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4.10: Exercises

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    30651
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    • Contributed by Henry Dauderis and David Annand
    • Athabasca University
    • Sourced from Lyryx Learning

    EXERCISE 4–1 (LO2) Classified Balance Sheet

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    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.

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