BE5-8 (L03) Included in Adams Company’s December 31, 2017, trial balance are the following accounts: Accounts Payable $220,000, Pension Liability $375,000, Discount on Bonds Payable $29,000, Unearned Rent Revenue $41,000, Bonds Payable $400,000, Salaries and Wages Payable $27,000, Interest Payable $12,000, and Income Taxes Payable $29,000. Prepare the current liabilities section of the balance sheet.
The current liabilities of the business entity total $329,000.
Discount on bonds payable can be defined as the difference in the value at which bonds are issued and their par value. It is reduced from the value of bonds in the balance sheet.
Unearned rent revenue
Salaries and wages payable
Income tax payable
E5-6 (L02,3) (Corrections of a Balance Sheet) The bookkeeper for Geronimo Company has prepared the following balance sheet as of July 31, 2017.
As of July 31, 2017
Notes and accounts payable
Account receivable (net)
The following additional information is provided.
1. Cash includes $1,200 in a petty cash fund and $15,000 in a bond sinking fund.
2. The net accounts receivable balance is comprised of the following two items: (a) accounts receivable $44,000 and (b) allowance for doubtful accounts $3,500.
3. Inventory costing $5,300 was shipped out on consignment on July 31, 2017. The ending inventory balance does not include the consigned goods. Receivables in the amount of $5,300 were recognized on these consigned goods.
4. Equipment had a cost of $112,000 and an accumulated depreciation balance of $28,000.
5. Income taxes payable of $6,000 were accrued on July 31. Geronimo 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 income taxes payable amount.
Prepare a corrected classified balance sheet as of July 31, 2017, from the available information, adjusting the account balances using the additional information.
Early in January 2018, Hopkins Company is preparing for a meeting with its bankers to discuss a loan request. Its bookkeeper provided the following accounts and balances at December 31, 2017.
Accounts receivable (net)
Notes and Accounts payable
Note payable (due 2019)
Except for the following items, Hopkins has recorded all adjustments in its accounts.
1. Cash includes $500 petty cash and $15,000 in a bond sinking fund.
2. Net accounts receivable is comprised of $52,000 in accounts receivable and $13,500 in allowance for doubtful accounts.
3. Equipment had a cost of $112,000 and accumulated depreciation of $28,000.
4. On January 8, 2018, one of Hopkins’ customers declared bankruptcy. At December 31, 2017, this customer owed Hopkins $9,000.
Prepare a corrected December 31, 2017, balance sheet for Hopkins Company.
Hopkins’ bank is considering granting an additional loan in the amount of $45,000, which will be due December 31, 2018. How can the information in the balance sheet provide useful information to the bank about Hopkins’ ability to repay the loan?
In the upcoming meeting with the bank, Hopkins plans to provide additional information about the fair value of its equipment and some internally generated intangible assets related to its customer lists. This information indicates that Hopkins has significant unrealized gains on these assets, which are not reflected on the balance sheet. What objections is the bank likely to raise about the usefulness of this information in evaluating Hopkins for the loan renewal?
Grant Wood Corporation’s balance sheet at the end of 2016 included the following items.
Current assets ($Cash 82,000)
Accumulated depreciation – Building
Accumulated depreciation – Equipment
The following information is available for 2017.
1. Net income was $55,000.
2. Equipment (cost $20,000 and accumulated depreciation $8,000) was sold for $10,000.
3. Depreciation expense was $4,000 on the building and $9,000 on equipment.
4. Patent amortization was $2,500.
5. Current assets other than cash increased by $29,000. Current liabilities increased by $13,000.
6. An addition to the building was completed at a cost of $27,000.
7. A long-term investment in stock was purchased for $16,000.
8. Bonds payable of $50,000 were issued.
9. Cash dividends of $30,000 were declared and paid.
10. Treasury stock was purchased at a cost of $11,000.
(Show only totals for current assets and current liabilities.)
(a) Prepare a statement of cash flows for 2017.
(b) Prepare a balance sheet at December 31, 2017.
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