I need the following exercises and problem completed

exercises E5-1B, E5-6B

problem P5-5B

c05BExercises.qxd 11/20/12 11:36 AM Page 1 B EXERCISES 2 3 E5-1B (Balance Sheet Classifications) Presented below are a number of balance sheet accounts of Castillo Inc. (a) (b) (c) (d) (e) (f) (g) Trading Securities. Work in Process. Investment in Preferred Stock. Unearned Subscription Revenue. Accrued Vacation Pay. Treasury Stock. Income Taxes Payable. (h) (i) (j) (k) (l) (m) (n) Warehouse in Process of Construction. Deficit. Cash Dividends Payable. Petty Cash. Accrued Interest on Notes Payable. Accumulated Depreciation. Common Stock Distributable. Instructions For each of the accounts above, indicate the proper balance sheet classification. In the case of borderline items, indicate the additional information that would be required to determine the proper classification. 2 3 E5-2B (Classification of Balance Sheet Accounts) Presented below are the captions of Chan Company's balance sheet. (a) (b) (c) (d) (e) Current assets. Investments. Property, plant, and equipment. Intangible assets. Other assets. (f) (g) (h) (i) (j) Current liabilities. Non-current liabilities. Capital stock. Additional paid-in capital. Retained earnings. Instructions Indicate by letter where each of the following items would be classified. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 2 3 Cash surrender value of life insurance. Prepaid insurance. Taxes payable. Bonds payable. Notes payable (due next year). Bond sinking fund. Common stock. Merchandise inventory. Office supplies. Land. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. Trading securities. Preferred stock. Allowance for doubtful accounts. Accounts receivable. Goodwill. Current portion of long-term debt. Wages payable. Buildings. Premium on bonds payable. Trade accounts payable. E5-3B (Classification of Balance Sheet Accounts) Assume that Clark Enterprises uses the following headings on its balance sheet. (a) (b) (c) (d) (e) Current assets. Investments. Property, plant, and equipment. Intangible assets. Other assets. (f) (g) (h) (i) (j) Current liabilities. Long-term liabilities. Capital stock. Paid-in capital in excess of par. Retained earnings. Instructions Indicate by letter how each of the following usually should be classified. If an item should appear in a note to the financial statements, use the letter \"N\" to indicate this fact. If an item need not be reported at all on the balance sheet, use the letter \"X.\" 1. 2. 3. 4. 5. 6. 7. 8. Twenty-year issue of bonds payable that will mature within the next year. (No sinking fund exists, and refunding is not planned.) Machinery retired from use and held for sale. Discount on bonds payable. (Assume related to bonds payable in No. 1, above.) Accumulated depreciation. Salaries that company budget shows will be paid to employees within the next year. Accrued interest on bonds payable. Fully depreciated machine still in use. Accrued interest on notes receivable. 9. Premium on preferred stock. 10. Copyrights. 11. Unearned subscriptions revenue. 12. Stock owned in affiliated companies. 13. Advances to suppliers. 14. Treasury stock. 15. Unearned rent revenue. 16. Sales tax payable. 17. Petty cash fund. 18. Unexpired insurance. 19. Noncontrolling interest. 1 c05BExercises.qxd 2 2 11/20/12 11:36 AM Page 2 Chapter 5 Balance Sheet and Statement of Cash Flows 3 E5-4B (Preparation of a Classified Balance Sheet) Assume that Cluver Inc. has the following accounts at the end of the current year. Accrued Salaries Payable. Cash Restricted for Plant Expansion. Land Held for Future Plant Site. Accumulated DepreciationBuildings. Retained Earnings Unearned Subscriptions Revenue. Finished Goods. Accounts Receivable. Bonds Payable (due in 4 years). ReceivablesOfficers (due in one year). Premium on Common Stock. Allowance for Doubtful Accounts Accounts Receivable 13. Noncontrolling interest 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. Common Stock Treasury Stock (at cost). Raw Materials. Unearned Rent Revenue. Copyrights. Notes Receivable (short-term). Cash. Buildings. Work in Process. Preferred Stock InvestmentsLong-term. Note Payable, short-term Discount on Bonds Payable. Instructions Prepare a classified balance sheet in good form. (No monetary amounts are necessary.) 