ACC/421

Brief Exercise 5-1

Windsor Corporation has the following accounts included in its December 31, 2017, trial balance: Accounts Receivable $113,600, Inventory $296,400, Allowance for Doubtful Accounts $8,100, Patents $72,200, Prepaid Insurance $9,580, Accounts Payable $83,600, and Cash $32,600. Prepare the current assets section of the balance sheet. (List Current Assets in order of liquidity.)

WINDSOR CORPORATION Balance Sheet (Partial)
					$
			$
:
					$

Exercise 5-3

For Fielder Enterprises, indicate how each of the following usually should be classified. If an item should appear in a note to the financial statements, select “Note to Financial Statement” to indicate this fact. If an item needs to be reported on the balance sheet, select "Balance Sheet" and if an item need not be reported at all, select “Not to be Reported.”

		Transactions		Reported in		Classification
1.		Prepaid insurance.
2.		Stock owned in affiliated companies
3.		Unearned service revenue.
4.		Advances to suppliers.
5.		Unearned rent revenue.
6.		Preferred stock.
7.		Additional paid-in capital on preferred stock.
8.		Copyrights.
9.		Petty cash fund.
10.		Sales taxes payable.
11.		Accrued interest on notes receivable.
12.		Twenty-year issue of bonds payable that will mature within the next year. (No sinking fund exists, and refunding is not planned.)
13.		Machinery retired from use and held for sale.
14.		Fully depreciated machine still in use.
15.		Accrued interest on bonds payable.
16.		Salaries that company budget shows will be paid to employees within the next year.
17.		Discount on bonds payable. (Assume related to bonds payable in item 12.)
18.		Accumulated Depreciation-Buildings.
19.		Noncontrolling interest.

Exercise 5-9 (Part Level Submission) The current assets and current liabilities sections of the balance sheet of Shamrock Company appear as follows. SHAMROCK COMPANY BALANCE SHEET (PARTIAL) DECEMBER 31, 2017 Cash $ 40,200 Accounts payable $  62,590 Accounts receivable $90,900 Notes payable 71,980     Less: Allowance for doubtful accounts 7,330 83,570 $134,570 Inventory 172,890 Prepaid expenses 9,720     $306,380     The following errors in the corporation’s accounting have been discovered: 1. January 2018 cash disbursements entered as of December 2017 included payments of accounts payable in the amount of $41,300, on which a cash discount of 2% was taken. 2. The inventory included $28,440 of merchandise that had been received at December 31 but for which no purchase invoices had been received or entered. Of this amount, $12,670 had been received on consignment; the remainder was purchased f.o.b. destination, terms 2/10, n/30. 3. Sales for the first four days in January 2018 in the amount of $30,480 were entered in the sales journal as of December 31, 2017. Of these, $23,360 were sales on account and the remainder were cash sales. 4. Cash, not including cash sales, collected in January 2018 and entered as of December 31, 2017, totaled $35,324. Of this amount, $23,324 was received on account after cash discounts of 2% had been deducted; the remainder represented the proceeds of a bank loan.

(a1) Calculate the following adjusted balances. Cash $ Accounts Receivable $ Inventory $ Accounts Payable $ Notes Payable $

Problem 5-2

Presented below are a number of balance sheet items for Flounder, Inc., for the current year, 2017.

Goodwill		$ 126,790		Accumulated Depreciation-Equipment		$ 292,160
Payroll Taxes Payable		179,381		Inventory		241,590
Bonds payable		301,790		Rent payable (short-term)		46,790
Discount on bonds payable		15,160		Income taxes payable		100,152
Cash		361,790		Rent payable (long-term)		481,790
Land		481,790		Common stock, $1 par value		201,790
Notes receivable		447,490		Preferred stock, $10 par value		151,790
Notes payable (to banks)		266,790		Prepaid expenses		89,710
Accounts payable		491,790		Equipment		1,471,790
Retained earnings		?		Debt investments (trading)		122,790
Income taxes receivable		99,420		Accumulated Depreciation-Buildings		270,360
Notes payable (long-term)		1,601,790		Buildings		1,641,790

Prepare a classified balance sheet in good form. Common stock authorized was 400,000 shares, and preferred stock authorized was 20,000 shares. Assume that notes receivable and notes payable are short-term, unless stated otherwise. Cost and fair value of debt investments (trading) are the same. (List Current Assets in the order of liquidity. List Property, Plant and Equipment in order of Land, Building and Equipment.)

