4.10: Exercises

EXERCISE 4–1 (LO2) Classified Balance Sheet

The following accounts and account balances are taken from the records of Joyes Enterprises Ltd. at December 31, 2016, its fiscal year-end.

	Dr.	Cr.
Accounts Receivable	$8,000
Accounts Payable		$7,000
Accumulated Depreciation – Buildings		1,000
Accumulated Depreciation – Equipment		4,000
Bank Loan (due 2017)		5000
Buildings	25,000
Cash	2,000
Dividends Declared	1,000
Equipment	20,000
Income Tax Payable		3,000
Land	5,000
Merchandise Inventory	19,000
Mortgage Payable (due 2019)		5,000
Prepaid Insurance	1,000
Share Capital		48,000
Retained Earnings, Jan. 1 2016	-0-	2,000
Totals	$81,000	$75,000
Net Income	-0-	6,000
Totals	-0-	-0-

Required:

1. Using the above information, prepare a classified balance sheet.
2. Does Joyes Enterprises Ltd. have sufficient resources to meet its obligations in the upcoming year?
3. Calculate the proportion of shareholders' to creditors' claims on the assets of Joyes.

EXERCISE 4–2 (LO2,3) Classified Balance Sheet

The following balance sheet was prepared for Abbey Limited:

Abbey Limited Balance Sheet As at November 30, 2015
Assets				Liabilities
Current				Current
Cash	$1,000			Accounts Payable	$5,600
Accounts Receivable	6,000			Notes Payable (due 2016)	2,000
Building	12,000			Bank Loan (due 2022)	1,000
Merchandise Inventory	3,000			Total Current Liabilities			$8,600
Total Current Assets			$22,000
Non-current				Non-current
Short-Term Investments	3,000			Mortgage Payable (due 2023)	7,000
Equipment	1,500			Retained Earnings	1,000
Unused Office Supplies	100			Salaries Payable	250
Truck	1,350			Total Non-current Liabilities			8,250
Total Non-current Assets			5,950	Total Liabilities			16,850
				Equity
				Share Capital			11,100
Total Assets			$27,950	Total Liabilities and Assets			$27,950

Required:

1. Identify the errors that exist in the balance sheet of Abbey Limited and why you consider this information incorrect.
2. Prepare a corrected, classified balance sheet.
3. Based on the balance sheet categories, what additional information should be disclosed in the notes to the financial statements?

EXERCISE 4–3 (LO2,3) Accounts Classifications

Below are various accounts:

	Land used in the normal course of business operations		Accrued salaries payable
	Notes payable, due in four months		Prepaid advertising
	Truck		Advertising expense
	Land held for investment		Unearned revenue
	Copyright		Service revenue
	Accounts payable		Cash
	Cash dividends		Mortgage payable, due in fifteen years
	Building		Mortgage payable, due in six months
	Furniture		Share capital
	Accounts receivable, from customer sales		Shop supplies
	Franchise		Accumulated depreciation, building
	Utilities expense		Depreciation expense
	Utilities payable		Office supplies

Required: Classify each account as one of the following:

1. current asset
2. long-term investment
3. property, plant and equipment
4. intangible asset
5. current liability
6. long-term liability
7. equity
8. not reported on the balance sheet

EXERCISE 4–4 (LO2) Preparing Closing Entries, Balance Sheet and Post-closing Trial balance

Below are the December 31, 2016, year-end accounts balances for Abled Appliance Repair Ltd. This is the business's third year of operations.

Cash	$80,000	Share capital	$1,000
Accounts receivable	66,000	Retained earnings	116,600
Office supplies inventory	2,000	Revenue	35,000
Prepaid insurance	5,000	Rent expense	3,000
Land	20,000	Salaries expense	8,000
Office equipment	10,000	Utilities expense	500
Accumulated depreciation, office equipment	2,000	Travel expense	1,500
Accounts payable	35,000	Insurance expense	600
Unearned consulting fees	10,000	Supplies and postage expense	3,000

Required:

1. Prepare the closing entries.
2. Prepare a classified balance sheet.
3. Prepare a post-closing trial balance.

EXERCISE 4–5 (LO2) Classified Balance Sheet

Below is the post-closing trial balance for Mystery Company Ltd. All accounts have normal balances.

Mystery Company Ltd. Trial Balance November 30, 2016
Accounts payable	$95,960
Accounts receivable	99,520
Accrued salaries payable	58,580
Accumulated depreciation, building	43,530
Accumulated depreciation, vehicle	8,650
Building	270,000
Cash	150,650
Copyright	51,600
Current portion of long-term debt	72,000
Income taxes payable	32,500
Interest payable	12,000
Notes payable, due 2025	145,000
Office supplies	1,300
Prepaid insurance expense	10,000
Prepaid rent expense	12,000
Retained earnings	74,850
Share capital	??
Unearned revenue	150,000
Vehicle	108,000

Required: Prepare a classified balance sheet.

EXERCISE 4–6 (LO2) Classified Balance Sheet

Below is the adjusted trial balance for Hitalle Heights Corp. All accounts have normal balances.

Hitalle Heights Corp. Trial Balance May 31, 2016
Accounts payable	$13,020
Accounts receivable	59,808
Accrued salaries and benefits payable	4,872
Accumulated depreciation, furniture	1,792
Cash	8,888
Cash dividends	2,800
Depreciation expense	1,333
Furniture	8,400
Income tax expense	2,520
Income taxes payable	3,320
Insurance expense	2,072
Interest expense	84
Interest payable	224
Land	58,048
Bank loan payable (long-term)	16,800
Shop supplies	1,008
Prepaid insurance expense	7,162
Rent expense	12,600
Travel expense	840
Retained earnings	192,355
Revenue	94,000
Salaries expense	23,352
Share capital	840
Shop supplies expense	420
Franchise	155,868
Unearned revenue	21,000
Utilities expense	3,020

Additional information:

The bank loan will be reduced by $5,200 next year.

There were 200 additional shares issued during the year for $200.

Required: Prepare a classified balance sheet and a statement of changes in equity for May 31, 2016.