3 E5-5B (Preparation of a Corrected Balance Sheet) Darling Company has decided to expand its operations. The bookkeeper recently completed the balance sheet in order to obtain additional funds for expansion. DARLING COMPANY BALANCE SHEET DECEMBER 31, 2014 Current assets Cash Accounts receivable (net) Inventories at lower of average cost or market Available-for-sale securitiesat cost (fair value $65,000) Property, plant, and equipment Building (net) Office equipment (net) Land held for future use Intangible assets Patents Cash surrender value of life insurance Prepaid expenses Current liabilities Accounts payable Notes payable (due next month) Pension obligation Unearned revenue Premium on bonds payable Long-term liabilities Bonds payable Stockholders' equity Common stock, $1.00 par, authorized 1,000,000 shares, issued 610,000 Additional paid-in capital Retained earnings $ 105,000 411,000 561,000 50,000 1,561,000 125,000 251,000 128,000 26,000 39,000 367,000 75,000 361,000 26,000 36,000 1,500,000 610,000 200,000 ? Instructions Prepare a revised balance sheet given the available information. Assume that the accumulated depreciation balance for the buildings is $302,000 and for the office equipment, $86,000. The allowance for doubtful accounts has a balance of $37,000. The pension obligation is considered a long-term liability. 3 E5-6B (Corrections of a Balance Sheet) The bookkeeper for Odie Company has prepared the following balance sheet as of June 30, 2014. c05BExercises.qxd 11/20/12 11:36 AM Page 3 B Exercises ODIE COMPANY BALANCE SHEET AS OF JUNE 30, 2014 Cash Accounts receivable (net) Inventories Equipment (net) Goodwill $ 26,500 81,000 93,000 187,000 50,000 Notes and accounts payable Long-term liabilities Stockholders' equity $ 126,000 50,000 261,500 $437,500 $437,500 The following additional information is provided. 1. 2. 3. 4. 5. Cash includes $800 in a petty cash fund and $14,000 in a bond sinking fund. The net accounts receivable balance is comprised of the following three items: (a) accounts receivabledebit balances $96,000; (b) accounts receivablecredit balances $8,000; (c) allowance for doubtful accounts $7,000. Merchandise inventory costing $11,200 was shipped out on consignment on June 30, 2014. The ending inventory balance does not include the consigned goods. Receivables in the amount of $11,200 were recognized on these consigned goods. Equipment had a cost of $260,000 and an accumulated depreciation balance of $73,000. Taxes payable of $21,500 were accrued on June 30. Odie 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. Instructions Prepare a corrected classified balance sheet as of June 30, 2014, from the available information, adjusting the account balances using the additional information. 3 E5-7B (Current Assets Section of the Balance Sheet) Presented below are selected accounts of Coffey Company at December 31, 2014. Finished Goods Revenue Received in Advance Bank Overdraft Equipment Work-in-Process Cash Short-term Investments in Stock Customer Advances Cash Restricted for Plant Expansion $ 78,000 135,000 12,000 379,500 51,000 55,500 46,500 54,000 75,000 Cost of Goods Sold Notes Receivable Accounts Receivable Raw Materials Supplies Expense Allowance for Doubtful Accounts Licenses Additional Paid-in Capital Treasury Stock $3,150,000 60,000 241,500 310,500 90,000 18,000 27,000 132,000 33,000 The following additional information is available. 1. 2. 3. 4. 5. 6. 