HW 2
(Corrections of a Balance Sheet)
The bookkeeper for Garfield Company has prepared the following balance sheet as of July 31, 2012.
Cash
Accounts receivable (net)
Inventories
Equipment (net)
Patents
GARFIELD COMPANY
Balance Sheet
As of July 31, 2012
$71,370
43,080
62,370
84,000
$281,820
The following additional information is provided.
Notes and accounts payable
Long-term liabilities
Stockholders' equity
$46,580
77,370
157,870
$281,820
1.
Cash includes $1,200 in a petty cash fund and $12,290 in a bond sinking fund.
2.
The net accounts receivable balance is comprised of the following two items: (a) accounts receivable–debit balances $46,580; (b) allowance for doubtful accounts $3,500.
3.
Merchandise inventory costing $5,740 was shipped out on consignment on July 31, 2012. The ending inventory balance does not include the consigned goods. Receivables in the amount of
$5,740 were recognized on these consigned goods.
4.
Equipment had a cost of $112,000 and an accumulated depreciation balance of $28,000.
5.
Taxes payable of $9,020 were accrued on July 31. Garfield Company, however, had set up a cash fund to meet this obligation. This cash fund was not included in the cash balance, but was offset against the taxes payable amount.
Prepare a corrected classified balance sheet as of July 31, 2012, from the available information, adjusting the account balances using the additional information. (List current liabilities from largest to smallest amounts, e.g. 10, 5, 2.)
GARFIELD COMPANY
Balance Sheet
July 31, 2012
Assets
Current assets
$
$
Less:
Total current assets
Long-term investments
Property, plant, and equipment
Less:
Intangible assets

Total assets
$
Total current liabilities
Long-term liabilities
Total liabilities
Stockholders' equity
Liabilities and Stockholders' Equity
Total liabilities and stockholders' equity
$
$
$
(Current Assets Section of the Balance Sheet)
Presented below are selected accounts of Aramis Company at December 31, 2012.
Finished goods
Revenue received in advance
Equipment
Work-in-process
Cash
Short-term investments in stock
Customer advances
Cash restricted for plant expansion
$57,040
90,000
46,250
36,000
57,600
The following additional information is available.
Cost of goods sold
Notes receivable
Supplies expense
Licenses
Additional paid-in capital
Treasury stock
$2,100,000
40,000
166,090
210,980
60,000
12,000
18,000
88,000
22,000
1.
Inventories are valued at lower of cost or market using LIFO.
2.
Equipment is recorded at cost. Accumulated depreciation, computed on a straight-line basis, is
$50,600.
3.
The short-term investments have a fair value of $29,000. (Assume they are trading securities.)
4.
The notes receivable are due April 30, 2014, with interest receivable every April 30. The notes bear interest at 6%. (Hint: Accrue interest due on December 31, 2012.)
5.
The allowance for doubtful accounts applies to the accounts receivable. Accounts receivable of
$50,000 are pledged as collateral on a bank loan.
6.
Licenses are recorded net of accumulated amortization of $14,000.
7.
Treasury stock is recorded at cost.
Prepare the current assets section of Aramis Company's December 31, 2012, balance sheet, with appropriate disclosures. (List current assets in order of liquidity.)
Current assets
Less:
$
$

Trading securities at fair value
Less:
Inventories at lower of cost (determined using LIFO) or market
Raw materials
Total current assets
$
(Current vs. Long-term Liabilities)
Pascal Corporation is preparing its December 31, 2012, balance sheet. The following items may be reported as either a current or long-term liability.
1.
On December 15, 2012, Pascal declared a cash dividend of $4.64 per share to stockholders of record on December 31. The dividend is payable on January 15, 2013. Pascal has issued
1,000,000 shares of common stock, of which 50,000 shares are held in treasury.
2.
At December 31, bonds payable of $102,895,000 are outstanding. The bonds pay 12% interest every September 30 and mature in installments of $26,247,000 every September 30, beginning September 30, 2013.
3.
At December 31, 2011, customer advances were $13,659,000. During 2012, Pascal collected
$30,549,000 of customer advances, and advances of $26,248,000 were earned.
For each item above indicate the dollar amounts to be reported as a current liability and as a longterm liability. (For item #2, list the bonds payable with the smallest amount first.)
1. Dividends payable
2. Bonds payable
Interest payable
Bonds payable
3. Customer advances
$
$
$
$
$
(Current Assets and Current Liabilities)
The current assets and liabilities sections of the balance sheet of Agincourt Company appear as follows.
Cash
Accounts receivable
Less: Allowance for doubtful
AGINCOURT COMPANY
Balance Sheet (Partial)
December 31, 2012
$91,980
8,400
$40,150 Accounts payable
83,580
$65,370
72,240
$137,610

