4.10: Exercises

• Henry Dauderis and David Annand
• Athabasca University via Lyryx Learning
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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

The bank loan will be reduced by $5,200 next year. There were 200 additional shares issued during the year for$200.