Acct 3101 Chapter 05
Acct 3101 Chapter 05
Acct 3101 Chapter 05
Uhura Company
Balance Sheet
December 31, 2007
Assets
Current assets
Cash .................................................................. $230,000
Trading securitiesat fair value ............. 120,000
Accounts receivable .................................... $357,000
Less: Allowance for doubtful
accounts................................................ 17,000 340,000
Inventories, at lower of average
cost or market ............................................ 401,000
Prepaid expenses ......................................... 12,000
Total current assets .............................. $1,103,000
Long-term investments
Land held for future use............................. 175,000
Cash surrender value of life
insurance ..................................................... 90,000 265,000
Intangible assets
Goodwill........................................................... 80,000
Total assets ............................................ $2,178,000
5-20
EXERCISE 5-5 (Continued)
Current liabilities
Accounts payable ........................................ $ 135,000
Notes payable (due next year) ................. 125,000
Rent payable .................................................. 49,000
Total current liabilities......................... $309,000
Long-term liabilities
Bonds payable .............................................. $500,000
Add: Premium on bonds payable ........... 53,000 $553,000
Pension obligation....................................... 82,000 635,000
Total liabilities ........................................ 944,000
Stockholders equity
Common stock, $1 par, authorized
400,000 shares, issued 290,000
shares ........................................................... 290,000
Additional paid-in capital........................... 160,000 450,000
Retained earnings........................................ 784,000*
Total stockholders equity.................. 1,234,000
Total liabilities and stock-
holders equity .................................... $2,178,000
5-21
EXERCISE 5-6 (3035 minutes)
Geronimo Company
Balance Sheet
July 31, 2007
Assets
Current assets
Cash .................................................................. $60,000*
Accounts receivable .................................... $46,700**
Less: Allowance for doubtful
accounts................................................ 3,500 43,200
Inventories ...................................................... 65,300***
Total current assets .............................. $168,500
Long-term investments
Bond sinking fund........................................ 15,000
Intangible assets
Patents ............................................................. 21,000
Total assets ............................................ $288,500
5-22
EXERCISE 5-6 (Continued)
****($44,000 + $8,000)
5-23
EXERCISE 5-11 (2530 minutes)
Kelly Corporation
Balance Sheet
December 31, 2007
Assets
Current assets
Cash.................................................................................. $ 6,850
Office supplies .............................................................. 1,200
Prepaid insurance........................................................ 1,000
Total current assets ............................................ $ 9,050
Equipment ............................................................................. 48,000
Less: Accumulated depreciation ................................... 4,000 44,000
Intangible assetstrademark ......................................... 950
Total assets............................................................ $54,000
5-29
EXERCISE 5-15 (2535 minutes)
5-34
EXERCISE 5-16 (2025 minutes)
5-35
EXERCISE 5-16 (Continued)
$132,000
=
($34,000 + $47,000) / 2
= 3.26 to 1
$184,000 + $247,000
$132,000 =
2
.61 to 1
5-36
EXERCISE 5-17 (3035 minutes)
5-37
EXERCISE 5-17 (Continued)
b The amount determined for current assets could be computed last and then is a
plug figure. That is, total liabilities and stockholders equity is computed because
information is available to determine this amount. Because the total assets amount is
the same as total liabilities and stockholders equity amount, the amount of total
assets is determined. Information is available to compute all the asset amounts except
current assets and therefore current assets can be determined by deducting the total
of all the other asset balances from the total asset balance (i.e., $551,000 $37,500
$201,000 $16,000). Another way to compute this amount, given the information, is
that beginning current assets plus the $29,000 increase in current assets other than
cash plus the $32,500 increase in cash equals $296,500.
5-38
EXERCISE 5-18 (2535 minutes)
2007 2006
(b) Current ratio 6.3 6.73
$126,000 $101,000
$ 20,000 $ 15,000
(c) Although, Madrasahs current ratio has declined from 2006 to 2007, it is
still in excess of 6. It appears the company has good liquidity and
financial flexibility.
5-39
PROBLEM 5-4
Assets
Current assets
Cash............................................................... $175,900
Accounts receivable................................. 170,000
Inventories................................................... 312,100
Total current assets........................... $658,000
Long-term investments
Assets allocated to trustee for
expansion:
Cash in bank ............................................... 70,000
U.S. Treasury notes, at fair value......... 138,000 208,000
Current liabilities
Notes payablecurrent installment....... $100,000
Federal income taxes payable .............. 75,000
Total current liabilities...................... $ 175,000
5-47
PROBLEM 5-4 (Continued)
Long-term liabilities
Notes payable ............................................... 500,000b
Total liabilities......................................... 675,000
Stockholders equity
Common stock, no par; 1,000,000
shares authorized and issued;
950,000 shares outstanding................... $1,150,000
Retained earnings ........................................ 538,000c
1,688,000
Less: Treasury stock, at cost (50,000
shares) .......................................................... (87,000)
Total stockholders equity .................. 1,601,000
Total liabilities and
stockholders equity.......................... $2,276,000
a
$1,640,000 $570,000 (to eliminate the excess of appraisal value over cost
from the Buildings account. Note that the appreciation capital account is
also deleted.)
b
$600,000 $100,000 (to reclassify the currently maturing portion of the
notes payable as a current liability.)
c
$658,000 $120,000 (to remove the value of goodwill from retained
earnings. Note 2 indicates that retained earnings was credited. Note that
the goodwill account is also deleted.)
5-48