AC 302 CHAPTER 5 QUESTION AND PROBLEMS

AC 302 CHAPTER 5 QUESTION AND PROBLEMS
Exercise 5 QUESTION 7
Name				Date			
Instructor				Course			
Intermediate Accounting 14th Edition by Kieso Weygandt and Warfield							
Primer on Using Excel in Accounting by Rex A Schildhouse							
							
E5-7 (Current Assets Section of the Balance Sheet) Presented below are selected accounts of Aramis Company at December 31, 2012.							
							
							
Finished Goods			$52,000 	Cost of Goods Sold			$2,100,000 
Unearned Revenue			90,000 	Notes Receivable			40,000 
Equipment			253,000 	Accounts Receivable			161,000 
Work in Process			34,000 	Raw Materials			187,000 
Cash			42,000 	Supplies Expense			60,000 
Equity Investments (Short-term)			31,000 	Allowance for Doubtful Accounts			12,000 
Customer Advances			36,000 	Licenses			18,000 
Cash Restricted 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 receivables are due April 30, 2014, with interest receivable every April 30. The notes bear							
interest at	6%	(Hint: Accrue interest due on December 31, 2012.)					
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.							
							
Instructions:							
Prepare the current assets section of Aramis Company- December 31, 2012, balance sheet, with appropriate disclosures.							
							
							
Current assets							
Title					Amount		
Title					Amount	Formula	
Title						Amount	
Title							
					Amount		
Title					Amount	Formula	
Title						Amount	
Inventories at lower-of-cost-(determined using LIFO)-or-market							
Title					Amount		
Title					Amount		
Title					Amount	Formula	
Total current assets						Formula	
							


Exercise 5-11
Name:				Date:		
Instructor:				Course:		
Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield						
Primer on Using Excel in Accounting by Rex A Schildhouse						
						
E5-11 (Balance Sheet Presentation) Presented below is the adjusted trial balance of Abbey Corporation at December 31, 2012.						
						
			Debits	Credits		
Cash			??			
Supplies			$1,200 			
Prepaid Insurance			1,000 			
Equipment			48,000 			
Accumulated Depreciation - Equipment				$9,000 		
Trademarks			950 			
Accounts Payable				10,000 		
Salaries and Wages Payable				500 		
Unearned Service Revenue				2,000 		
Bonds Payable, due 2017				9,000 		
Common Stock				10,000 		
Retained Earnings				20,000 		
Service Revenue				10,000 		
Salaries and Wages Expense			9,000 			
Insurance Expense			1,400 			
Rent Expense			1,200 			
Interest Expense			900 			
Total			??	??		
						
Additional information:						
1. Net loss for the year was		$2,500 				
2. No dividends were declared during 2012.						
						
Instructions:						
Prepare a classified balance sheet as of December 31, 2012.						
Solution to cash as desired.						
						
						
						
ABBEY CORPORATION						
Balance Sheet						
December 31, 2012						
Assets						
Current assets						
Account Title				Amount		
Account Title				Amount		
Account Title				Amount		
Total current assets					Formula	
Account Title				Amount		
Account Title				Amount	Formula	
Account Title					Amount	
Total assets					Formula	
						
Liabilities and Shareholders’ Equity						
Current liabilities						
Account Title				Amount		
Account Title				Amount		
Account Title				Amount		
Total current liabilities					Formula	
Account Title					Amount	
Total liabilities					Formula	
						
Shareholders’ equity						
Account Title				Amount		
Account Title				Amount		
Total shareholders’ equity					Formula	
Total liabilities and shareholders’ equity					Formula	
						
	Computation of retained earnings:					
	Account Title				Amount	
	Title				Amount	
	Account Title				Formula	
						
	or:					
						
	Title				Formula	
	Less: Account Title			Amount		
	Less: Account Title			Amount		
	Less: Account Title			Amount		
	Less: Account Title			Amount	Formula	
	Period Net income / (Net loss)				Formula	
	Title				Amount	
	Title				Formula	
						
						

Problem 5-2
Name:				Date:			
Instructor:				Course:			
Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield							
Primer on Using Excel in Accounting by Rex A Schildhouse							
							
P5-2 (Balance Sheet Presentation) Presented below are a number of balance sheet items for Montoya, Inc., for the current year, 2012.							
							
							
Goodwill			$125,000 	Accumulated Depreciation - Equipment			$292,000 
Payroll Taxes Payable			177,591 	Inventory			239,800 
Bonds Payable			300,000 	Rent Payable - Short-term			45,000 
Discount on Bonds Payable			15,000 	Income Tax Payable			98,362 
Cash			360,000 	Rental Expense Long-term			480,000 
Land			480,000 	Common Stock, $1 Par Value			200,000 
Notes Receivable			445,700 	Preferred Stock, $10 Par Value			150,000 
Notes Payable to Banks			265,000 	Prepaid Expenses			87,920 
Accounts Payable			490,000 	Equipment			1,470,000 
Retained Earnings			?	Equity Investments (Trading)			121,000 
Income Taxes Receivable			97,630 	Accumulated Depreciation - Buildings			270,200 
Unsecured Notes Payable (Long-term)			1,600,000 	Buildings			1,640,000 
							
Instructions:							
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 marketable securities are the same.							
							
