Presented below is a list of accounts in alphabetical order

Intermediate Accounting Problems Ch3

P 3-1

Balance sheet preparation

Presented below is a list of balance sheet accounts in alphabetical order.

Accounts payable

Inventories

Accounts receivable

Land (in use)

Accumulated depreciation—buildings

Long-term investments

Accumulated depreciation—equipment

Notes payable (due in 6 months)

Allowance for uncollectible accounts

Notes receivable (due in 2 years)

Bond sinking fund

Patent

Bonds payable (due in 10 years)

Preferred stock

Buildings

Prepaid expenses

Cash

Rent payable (current)

Common stock

Retained earnings

Copyright

Short-term investments

Equipment

Taxes payable

Interest receivable (due in three months)

Wages payable

Required:

Prepare a classified balance sheet ignoring monetary amounts.

P 3-2

Balance sheet preparation; missing elements

The data listed below are taken from a balance sheet of Trident Corporation. Some amounts, indicated by question marks, have been intentionally omitted.

Required:

1.

Determine the missing amounts.

2.

Prepare Trident's classified balance sheet.

P 3-3

Balance sheet preparation

p. 155

The following is a December 31, 2011, post-closing trial balance for Almway Corporation.

Additional information:

1.

The investment account includes an investment in common stock of another corporation of $30,000 which management intends to hold for at least three years. The balance of these investments are intended to be sold in the coming year.

2.

The land account includes land which cost $25,000 that the company has not used and is currently listed for sale.

3.

The cash account includes $15,000 set aside in a fund to pay bonds payable that mature in 2014 and $23,000 set aside in a three-month Treasury bill.

4.

The notes payable account consists of the following:

a.

a $30,000 note due in six months.

b.

a $50,000 note due in six years.

c.

a $50,000 note due in five annual installments of $10,000 each, with the next installment due February 15, 2012.

5.

The $60,000 balance in accounts receivable is net of an allowance for uncollectible accounts of $8,000.

6.

The common stock account represents 100,000 shares of no par value common stock issued and outstanding. The corporation has 500,000 shares authorized.

Required:

Prepare a classified balance sheet for the Almway Corporation at December 31, 2011.

P 3-4

Balance sheet preparation

The following is a December 31, 2011, post-closing trial balance for the Weismuller Publishing Company.

p. 156

Additional information:

1.

Prepaid expenses include $120,000 paid on December 31, 2011, for a two-year lease on the building that houses both the administrative offices and the manufacturing facility.

2.

Investments include $30,000 in Treasury bills purchased on November 30, 2011. The bills mature on January 30, 2012. The remaining $110,000 includes investments in marketable equity securities that the company intends to sell in the next year.

3.

Unearned revenue represents customer prepayments for magazine subscriptions. Subscriptions are for periods of one year or less.

4.

The notes payable account consists of the following:

a.

a $40,000 note due in six months.

b.

a $100,000 note due in six years.

c.

a $60,000 note due in three annual installments of $20,000 each, with the next installment due August 31, 2012.

5.

The common stock account represents 400,000 shares of no par value common stock issued and outstanding. The corporation has 800,000 shares authorized.

Required:

Prepare a classified balanced sheet for the Weismuller Publishing Company at December 31, 2011.

P 3-5

Balance sheet preparation

The following is a June 30, 2011, post-closing trial balance for Excell Company.

Additional information:

1.

The short-term investments account includes $18,000 in U.S. treasury bills purchased in May. The bills mature in July.

2.

The accounts receivable account consists of the following:

3.

The notes payable account consists of two notes of $50,000 each. One note is due on September 30, 2011, and the other is due on November 30, 2012.

4.

The mortgage payable is payable in semiannual installments of $5,000 each plus interest. The next payment is due on October 31, 2011. Interest has been properly accrued and is included in accrued expenses.

5.

Five hundred thousand shares of no par common stock are authorized, of which 200,000 shares have been issued and are outstanding.

6.

The land account includes $50,000 representing the cost of the land on which the company's office building resides. The remaining $25,000 is the cost of land that the company is holding for investment purposes.

Required:

Prepare a classified balance sheet for the Excell Company at June 30, 2011.

P 3-6

Balance sheet preparation; disclosures

p. 157

The following is a December 31, 2011, post-closing trial balance for the Vosburgh Electronics Corporation.

Additional information:

1.

The common stock represents 1 million shares of no par stock authorized, 500,000 shares issued and outstanding.

2.

The loans to employees are due on June 30, 2012.

3.

The note receivable is due in installments of $50,000, payable on each September 30. Interest is payable annually.

4.

Short-term investments consist of marketable equity securities that the company plans to sell in 2012 and $50,000 in treasury bills purchased on December 15 of the current year that mature on February 15, 2012. Long-term investments consist of marketable equity securities that the company does not plan to sell in the next year.