accounts
Inventories
Prepaid expenses
$306,230
The following errors in the corporation's accounting have been discovered:
1.
January 2013 cash disbursements entered as of December 2012 included payments of accounts payable in the amount of $39,500, on which a cash discount of 2% was taken.
2.
The inventory included $27,000 of merchandise that had been received at December 31 but for which no purchase invoices had been received or entered. Of this amount, $12,000 had been received on consignment; the remainder was purchased f.o.b. destination, terms 2/10, n/30.
3.
Sales for the first four days in January 2013 in the amount of $30,000 were entered in the sales book as of December 31, 2012. Of these, $21,500 were sales on account and the remainder were cash sales.
4.
Cash, not including cash sales, collected in January 2013 and entered as of December 31,
2012, totaled $36,032. Of this amount, $24,892 was received on account after cash discounts of 2% had been deducted; the remainder represented the proceeds of a bank loan.
(a) Restate the current assets and liabilities sections of the balance sheet in accordance with good accounting practice. (Assume that both accounts receivable and accounts payable are recorded gross.) (List current liabilities with notes payable first.)
AGINCOURT COMPANY
Partial Balance Sheet
As of December 31, 2012
Current assets
$
$
Less:
Inventories
Total current assets
Current liabilities
$
$
Total current liabilities
$
(b) State the net effect of your adjustments on Agincourt Company's retained earnings balance. (For negative numbers use either a negative sign preceding the number, e.g. -45 or parenthesis, e.g. (45).)
Adjustment to retained earnings balance:
Add: January sales discounts
$
Deduct: January sales
$
January purchase discounts
December purchases
Consignment inventory

Change (decrease) to retained earnings
$
(Current Liabilities)
Mary Smith is the controller of Arnold Corporation and is responsible for the preparation of the yearend financial statements. The following transactions occurred during the year.
(a) On December 20, 2012, an employee filed a legal action against Arnold for $106,700 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 2012 are estimated to be $152,200.
(c) On December 1, 2012, the company borrowed $950,400 at 8% per year. Interest is paid quarterly.
(d) Credit sales for the year amounted to $10,114,500. Arnold's expense provision for doubtful accounts is estimated to be 2% of credit sales.
(e) On December 15, 2012, the company declared a $2.48 per share dividend on the 40,300 shares of common stock outstanding, to be paid on January 5, 2013.
(f) During the year, customer advances of $192,600 were received; $59,900 of this amount was earned by December 31, 2012.
For each item above, indicate the dollar amount to be reported as a current liability. If a liability is not reported, enter 0.
(a)
(b)
(c)
(d)
(e)
(f)
$
$
$
$
$
$
(Preparation of a Balance Sheet)
Presented below is the trial balance of Vivaldi Corporation at December 31, 2012.
Cash
Sales
Trading securities (at cost, $145,000)
Cost of goods sold
Long-term investments in bonds
Long-term investments in stocks
Short-term notes payable
Accounts payable
Selling expenses
Investment revenue
Land
Buildings
Dividends payable
Accrued liabilities
Debit
$200,290
155,540
4,802,540
302,290
280,290
2,002,540
260,000
1,043,290
Credits
$7,902,540
92,540
457,540
64,920
139,290
98,540

Accounts receivable
Accumulated depreciation-Buildings
Allowance for doubtful accounts
Administrative expenses
Interest expense
Inventories
Extraordinary gain
Long-term notes payable
Equipment
Bonds payable
Accumulated depreciation-Equipment
Franchise (net of $80,000 amortization)
Common stock ($5 par)
Treasury stock
Patent (net of $30,000 amortization)
Retained earnings
Additional paid-in capital
437,540
352,000
27,540
901,920
212,920
600,290
81,920
903,290
602,540
1,003,290
60,000
160,000
1,002,540
193,540
195,000
81,290
83,290
$12,350,530 $12,350,530
Prepare a balance sheet at December 31, 2012, for Vivaldi Corporation. Ignore income taxes. (List liabilities, long-term investments, and intangible assets from largest to smallest amounts, e.g. 10, 5, 3.)
Current assets
Less: Allowance for doubtful accounts
Inventories
VIVALDI CORPORATION
Balance Sheet
December 31, 2012
Assets
$
$
Total current assets
Long-term investments
Total long-term investments
Property, plant, and equipment
$
Less:
Equipment
Less:
Total property, plant, and equipment
Intangible assets

Total intangible assets
Total assets
Current liabilities
Dividends payable
Total current liabilities
Long-term liabilities
Total long-term liabilities
Total liabilities
Stockholders' equity
Paid-in capital
Liabilities and Stockholders' Equity
$
$
Retained earnings
Total paid-in capital and retained earnings
Less:
Total stockholders' equity
Total liabilities and stockholders' equity
$
$
$