	MONTOYA, INC.						
	Balance Sheet						
	December 31, 2012						
	Assets						
	Current assets						
	Account Title				Amount		
	Account Title				Amount		
	Account Title				Amount		
	Account Title				Amount		
	Account Title				Amount		
	Account Title				Amount		
	Total current assets					Formula	
							
	Property, plant, and equipment						
	Account Title				Amount		
	Account Title			Amount			
	Account Title			Amount	Formula		
	Account Title			Amount			
	Account Title			Amount	Formula		
						Formula	
	Intangible assets						
	Account Title					Amount	
	Total assets					Formula	
							
	Liabilities and Shareholders’ Equity						
	Current liabilities						
	Account Title				Amount		
	Account Title				Amount		
	Account Title				Amount		
	Account Title				Amount		
	Account Title				Amount		
	Total current liabilities					Formula	
							
	Long-term liabilities						
	Account Title				Amount		
	Account Title			Amount			
	Account Title			Amount	Formula		
	Account Title				Amount	Formula	
	Total liabilities					Formula	
							
	Shareholders’ equity						
	Account Title						
	Account Title with details						
				Amount			
	Account Title with details						
				Amount	Formula		
	Account title				Amount		
	Title					Formula	
	Total liabilities and shareholders’ equity					Formula	
							
		Computation of Retained earnings:					
		Accounting Equation					
		Title			Amount		
		Title			Amount		
		Title			Amount		
		Title			Formula		
							
							

Problem 5-6
Name:				Date:			
Instructor:				Course:			
Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield							
Primer on Using Excel in Accounting by Rex A Schildhouse							
							
P5-6 (Preparation of a Statement of Cash Flows and a Balance Sheet) Lansbury Inc. had the balance sheet shown on the following page at December 31, 2011.							
							
							
LANSBURY INC.							
Balance Sheet							
December 31, 2011							
Cash		$20,000 	Accounts Payable		$30,000 		
Accounts Receivable		21,200 	Notes Payable (Long-term)		41,000 		
Investments		32,000 	Common Stock		100,000 		
Plant Assets (Net)		81,000 	Retained Earnings		23,200 		
Land		40,000 					
		$194,200 			$194,200 		
							
During 2012 the following occurred:							
1. Lansbury Inc. sold part of its investment portfolio for					$15,000 	This transaction	
resulted in a gain of		$3,400 	for the firm. The company classifies its investments as available-for-				
sale.							
2. A tract of land was purchased for			$18,000 	cash.			
3. Long-term notes payable in the amount of			$16,000 	were retired before maturity by paying			
$16,000 	cash. 						
4. An additional 	$20,000 	in common stock was issued at par.					
5. Dividends totaling		$8,200 	were declared and paid to stockholders.				
6. Net income for 2012 was		$32,000 	after allowing for depreciation of			$11,000 	
7. Land was purchased through the issuance of				$30,000 	in bonds.		
8. At December 31, 2012, Cash was			$32,000 	Accounts Receivable was		$41,600 	
and Accounts Payable remained at			$30,000 				
							
Instructions:							
(a) Prepare a statement of cash flows for 2012.							
							
	LANSBURY INC.						
	Statement of Cash Flows						
	For the Year Ended December 31, 2012						
	Cash flows from operating activities						
	Title				Amount		
	Account Title						
							
	Account Title			Amount			
	Account Title			Amount			
	Account Title						
				Amount	Formula		
	Net cash provided by operating activities		20200		Formula		
							
	Cash flows from investing activities						
	Account Title	17000		Amount			
	Account Title	-18000		Amount			
	Net cash used in investing				Formula		
							
	Cash flows from financing activities						
	Account Title			Amount			
	Account Title			Amount			
	Account Title			Amount			
	Net cash used by financing activities				Formula		
							
	Net increase in cash				Formula		
	Cash at beginning of year				Amount		
	Cash at end of year				Formula		
							
	Enter text as appropriate						
	Enter text as appropriate						
							
(b) Prepare an unclassified balance sheet as it would appear at December 31, 2012.							
							
LANSBURY INC.							
Balance Sheet							
December 31, 2012							
Assets				Liabilities and Stockholders’ Equity			
Account Title		Amount		Account Title		Amount	
Account Title		Amount		Account Title		Amount	(4)
Account Title		Amount	(1)	Account Title		Amount	(5)
Account Title		Amount	(2)	Account Title		Amount	(6)
Account Title		Amount	(3)	Account Title		Amount	(7)
Total assets		Formula		Total Liabilities and SHE		Formula	
							
(1)	Formula or calculation area as desired.						
(2)	Formula or calculation area as desired.						
(3)	Formula or calculation area as desired.						
(4)	Formula or calculation area as desired.						
(5)	Formula or calculation area as desired.						
(6)	Formula or calculation area as desired.						
(7)	Formula or calculation area as desired.						
							
"(c) How might the statement of cash flows help the user of the financial statements? Compute two cash
     flow ratios."							
							
							
Enter text answer here							
							
							
							
							
							
							
							
							
							
							
An analysis of Lansbury- free cash flow indicates it is negative as shown below:							
							
	Free Cash Flow Analysis						
	Net cash provided by operating activities			Amount			
	Less:   Purchase of land			Amount			
	Dividends			Amount			
	Free cash flow			Formula			
							
Enter first ratio here							
							
Enter second ratio here							
							
Comments as desired