Week 3 exercises | Accounting homework help

WEEK 3 EXERCISES

 

Brief Exercise 5-2 Koch Corporation’s

Exercise 5-1 Deep Blue Something, Inc

Exercise 5-4  Denis Savard Inc

Exercise 5-7 Yasunari Kawabata Company

Exercise 5-12 Scott Butler Corporation

Exercise 24-2 For each of the following subsequent

Exercise 24-3 Carlton Company

Exercise 24-4 As loan analyst for Utrillo Bank

 

Brief Exercise 5-2

Koch Corporation’s adjusted trial balance contained the following asset accounts at December 31, 2014: Cash $7,000; Land $40,000; Patents $12,500; Accounts Receivable $90,000; Prepaid Insurance $5,200; Inventory $30,000; Allowance for Doubtful Accounts $4,000; Equity Investments (trading) $11,000.

Prepare the current assets section of the balance sheet. (List Current Assets in order of liquidity.)

Brief Exercise 5-6

Patrick Corporation’s adjusted trial balance contained the following asset accounts at December 31, 2014: Prepaid Rent $12,000; Goodwill $50,000; Franchise Fees Receivable $2,000; Franchises $47,000; Patents $33,000; Trademarks $10,000.

 

Prepare the intangible assets section of the balance sheet

 

Exercise 5-1

Presented below are a number of balance sheet accounts of Deep Blue Something, Inc. For each of the accounts below, indicate the proper balance sheet classification.         

 

 

Balance Sheet Accounts

 

Balance Sheet Classification

(a)

 

Investment in Preferred Stock.

   

(b)

 

Treasury Stock.

 

 

(c)

 

Common Stock.

 

 

(d)

 

Dividends Payable.

 

 

(e)

 

Accumulated Depreciation-Equipment.

 

 

(f)(1)

 

Construction in Process (Constructed for another party).

 

 

(f)(2)

 

Construction in Process (Constructed for the use of Deep Blue Something, Inc.).

   

(g)

 

Petty Cash.

   

(h)

 

Interest Payable.

 

 

(i)

 

Deficit.

 

 

(j)

 

Equity Investments (trading).

 

 

(k)

 

Income Taxes Payable.

 

 

(l)

 

Unearned Subscription Revenue.

 

 

(m)

 

Work in Process.

 

 

(n)

 

Salaries and Wages Payable.

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise 5-4

Assume that Denis Savard Inc. has the following accounts at the end of the current year.

1.

 

Common Stock

 

14.

 

Accumulated Depreciation-Buildings.

2.

 

Discount on Bonds Payable.

 

15.

 

Cash Restricted for Plant Expansion.

3.

 

Treasury Stock (at cost).

 

16.

 

Land Held for Future Plant Site.

4.

 

Notes Payable (short-term).

 

17.

 

Allowance for Doubtful Accounts.

5.

 

Raw Materials

 

18.

 

Retained Earnings.

6.

 

Preferred Stock (Equity) Investments (long-term).

 

19.

 

Paid-in Capital in Excess of Par-Common Stock.

7.

 

Unearned Rent Revenue.

 

20.

 

Unearned Subscriptions Revenue.

8.

 

Work in Process.

 

21.

 

Receivables-Officers (due in one year).

9.

 

Copyrights.

 

22.

 

Inventory (finished goods).

10.

 

Buildings.

 

23.

 

Accounts Receivable.

11.

 

Notes Receivable (short-term).

 

24.

 

Bonds Payable (due in 4 years).

12.

 

Cash.

 

25.

 

Noncontrolling Interest.

13.

 

Salaries and Wages Payable.

 

 

 

 

 

Prepare a classified balance sheet in good form. (List Current Assets in order of liquidity. For Land, Treasury Stock, Notes Payable, Preferred Stock Investments, Notes Receivable, Receivables-Officers, Inventory, Bonds Payable, and Restricted Cash, enter the account name only and do not provide the descriptive information provided in the question.)

 

Exercise 5-7

Presented below are selected accounts of Yasunari Kawabata Company at December 31, 2014.

Inventory (finished goods)

 

$ 52,000

 

Cost of Goods Sold

 

$2,100,000

Unearned Service Revenue

 

90,000

 

Notes Receivable

 

40,000

Equipment

 

253,000

 

Accounts Receivable

 

161,000

Inventory (work in process)

 

34,000

 

Inventory (raw materials)

 

207,000

Cash

 

37,000

 

Supplies Expense

 

60,000

Equity Investments (short-term)

 

31,000

 

Allowance for Doubtful Accounts

 

12,000

Customer Advances

 

36,000

 

Licenses

 

18,000

Restricted Cash for Plant Expansion

 

50,000

 

Additional Paid-in Capital

 

88,000

 

 

 

 

Treasury Stock

 

22,000

 

The following additional information is available

1. Inventories are valued at lower-of-cost-or-market using LIFO.

2. Equipment is recorded at cost. Accumulated depreciation, computed on a straight-line basis, is $50,600.

3. The short-term investments have a fair value of $29,000. (Assume they are trading securities.)

4. The notes receivable are due April 30, 2016, with interest receivable every April 30. The notes bear interest at 6%. (Hint: Accrued interest due on December 31, 2014.)

5. The allowance for doubtful accounts applies to the accounts receivable. Accounts receivable of $50,000 are pledged as collateral on a bank loan.

6. Licenses are recorded net of accumulated amortization of $14,000.

7. Treasury stock is recorded at cost..

 

Prepare the current assets section of Yasunari Kawabata Company’s December 31, 2014, balance sheet, with appropriate disclosures. (List Current Assets in order of liquidity. Enter account name only and do not provide the descriptive information provided in the question.)

