What types of contractual obligations must be disclosed in great detail in the notes to the balance sheet? Why do you think these detailed provisions should be disclosed?
Four items for which disclosure is mandatory on the financial statement are:
A plan in which the employee and employer both contribute a specific amount when the employee is working, and the employee will benefit from this account after retirement is known as a pension plan.
All these disclosures are necessary because these contracts are long-term, and the company’s well-being depends on this.
Presented below is a condensed version of the comparative balance sheets for Zubin Mehta Corporation for the last two years at December 31.
Investments were sold at a loss of $10,000; no equipment was sold; cash dividends paid were $30,000; and net income was $160,000.
(a) Prepare a statement of cash flows for 2017 for Zubin Mehta Corporation.
(b) Determine Zubin Mehta Corporation’s free cash flow.
(L03) (Preparation of a Classified Balance Sheet, Periodic Inventory) Presented below is a list of accounts in alphabetical order.
Accumulated Depreciation—Equipment Land for Future Plant Site
Accumulated Other Comprehensive Income - Loss from Flood
Advances to Employees- Noncontrolling Interest
Advertising Expense - Notes Payable (due next year)
Allowance for Doubtful Accounts - Paid-in Capital in Excess of Par— preferred stock
Bond Sinking Fund -Patents
Bonds Payable - Payroll Taxes Payable
Buildings - Pension Liability
Cash (in bank) - Petty Cash
Cash (on hand) - Preferred Stock
Cash Surrender Value of Life Insurance -Premium on Bonds Payable
Commission Expense- Prepaid Rent
Common Stock- Purchase Returns and Allowances
Copyrights - Purchases
Debt Investments (trading)- Retained Earnings
Dividends Payable- Salaries and Wages Expense (sales)
Equipment - Salaries and Wages Payable
Freight-In Sales- Discounts
Gain on Disposal of Equipment- Sales Revenue
Interest Receivable - Treasury Stock (at cost)
Inventory—Beginning Unearned Subscriptions Revenue
Instructions Prepare a classified balance sheet in good form. (No monetary amounts are to be shown.)
(Critique of Balance Sheet Format and Content) The following is the balance sheet of Sameed Brothers Corporation (000s omitted).
SAMEED BROTHERS CORPORATION
DECEMBER 31, 2017
Stock investment in subsidiary company
Property, Plant and Equipment
Building and land
Less: Reserve for depreciation
Cash Surrender value of life insurance
Liabilities and Stockholder’s equity
Reserve for income taxes
Customer’s account with credit balance
Unamortized premium on bonds payable
Long term liabilities
Common stock at par $5
Cash Dividend declared
Total liabilities and Stockholder’s equity
Evaluate the balance sheet presented. State briefly the proper treatment of any item criticized
E5-8 (L02) (Current vs. Long-term Liabilities) Frederic Chopin Corporation is preparing its December 31, 2017, balance sheet. The following items may be reported as either a current or long-term liability.
1. On December 15, 2017, Chopin declared a cash dividend of $2.50 per share to stockholders of record on December 31. The dividend is payable on January 15, 2018. Chopin 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 $100,000,000 are outstanding. The bonds pay 12% interest every September 30 and mature in installments of $25,000,000 every September 30, beginning September 30, 2018.
3. At December 31, 2016, customer advances were $12,000,000. During 2017, Chopin collected $30,000,000 of customer advances; advances of $25,000,000 should be recognized in income.
Instructions For each item above, indicate the dollar amounts to be reported as a current liability and as a long-term liability if any.
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