7. Inventories are valued at lower-of-cost-or-market using LIFO. Equipment is recorded at cost. Accumulated depreciation, computed on a straight-line basis, is $75,900. The short-term investments have a fair value of $43,500. (Assume they are trading securities.) The notes receivable are due April 30, 2016, with interest receivable every April 30. The notes bear interest at 12%. (Hint: Accrue interest due on December 31, 2014.) The allowance for doubtful accounts applies to the accounts receivable. Accounts receivable of $75,000 are pledged as collateral on a bank loan. Licenses are recorded net of accumulated amortization of $21,000. Treasury stock is recorded at cost. Instructions Prepare the current assets section of Coffey Company's December 31, 2014, balance sheet, with appropriate disclosures. 2 E5-8B (Current vs. Long-term Liabilities) Constantin Corporation is preparing its December 31, 2014, balance sheet. The following items may be reported as either a current or long-term liability. 1. 2. At December 31, bonds payable of $200,000,000 are outstanding. The bonds pay 12% interest every September 30 and mature in installments of $50,000,000 every September 30, beginning September 30, 2015. On December 15, 2014, Constantin declared a cash dividend of $5.00 per share to stockholders of record on December 31. The dividend is payable on January 15, 2015. Constantin has issued 1,000,000 shares of common stock, of which 50,000 shares are held in treasury. 3 c05BExercises.qxd 4 11/20/12 11:36 AM Page 4 Chapter 5 Balance Sheet and Statement of Cash Flows 3. 4. Also on December 31, Constantin declared a 10% stock dividend to stockholders of record on January 15, 2015. The dividend will be distributed on January 31, 2015. Constantin's common stock has a par value of $20 per share and a market value of $76 per share. At December 31, 2013, customer advances were $24,000,000. During 2014, Constantin collected $60,000,000 of customer advances, and advances of $50,000,000 were earned. Instructions For each item above indicate the dollar amounts to be reported as a current liability and as a long-term liability, if any. 2 3 E5-9B (Current Assets and Current Liabilities) The current assets and liabilities sections of the balance sheet of Cooper Company appear as follows. COOPER COMPANY BALANCE SHEET (PARTIAL) DECEMBER 31, 2014 Cash Accounts receivable Less: Allowance for doubtful accounts Inventories Prepaid expenses $100,000 $222,500 Accounts payable Notes payable $152,500 167,500 $320,000 17,500 205,000 427,500 22,500 $755,000 The following errors in the corporation's accounting have been discovered: 1. The inventory included $67,500 of merchandise that had been received at December 31 but for which no purchase invoices had been received or entered. Of this amount, $30,000 had been received on consignment; the remainder was purchased f.o.b. destination, terms 2/10, n/30. 2. January 2015 cash disbursements entered as of December 2014 included payments of accounts payable in the amount of $97,500, on which a cash discount of 2% was taken. 3. Cash, not including cash sales, collected in January 2015 and entered as of December 31, 2014, totaled $88,310. Of this amount, $58,310 was received on account after cash discounts of 2% had been deducted; the remainder represented the proceeds of a bank loan. 4. Sales for the first four days in January 2015 in the amount of $75,000 were entered in the sales book as of December 31, 2014. Of these, $53,750 were sales on account, and the remainder were cash sales. Instructions (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.) (b) State the net effect of your adjustments on Cooper Company's retained earnings balance. 