 

Exercise 5-12

Presented below is the trial balance of Scott Butler Corporation at December 31, 2014.

 

 

Debit

 

Credit

Cash

 

$   197,000

 

 

Sales

 

 

 

$ 8,100,000

Debt Investments (trading) (cost, $145,000)

 

153,000

 

 

Cost of Goods Sold

 

4,800,000

 

 

Debt Investments (long-term)

 

299,000

 

 

Equity Investments (long-term)

 

277,000

 

 

Notes Payable (short-term)

 

 

 

90,000

Accounts Payable

 

 

 

455,000

Selling Expenses

 

2,000,000

 

 

Investment Revenue

 

 

 

63,000

Land

 

260,000

 

 

Buildings

 

1,040,000

 

 

Dividends Payable

 

 

 

136,000

Accrued Liabilities

 

 

 

96,000

Accounts Receivable

 

435,000

 

 

Accumulated Depreciation-Buildings

 

 

 

152,000

Allowance for Doubtful Accounts

 

 

 

25,000

Administrative Expenses

 

900,000

 

 

Interest Expense

 

211,000

 

 

Inventory

 

597,000

 

 

Gain (extraordinary)

 

 

 

80,000

Notes Payable (long-term)

 

 

 

900,000

Equipment

 

600,000

 

 

Bonds Payable

 

 

 

1,000,000

Accumulated Depreciation-Equipment

 

 

 

60,000

Franchises

 

160,000

 

 

Common Stock ($5 par)

 

 

 

1,000,000

Treasury Stock

 

191,000

 

 

Patents

 

195,000

 

 

Retained Earnings

 

 

 

78,000

Paid-in Capital in Excess of Par

 

 

 

80,000

        Totals

 

$12,315,000

 

$12,315,000

 

Prepare a balance sheet at December 31, 2014, for Scott Butler Corporation. (Ignore income taxes). (List Current Assets in order of liquidity. List Property, Plant and Equipment in order of Land, Building and Equipment. Enter account name only and do not provide the descriptive information provided in the question.)

Exercise 24-2

For each of the following subsequent (post-balance-sheet) events, indicate whether a company should (a) adjust the financial statements, (b) disclose in notes to the financial statements, or (c) neither adjust nor disclose.

Sr. No.

 

Subsequent (Post-Balance-Sheet) Events

 

 

1.

 

Settlement of federal tax case at a cost considerably in excess of the amount expected at year-end.

 

 

2.

 

Introduction of a new product line.

 

 

3.

 

Loss of assembly plant due to fire.

 

 

4.

 

Sale of a significant portion of the company’s assets.

 

 

5.

 

Retirement of the company president.

 

 

6.

 

Prolonged employee strike.

 

 

7.

 

Loss of a significant customer.

 

 

8.

 

Issuance of a significant number of shares of common stock.

 

 

9.

 

Material loss on a year-end receivable because of a customer’s bankruptcy.

 

 

10.

 

Hiring of a new president.

 

 

11.

 

Settlement of prior year’s litigation against the company (no loss was accrued).

 

 

12.

 

Merger with another company of comparable size.

 

 

 

Exercise 24-3

Carlton Company is involved in four separate industries. The following information is available for each of the four industries.

Operating Segment

 

Total Revenue

 

Operating Profit (Loss)

 

 

Identifiable Assets

W

 

$60,000

 

$15,000

 

 

$167,000

X

 

10,000

 

3,000

 

 

83,000

Y

 

23,000

 

(2,000)

 

21,000

Z

 

9,000

 

1,000

 

 

19,000

 

 

$102,000

 

$17,000

 

 

$290,000

 

Determine which of the operating segments are reportable based on the:

 

 

 

 

Reportable Segments

(a)

 

Revenue test.

 

 

(b)

 

Operating profit (loss) test.

 

 

(c)

 

Identifiable assets test.

 

 

 

 

Exercise 24-4

As loan analyst for Utrillo Bank, you have been presented the following information.

 

 

Toulouse Co.

 

Lautrec Co.

Assets

 

 

 

 

 

 

Cash

 

$120,000

 

 

$320,000

 

Receivables

 

220,000

 

 

302,000

 

Inventories

 

570,000

 

 

518,000

 

   Total current assets

 

910,000

 

 

1,140,000

 

Other assets

 

500,000

 

 

612,000

 

   Total assets

 

$1,410,000

 

 

$1,752,000

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities

 

$305,000

 

 

$350,000

 

Long-term liabilities

 

400,000

 

 

500,000

 

Capital stock and retained earnings

 

705,000

 

 

902,000

 

   Total liabilities and stockholders’ equity

 

$1,410,000

 

 

$1,752,000

 

Annual sales

 

$930,000

 

 

$1,500,000

 

Rate of gross profit on sales

 

30

%

 

40

%

 

Each of these companies has requested a loan of $50,000 for 6 months with no collateral offered. Because your bank has reached its quota for loans of this type, only one of these requests is to be granted.

Compute the various ratios for each company. (Round answer to 2 decimal places, e.g. 2.25.)

 

 

Toulouse Co.

 

Lautrec Co.

Current ratio

 

 

 : 1

 

 

 : 1

Acid-test ratio

 

 

 : 1

 

 

 : 1

Accounts receivable turnover

 

 

 times

 

 

 times

Inventory turnover

 

 

 times

 

 

 times

Cash to current liabilities

 

 

 : 1

 

 

 : 1

 

 

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