Calculations Shown

Question 1                

 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.)                

Question 2                

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.                

Question 3  

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.  

(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.

Question 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.)

Question 5                

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

Inventory (finished goods)   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.)                

Question 6  

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

  Debit

Cash  $  

Sales  

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)  

Accounts Payable  

Selling Expenses  2,000,000

Investment Revenue  

Land  260,000

Buildings  1,040,000

Dividends Payable  

Accrued Liabilities  

Accounts Receivable  435,000

Accumulated Depreciation-Buildings  

Allowance for Doubtful Accounts  

Administrative Expenses  900,000

Interest Expense  211,000

Inventory  597,000

Gain (extraordinary)  

Notes Payable (long-term)  

Equipment  600,000

Bonds Payable  

Accumulated Depreciation-Equipment  

Franchises  160,000

Common Stock ($5 par)  

Treasury Stock  191,000

Patents  195,000

Retained Earnings  

Paid-in Capital in Excess of Par  

        Totals  $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.)  

Question 7  

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.

Question 8       

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:       

Question 9      

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 %

GP  $279,000    $600,000  

COS  $651,000    $900,000  

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.)