2 3 E5-10B (Current Liabilities) Travis is the controller of Dave Corporation and is responsible for the preparation of the year-end financial statements. The following transactions occurred during the year. (a) Credit sales for the year amounted to $5,000,000. Dave's expense provision for doubtful accounts is estimated to be 3% of credit sales. (b) On December 15, 2014, the company declared a $1.00 per share dividend on the 40,000 shares of common stock outstanding, to be paid on January 5, 2015. (c) During the year, customer advances of $80,000 were received; $25,000 of this amount was earned by December 31, 2014. (d) On December 1, 2014, the company borrowed $300,000 at 8% per year. Interest is paid quarterly. (e) On December 20, 2014, an employee filed a legal action against Dave Corporation for $50,000 for wrongful dismissal. Management believes the action to be frivolous and without merit. The likelihood of payment to the employee is remote. (f) Bonuses to key employees based on net income for 2014 are estimated to be $75,000. Instructions For each item above, indicate the dollar amount to be reported as a current liability. If a liability is not reported, explain why. c05BExercises.qxd 11/20/12 11:36 AM Page 5 B Exercises 3 E5-11B (Balance Sheet Preparation) Presented below is the adjusted trial balance of De Young Corporation at December 31, 2014. Debits Cash Office Supplies Prepaid Insurance Equipment Accumulated DepreciationEquipment Trademarks Accounts Payable Salaries and Wages Payable Unearned Service Revenue Bonds Payable, due 2019 Common Stock Retained Earnings Service Revenue Salaries and Wages Expense Insurance Expense Rent Expense Interest Expense Credits $ ? 2,640 2,200 105,600 $ 8,800 2,090 22,000 1,100 4,400 19,800 22,000 55,000 22,000 19,800 3,080 2,640 1,980 Total $ ? $ ? Additional information: 1. 2. Net loss for the year was $5,500. No dividends were declared during 2014. Instructions Prepare a classified balance sheet as of December 31, 2014. 3 E5-12B (Preparation of a Balance Sheet) Presented below is the trial balance of Do Corporation at December 31, 2014. Debits 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 Accounts Receivable Accumulated DepreciationBuildings Allowance for Doubtful Accounts Administrative Expenses Interest Expense Inventories Extraordinary Gain Prior Period AdjustmentDepr. Error Long-term Notes Payable Equipment Bonds Payable Accumulated DepreciationEquipment Franchise (net of $80,000 amortization) Common Stock ($5 par) Treasury Stock Patent (net of $30,000 amortization) Retained Earnings Additional Paid-in Capital Totals $ Credits 98,500 $4,050,000 76,500 2,400,000 149,500 138,500 45,000 227,500 1,000,000 31,500 130,000 520,000 68,000 48,000 217,500 76,000 12,500 450,000 105,500 298,500 40,000 70,000 450,000 300,000 500,000 30,000 80,000 500,000 95,500 97,500 109,000 40,000 $6,227,500 $6,227,500 5 c05BExercises.qxd 6 11/20/12 11:36 AM Page 6 Chapter 5 Balance Sheet and Statement of Cash Flows Instructions Prepare a balance sheet at December 31, 2014, for Do Corporation. Ignore income taxes. 5 E5-13B (Statement of Cash FlowsClassifications) The major classifications of activities reported in the statement of cash flows are operating, investing, and financing. Classify each of the transactions listed below as: 1. 2. 3. 4. 5. Operating activityadd to net income. Operating activitydeduct from net income. Investing activity. Financing activity. Not reported as a cash flow. The transactions are as follows. (a) (b) (c) (d) (e) (f) (g) 6 Depreciation of machinery. Payment of cash dividends. Purchase of treasury stock. Decrease in accounts payable during the year. Increase in accounts receivable during the year. Loss on sale of equipment. Exchange of furniture for office equipment. (h) (i) (j) (k) (l) (m) Sale of equipment. Purchase of land and building. Amortization of patent. Issuance of bonds for plant assets. Redemption of bonds. Issuance of capital stock. E5-14B (Preparation of a Statement of Cash Flows) The comparative balance sheets of Duong Inc. at the beginning and the end of the year 2014 appear below. DUONG INC. BALANCE SHEETS Assets Dec. 31, 2014 $ 26,000 176,000 44,000 (22,000) $224,000 $ 40,000 200,000 76,000 $ 30,000 160,000 34,000 $316,000 Total $ 90,000 182,000 78,000 (34,000) $316,000 Cash Accounts receivable Equipment Less: Accumulated depreciation Jan. 1, 2014 Inc./Dec. $224,000 $64,000 6,000 34,000 12,000 Inc. Inc. Inc. Inc. Liabilities and Stockholders' Equity Accounts payable Common stock Retained earnings Total $10,000 Inc. 40,000 Inc. 42,000 Inc. Net income of $88,000 was reported, and dividends of $46,000 were paid in 2014. New equipment was purchased and none was sold. Instructions Prepare a statement of cash flows for the year 2014. 