaranteed redemption date, 20x9.
Authorized and outstanding, 6,000 shares. ............................
Future income tax liability ...........................................................
Total liabilities .............................................................................
Shareholders’ Equity
Contributed capital:
Common shares, no-par, authorized 10,000 shares,
xxx ** shares issued................................................................
Contributed capital – donated capital .......................................
Total contributed capital .....................................................
Retained earnings ......................................................................
Total shareholders’ equity...................................................
Total liabilities and shareholders’ equity ......................
$ 16,000
45,000
12,000
50,000
17,000
140,000
67,000
9,000
76,000
22,500
98,500
$238,500
*$15,000 less customer accounts with credit balances of $100. The $100 may also be
disclosed as accounts payable.
**Unknown, must be disclosed.
Some students may also point out that the current portion of long-term liabilities, if any,
must be reclassified.
Copyright 2008 McGraw-Hill Ryerson Ltd. All rights reserved
Intermediate Accounting, 4th edition - Beechy/Conrod