FLOUNDER, INC. Balance Sheet
Assets
			$
					$
	$
:
:
					$
Liabilities and Stockholders' Equity
			$
					$
	$
:
					$

Brief Exercise 24-1 (Essay)

An annual report of Crestwood Industries states, “The company and its subsidiaries have long-term leases expiring on various dates after December 31, 2017. Amounts payable under such commitments, without reduction for related rental income, are expected to average approximately $5,711,000 annually for the next 3 years. Related rental income from certain subleases to others is estimated to average $3,094,000 annually for the next 3 years.” What information is provided by this note?

Brief Exercise 24-8

Answer each of the questions in the following unrelated situations. (a) The current ratio of a company is 5:1 and its acid-test ratio is 1:1. If the inventories and prepaid items amount to $488,000, what is the amount of current liabilities?

Current Liabilities

$

(b) A company had an average inventory last year of $206,000 and its inventory turnover was 6. If sales volume and unit cost remain the same this year as last and inventory turnover is 8 this year, what will average inventory have to be during the current year? (Round answer to 0 decimal places, e.g. 125.)

Average Inventory

$

(c) A company has current assets of $99,000 (of which $44,000 is inventory and prepaid items) and current liabilities of $44,000. What is the current ratio? What is the acid-test ratio? If the company borrows $15,000 cash from a bank on a 120-day loan, what will its current ratio be? What will the acid-test ratio be? (Round answers to 2 decimal places, e.g. 2.50.)

Current Ratio			:1
Acid Test Ratio			:1
New Current Ratio			:1
New Acid Test Ratio			:1

(d) A company has current assets of $572,000 and current liabilities of $257,000. The board of directors declares a cash dividend of $190,000. What is the current ratio after the declaration but before payment? What is the current ratio after the payment of the dividend? (Round answers to 2 decimal places, e.g. 2.50.)

Current ratio after the declaration but before payment			:1
Current ratio after the payment of the dividend			:1

Problem 24-3 (Essay) Bradburn Corporation was formed 5 years ago through a public subscription of common stock. Daniel Brown, who owns 15% of the common stock, was one of the organizers of Bradburn and is its current president. The company has been successful, but it currently is experiencing a shortage of funds. On June 10, 2018, Daniel Brown approached the Topeka National Bank, asking for a 24-month extension on two $35,000 notes, which are due on June 30, 2018, and September 30, 2018. Another note of $6,000 is due on March 31, 2019, but he expects no difficulty in paying this note on its due date. Brown explained that Bradburn’s cash flow problems are due primarily to the company’s desire to finance a $300,000 plant expansion over the next 2 fiscal years through internally generated funds. The commercial loan officer of Topeka National Bank requested the following financial reports for the last 2 fiscal years. BRADBURN CORPORATION BALANCE SHEET MARCH 31 Assets 2018 2017 Cash $18,200 $12,500 Notes receivable 148,000 132,000 Accounts receivable (net) 131,800 125,500 Inventories (at cost) 105,000 50,000 Plant & equipment (net of depreciation) 1,449,000 1,420,500     Total assets $1,852,000 $1,740,500   Liabilities and Owners’ Equity Accounts payable $79,000 $91,000 Notes payable 76,000 61,500 Accrued liabilities 9,000 6,000 Common stock (130,000 shares, $10 par) 1,300,000 1,300,000 Retained earningsa 388,000 282,000     Total liabilities and stockholders’ equity $1,852,000 $1,740,500   aCash dividends were paid at the rate of $1 per share in fiscal year 2017 and $2 per share in fiscal year 2018. BRADBURN CORPORATION INCOME STATEMENT FOR THE FISCAL YEARS ENDED MARCH 31 2018 2017 Sales revenue $3,000,000 $2,700,000 Cost of goods solda 1,530,000 1,425,000 Gross margin 1,470,000 1,275,000 Operating expenses 860,000 780,000 Income before income taxes 610,000 495,000 Income taxes (40%) 244,000 198,000 Net income $366,000 $297,000   aDepreciation charges on the plant and equipment of $100,000 and $102,500 for fiscal years ended March 31, 2017 and 2018, respectively, are included in cost of goods sold.

Identify and explain what other financial reports and/or financial analyses might be helpful to the commercial loan officer of Topeka National Bank in evaluating Daniel Brown's request for a time extension on Bradburn’s notes. Link to Text

Assume that the percentage changes experienced in fiscal year 2018 as compared with fiscal year 2017 for sales and cost of goods sold will be repeated in each of the next 2 years. Is Bradburn’s desire to finance the plant expansion from internally generated funds realistic? Discuss. Link to Text

Should Topeka National Bank grant the extension on Bradburn’s notes considering Daniel Brown’s statement about financing the plant expansion through internally generated funds? Discuss.

Buildings

Less

December 31, 2017

Property, Plant and Equipment

Land