6 7 E5-15B (Preparation of a Statement of Cash Flows) Presented below is a condensed version of the comparative balance sheets for Garcia Corporation for the last two years at December 31. 2014 Cash Accounts receivable Investments Equipment Less: Accumulated depreciation Current liabilities Capital stock Retained earnings 2013 $442,500 450,000 130,000 745,000 (265,000) 335,000 400,000 767,500 $195,000 462,500 185,000 600,000 (222,500) 377,500 400,000 442,500 Additional information: Investments were sold at a loss (not extraordinary) of $25,000; no equipment was sold; cash dividends paid were $75,000; and net income was $400,000. c05BExercises.qxd 11/20/12 11:36 AM Page 7 B Exercises Instructions (a) Prepare a statement of cash flows for 2012 for Garcia Corporation. (b) Determine Garcia Corporation's free cash flow. 6 7 E5-16B (Preparation of a Statement of Cash Flows) A comparative balance sheet for Gokhale Corporation is presented below. December 31 Assets 2014 $ 33,000 99,000 283,500 165,000 300,000 (63,000) $817,500 $ 51,000 225,000 321,000 298,500 $ 70,500 300,000 246,000 201,000 $895,500 Total $109,500 123,000 270,000 106,500 390,000 (103,500) $895,500 Cash Accounts receivable Inventories Land Equipment Accumulated depreciationequipment 2013 $817,500 Liabilities and Stockholders' Equity Accounts payable Bonds payable Common stock ($1 par) Retained earnings Total Additional information: 1. 2. 3. Net income for 2014 was $187,500. Cash dividends of $90,000 were declared and paid. Bonds payable amounting to $75,000 were retired through issuance of common stock. Instructions (a) Prepare a statement of cash flows for 2014 for Gokhale Corporation. (b) Determine Gokhale Corporation's current cash debt coverage ratio, cash debt coverage ratio, and free cash flow. Comment on its liquidity and financial flexibility. 3 6 E5-17B (Preparation of a Statement of Cash Flows and a Balance Sheet) Gonzalvo Corporation's balance sheet at the end of 2013 included the following items. Current assets Land Building Equipment Accum. depr.building Accum. depr.equipment Patents Total $282,000 36,000 144,000 108,000 (36,000) (13,200) 48,000 Current liabilities Bonds payable Common stock Retained earnings Total $180,000 120,000 216,000 52,800 $568,800 $568,800 The following information is available for 2014. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Treasury stock was purchased at a cost of $13,200. Cash dividends of $36,000 were declared and paid. A long-term investment in stock was purchased for $19,200. Current assets other than cash increased by $34,800. Current liabilities increased by $15,600. Depreciation expense was $4,800 on the building and $10,800 on equipment. Net income was $66,000. Bonds payable of $60,000 were issued. An addition to the building was completed at a cost of $32,400. Patent amortization was $3,000. Equipment (cost $24,000 and accumulated depreciation $9,600) was sold for $12,000. Instructions (a) Prepare a statement of cash flows for 2014. (b) Prepare a balance sheet at December 31, 2014. 