5.

Unearned revenue represents customer payments for extended service contracts. Eighty percent of these contracts expire in 2012, the remainder in 2013.

6.

Notes payable consists of two notes, one for $100,000 due on January 15, 2013, and another for $200,000 due on June 30, 2014.

Required:

1.

Prepare a classified balance sheet for Vosburgh at December 31, 2011.

2.

Identify the items that would require additional disclosure, either on the face of the balance sheet or in a disclosure note.

P 3-7

Balance sheet preparation; errors

The following balance sheet for the Hubbard Corporation was prepared by the company:

p. 158

Additional information:

1.

The buildings, land, and machinery are all stated at cost except for a parcel of land that the company is holding for future sale. The land originally cost $50,000 but, due to a significant increase in market value, is listed at $120,000. The increase in the land account was credited to retained earnings.

2.

Marketable equity securities consist of stocks of other corporations and are recorded at cost, $20,000 of which will be sold in the coming year. The remainder will be held indefinitely.

3.

Notes payable are all long-term. However, a $100,000 note requires an installment payment of $25,000 due in the coming year.

4.

Inventories are recorded at current resale value. The original cost of the inventories is $160,000.

Required:

Prepare a corrected classified balance sheet for the Hubbard Corporation at December 31, 2011.

P 3-8

Balance sheet; errors; missing amounts

The following incomplete balance sheet for the Sanderson Manufacturing Company was prepared by the company's controller. As accounting manager for Sanderson, you are attempting to reconstruct and revise the balance sheet.

p. 159

Additional information ($ in 000s):

1.

Certain records that included the account balances for the patent and shareholders' equity items were lost. However, the controller told you that a complete, preliminary balance sheet prepared before the records were lost showed a debt to equity ratio of 1.2. That is, total liabilities are 120% of total shareholders' equity. Retained earnings at the beginning of the year was $4,000. Net income for 2011 was $1,560 and $560 in cash dividends were declared and paid to shareholders.

2.

Management intends to sell the investments in the next six months.

3.

Interest on both the note and the bonds is payable annually.

4.

The note payable is due in annual installments of $1,000 each.

5.

Unearned revenue will be earned equally over the next two fiscal years.

6.

The common stock represents 400,000 shares of no par stock authorized, 250,000 shares issued and outstanding.

Required:

Prepare a complete, corrected, classified balance sheet.

P 3-9

Balance sheet preparation

Presented below is the balance sheet for HHD, Inc., at December 31, 2011.

The captions shown in the summarized statement above include the following:

a.

Current assets: cash, $150,000; accounts receivable, $200,000; inventories, $225,000; and prepaid insurance, $25,000.

b.

Investments: investments in common stock, short term, $90,000, and long term, $160,000; and bond sinking fund, $250,000.

c.

Property, plant, and equipment: buildings, $1,500,000 less accumulated depreciation, $600,000; equipment, $500,000 less accumulated depreciation, $200,000; and land, $800,000.

d.

Intangible assets: patent, $110,000; and copyright, $90,000.

e.

Current liabilities: accounts payable, $100,000; notes payable, short term, $150,000, and long term, $90,000; and taxes payable, $60,000.

f.

Long-term liabilities: bonds payable due 2016.

g.

Shareholders' equity: common stock, $1,000,000; retained earnings, $800,000. Five hundred thousand shares of no par common stock are authorized, of which 200,000 shares were issued and are outstanding.

Required:

Prepare a corrected classified balance sheet for HHD, Inc., at December 31, 2011.

P 3-10

Balance sheet preparation

Melody Lane Music Company was started by John Ross early in 2011. Initial capital was acquired by issuing shares of common stock to various investors and by obtaining a bank loan. The company operates a retail store that sells records, tapes, and compact discs. Business was so good during the first year of operations that John is considering opening a second store on the other side of town. The funds necessary for expansion will come from a new bank loan. In order to approve the loan, the bank requires financial statements.

John asks for your help in preparing the balance sheet and presents you with the following information for the year ending December 31, 2011:

c.

The bank loan was made on March 31, 2011. A note was signed requiring payment of interest and principal on March 31, 2012. The interest rate is 12%.

p. 160

d.

The equipment and furniture were purchased on January 3, 2011, and have an estimated useful life of 10 years with no anticipated salvage value. Depreciation per year is $4,000.

e.

Inventories on hand at the end of the year cost $100,000.

f.

Amounts owed at December 31, 2011, were as follows:

g.

Rent on the store building is $1,000 per month. On December 1, 2011, four months' rent was paid in advance.

h.

Net income for the year was $76,000. Assume that the company is not subject to federal, state, or local income tax.

i.

One hundred thousand shares of no par common stock are authorized, of which 20,000 shares were issued and are outstanding.

Required:

Prepare a balance sheet at December 31, 2011.