7 c05BExercises.qxd 8 6 11/20/12 11:36 AM Page 8 Chapter 5 Balance Sheet and Statement of Cash Flows 7 E5-18B (Preparation of a Statement of Cash Flows Analysis) A comparative balance sheet for Harrison Corporation is presented below. HARRISON CORPORATION BALANCE SHEETS December 31 Assets Cash Accounts receivable Inventory Building Accumulated depreciationbuilding Land Total 2014 2013 $ 36,500 41,000 90,000 130,000 (34,500) 35,500 $ 11,000 33,000 94,500 100,000 (21,000) 55,000 $ 298,500 $ 272,500 $ 17,000 75,000 107,000 99,500 $ 23,500 100,000 82,000 67,000 $ 298,500 Inc/Dec. $272,500 $ 25,500 8,000 4,500 30,000 13,500 19,500 Inc. Inc. Dec. Inc. Inc. Dec. 6,500 25,000 25,000 32,500 Dec. Dec. Inc. Inc. Liabilities and Stockholders' Equity Accounts payable Bonds payable Common stock ($1 par) Retained earnings Total Additional information: Cash dividends of $30,000 were declared and paid. Bonds payable of $25,000 were converted to common stock. Instructions (a) Prepare a statement of cash flows for 2014. (b) Compute the current ratio (current assets current liabilities) as of December 31, 2013 and 2014 and compute free cash flow for the year 2014. (c) In light of the analysis in (b), comment on Harrison's liquidity and financial flexibility. c05BProblems.indd Page 1 07/12/12 11:54 AM user-f409 B PROBLEMS 3 P5-1B (Preparation of a Classified Balance Sheet, Periodic Inventory) Presented below is a list of accounts in alphabetical order. Accounts Receivable Accumulated DepreciationBuildings Accumulated DepreciationEquipment Advances to Employees Advertising Expense Allowance for Doubtful Accounts Bond Sinking Fund Bonds Payable Buildings Cash in Bank Cash on Hand Cash Surrender Value of Life Insurance Commission Expense Common Stock Debt Investments (trading) Discount on Bonds Payable Dividends Payable Equipment Freight-in Gain from Condemnation Interest Receivable InventoryBeginning InventoryEnding Land Land for Future Plant Site Loss on Sale of Equipment Non-controlling Interest Notes Payable (due next year) Patents Payroll Taxes Payable Pension Obligations Petty Cash Preferred Stock Paid-in Capital in Excess of ParCommon Stock Prepaid Rent Purchases Purchase Returns and Allowances Rent Revenue Retained Earnings Sales Sales Discounts Salaries and Wages Expense (sales) Salaries and Wages Payable Trademarks Treasury Stock (at cost) Unearned Rent Revenue Instructions Prepare a classified balance sheet in good form. (No monetary amounts are to be shown.) 3 P5-2B (Balance Sheet Preparation) Presented below are a number of balance sheet items for Roma, Inc., for the current year, 2014. Goodwill Payroll taxes payable Bonds payable Discount on bonds payable Cash Land Notes receivable Notes payable (to banks) Accounts payable Retained earnings Income taxes receivable Unsecured notes payable (long-term) $ 210,000 65,300 500,000 35,000 61,000 351,000 160,500 264,900 347,000 ? 45,600 1,300,000 Accumulated depreciationequipment Inventory Rent payable (short-term) Income tax payable Rent payable (long-term) Common stock, $1 par value Preferred stock, $25 par value Prepaid expenses Equipment Equity investments (trading) Accumulated depreciationbuildings Buildings $ 467,000 398,600 40,000 110,800 80,000 250,000 1,250,000 68,760 1,386,000 375,000 361,200 2,800,000 Instructions Prepare a classified balance sheet in good form. Common stock authorized was 1,000,000 shares, and preferred stock authorized was 50,000 shares. Assume that notes receivable and notes payable are short-term, unless stated otherwise. Cost and fair value of equity investments (trading) are the same. 1 c05BProblems.indd Page 2 07/12/12 11:54 AM user-f409 2 Chapter 5 Balance Sheet and Statement of Cash Flows 3 P5-3B (Balance Sheet Adjustment and Preparation) The adjusted trial balance of Black and Blue Company and other related information for the year 2014 are presented on the next page. BLACK AND BLUE COMPANY ADJUSTED TRIAL BALANCE DECEMBER 31, 2014 Debits Cash Accounts Receivable Allowance for Doubtful Accounts Prepaid Insurance Inventory Equity Investments (long-term) Land Construction in Process (building) Patents Equipment Accumulated DepreciationEquipment Discount on Bonds Payable Accounts Payable Accrued Expenses Notes Payable Bonds Payable Common Stock Paid-in Capital in Excess of ParCommon Stock Retained Earnings $ Credits 26,500 270,600 $ 17,700 6,200 241,300 131,000 65,000 285,000 76,000 325,000 160,000 33,000 187,000 61,200 130,000 300,000 250,000 186,000 167,700 $1,459,600 $1,459,600 Additional information: 1. The FIFO method of inventory value is used. 2. The cost and fair value of the long-term equity investments is the same. 3. The amount of the Construction in Progress account represents the costs expended to date on a building in the process of construction. (The company rents factory space at the present time.) The land on which the building is being constructed cost $65,000, as shown in the trial balance. 4. The patents were purchased by the company at a cost of $100,000 and are being amortized on a straight-line basis. 5. Of the discount on bonds payable, $3,000 will be amortized in 2015. 6. The notes payable represent bank loans that are secured by long-term equity investments carried at $131,000. These bank loans are due in 2015. 7. The bonds payable bear interest at 6% payable every December 31, and are due January 1, 2025. 8. 500,000 shares of common stock of a par value of $1 were authorized, of which 250,000 shares were issued and outstanding. Instructions Prepare a balance sheet as of December 31, 2014, so that all important information is fully disclosed. c05BProblems.indd Page 3 07/12/12 11:54 AM user-f409 B Problems 3 P5-4B (Preparation of a Corrected Balance Sheet) Presented below is the balance sheet of Maple Corporation as of December 31, 2014. 3 MAPLE CORPORATION BALANCE SHEET DECEMBER 31, 2014 Assets Goodwill (Note 2) Buildings (Note 1) Inventory Land Accounts receivable Treasury stock (6,000 shares) Cash on hand Assets allocated to trustee for plant expansion Cash in bank Equity investments (trading) $ 200,000 2,260,000 216,500 687,000 296,000 68,500 134,600 50,000 136,000 $4,048,600 Equities Notes payable (Note 3) Common stock, authorized and issued, 100,000 shares, no par Non-controlling Interest Retained earnings Appreciation capital (Note 1) Income tax payable Reserve for depreciation recorded to date on the building $ 800,000 650,000 68,000 1,276,600 425,000 119,000 710,000 $4,048,600 Note 1: Buildings are stated at cost, except for one building that was recorded at appraised value. The excess of appraisal value over cost was $425,000. Depreciation has been recorded based on cost. Note 2: : Goodwill in the amount of $200,000 was recognized because the company believed that book value was not an accurate representation of the fair value of the company. The gain of $200,000 was credited to Retained Earnings. Note 3: Notes payable are long-term except for the current installment due of $125,000. Instructions Prepare a corrected classified balance sheet in good form. The notes above are for information only. 3 P5-5B (Balance Sheet Adjustment and Preparation) Presented below is the balance sheet of Barbie Corporation for the current year, 2014. BARBIE CORPORATION BALANCE SHEET DECEMBER 31, 2014 Current assets Investments Property, plant, and equipment Intangible assets $ 865,000 520,000 1,650,000 754,000 Current liabilities Long-term liabilities Stockholders' equity $ 685,000 1,500,000 1,604,000 $3,789,000 $3,789,000 The following information is presented. 1. The current assets section includes: cash $71,000, accounts receivable $363,000 less $21,000 for allowance for doubtful accounts, inventories $488,000, and unearned revenue $36,000. Inventories are stated on the lower-of-average-cost-or-market. 2. The investments section includes: the cash surrender value of a life insurance contract $120,000; investments in common stock, short-term (trading) $210,000 and long-term (available-for-sale) $90,000; and bond sinking fund $100,000. The cost and fair value of investments in common stock are the same. c05BProblems.indd Page 4 07/12/12 11:54 AM user-f409 4 Chapter 5 Balance Sheet and Statement of Cash Flows 3. Property, plant, and equipment includes: buildings $1,060,000 less accumulated depreciation $460,000; equipment $810,000 less accumulated depreciation $420,000; land $500,000; and land held for future use $160,000. 4. Intangible assets include: a patent $464,000; goodwill $200,000; and discount on bonds payable $90,000. 5. Current liabilities include: accounts payable $240,000; notes payableshort-term $160,000 and longterm $240,000; and taxes payable $45,000. 6. Long-term liabilities are composed solely of 5% bonds payable due 2022. 7. Stockholders' equity has: preferred stock, $100 par value, authorized 100,000 shares, issued 5,000 shares for $500,000; and common stock, $1.00 par value, authorized 1,000,000 shares, issued 200,000 shares at an average price of $4.52. In addition, the corporation has retained earnings of $205,000. Instructions Prepare a balance sheet in good form, adjusting the amounts in each balance sheet classification as affected by the information given above. 3 6 7 P5-6B (Preparation of a Statement of Cash Flows and a Balance Sheet) Maroon Six Inc. had the balance sheet shown below at December 31, 2013. MAROON SIX INC. BALANCE SHEET DECEMBER 31, 2013 Cash Accounts receivable Investments Plant assets (net) Land $ 31,000 56,800 86,000 138,500 66,000 Accounts payable Notes payable (long-term) Common stock Retained earnings $ 61,000 76,000 200,000 41,300 $378,300 $378,300 During 2014, the following occurred. 1. Maroon Six Inc. sold part of its investment portfolio for $20,000. This transaction resulted in a loss of $2,100 for the firm. The company classifies its investments as available-for-sale. 2. A tract of land was purchased for $25,000 cash. 3. Long-term notes payable in the amount of $30,000 were retired before maturity by paying $30,000 cash. 4. An additional $43,000 in common stock was issued at par. 5. Dividends of $20,000 were declared and paid to stockholders. 6. Net income for 2014 was $21,000 after allowing for depreciation of $16,000. 7. Land was purchased through the issuance of $61,000 in notes payable. 8. At December 31, 2014, Cash was $46,100, Accounts Receivable was $61,800, and Accounts Payable remained at $61,000. Instructions (a) Prepare a statement of cash flows for 2014. (b) Prepare an unclassified balance sheet as it would appear at December 31, 2014. (c) How might the statement of cash flows help the user of the financial statements? Compute two cash flow ratios. c05BProblems.indd Page 5 07/12/12 11:54 AM user-f409 B Problems 5 1 3 6 7 P5-7B (Preparation of a Statement of Cash Flows and Balance Sheet) Ficus Inc. had the following balance sheet at December 31, 2013. FICUS INC. BALANCE SHEET DECEMBER 31, 2013 Cash Accounts receivable Investments Plant assets (net) Land $ 31,000 56,800 86,000 138,500 66,000 Accounts payable $ 61,000 Notes payable (long-term) 76,000 Common stock 200,000 Retained earnings 41,300 $378,300 $378,300 During 2014, the following occurred. 1. 2. 3. 4. 5. 6. 7. Ficus liquidated its available-for-sale investment portfolio at a gain of $15,000. A tract of land was purchased for $61,000 cash. An additional $15,200 in common stock was issued at par. Dividends totaling $41,000 were declared and paid to stockholders. Net income for 2014 was $46,000, including $8,000 in depreciation expense. Land was purchased through the issuance of $195,000 in additional notes payable. At December 31, 2014, Cash was $68,000, Accounts Receivable was $84,000, and Accounts Payable was $72,000. Instructions (a) Prepare a statement of cash flows for the year 2014 for Ficus. (b) Prepare the balance sheet as it would appear at December 31, 2014. (c) Compute Ficus' free cash flow and the current cash debt coverage ratio for 2014. (d) Use the analysis of Ficus to illustrate how information in the balance sheet and statement of cash flows helps the user of the financial statements