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Presented below are selected accounts of Yasunari Kawabata Company at December 31, 2017.
Instructions
Prepare the current assets section of Yasunari Kawabata Company’s December 31, 2017,
balance sheet, with appropriate disclosures.
Current Assets Section of the Balance Sheet
Current assets
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Solution: E5-7 (LO 3) Current Assets Section of the Balance Sheet
Presented below are selected accounts of Yasunari Kawabata Company at December 31, 2017.
Instructions
Prepare the current assets section of Yasunari Kawabata Company’s December 31, 2017,
balance sheet, with appropriate disclosures.
Kelly Corporation
Trial Balance
December 31, 2017
Debit Credit
Cash $ ?
Supplies 1,200
Prepaid Insurance 1,000
Equipment 48,000
Accumulated Depreciation - Equipment $ 4,000
Trademarks 950
Accounts Payable 10,000
Salaries and Wages Payable 500
Unearned Service Revenue 2,000
Bonds Payable (due 2024) 9,000
Common Stock 10,000
Retained Earnings 25,000
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 2017.
Instructions:
Prepare a classified balance sheet as of December 31, 2017.
Kelly Corporation
Trial Balance
December 31, 2017
Debit Credit
Cash $ ?
Supplies 1,200
Prepaid Insurance 1,000
Equipment 48,000
Accumulated Depreciation - Equipment $ 4,000
Trademarks 950
Accounts Payable 10,000
Salaries and Wages Payable 500
Unearned Service Revenue 2,000
Bonds Payable (due 2024) 9,000
Common Stock 10,000
Retained Earnings 25,000
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 2017.
Instructions:
Prepare a classified balance sheet as of December 31, 2017.
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 debt
investments (trading) are the same.
MONTOYA, INC.
Balance Sheet
December 31, 2017
Assets
Current assets
Long-term liabilities
Stockholders’ equity
Solution: P5-2 (LO 3) Balance Sheet Preparation
Presented below are a number of balance sheet items for Montoya, Inc., for the current year,
2017.
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 debt investments
(trading) are the same.
MONTOYA, INC.
Balance Sheet
December 31, 2017
Assets
Current assets
Cash $ 360,000
Debt investments (trading) 121,000
Notes receivable 445,700
Income taxes receivable 97,630
Inventory 239,800
Prepaid expenses 87,920
Total current assets $ 1,352,050
Landsbury Inc.
Balance Sheet
December 31, 2016
Assets Liabilities and Stockholders’ Equity
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
1. Lansbury Inc. sold part of its debt 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 $13,000 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 of $8,200 were declared and paid to stockholders.
6. Net income for 2017 was $32,000 after allowing for depreciation of $11,000.
7. Land was purchased through the issuance of $35,000 in bonds.
8. At December 31, 2017, 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 2017.
LANSBURY INC.
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
(b) Prepare an unclassified balance sheet as it would appear at December 31, 2017.
Land:
Notes payable:
Bonds payable:
Common stock:
Retained earnings:
LANSBURY INC.
Balance Sheet
December 31, 2017
Assets Liabilities and Stockholders’ Equity
(c) How might the statement of cash flows help the user of the financial statements?
Solution: P5-6 (LO 3,5,6) Preparation of a Statement of Cash Flows and a Balance
Sheet
Lansbury Inc. had the following
balance sheet at December 31, 2016.
Landsbury Inc.
Balance Sheet
December 31, 2016
Assets Liabilities and Stockholders’ Equity
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
1. Lansbury Inc. sold part of its debt 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 $13,000 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 of $8,200 were declared and paid to stockholders.
6. Net income for 2017 was $32,000 after allowing for depreciation of $11,000.
7. Land was purchased through the issuance of $35,000 in bonds.
8. At December 31, 2017, 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 2017.
LANSBURY INC.
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Net income $ 32,000
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation expense $ 11,000
Gain on sale of investments (3,400)
Increase in account receivable (20,400) (12,800)
Net cash provided by operating activities 19,200
(b) Prepare an unclassified balance sheet as it would appear at December 31, 2017.
Plant assets:
December 31, 2016 balance $ 81,000
Depreciation, current year (11,000)
December 31, 2017 balance $ 70,000
Land:
December 31, 2016 balance $ 40,000
Purchase of land 13,000
Purchase of land for bonds 35,000
December 31, 2017 balance $ 88,000
Notes payable:
December 31, 2016 balance $ 41,000
Retirement of notes (16,000)
December 31, 2017 balance $ 25,000
Bonds payable:
December 31, 2016 balance $ -
Issuance of bonds 35,000
December 31, 2017 balance $ 35,000
Common stock:
December 31, 2016 balance $ 100,000
Issuance of common stock at par 20,000
December 31, 2017 balance $ 120,000
Retained earnings:
December 31, 2016 balance $ 23,200
Net income 32,000
Dividends declared (8,200)
December 31, 2017 balance $ 47,000
LANSBURY INC.
Balance Sheet
December 31, 2017
Assets Liabilities and Stockholders’ Equity
Cash $ 37,000 Accounts payable $ 30,000
Accounts receivable 41,600 Notes payable (long-term) 25,000
Debt investments 20,400 Bonds payable 35,000
Plant assets (net) 70,000 Common stock 120,000
Land 88,000 Retained earnings 47,000
$ 257,000 $ 257,000
(c) How might the statement of cash flows help the user of the financial statements?
Cash flow information is useful for assessing the amount, timing, and uncertainty of future
cash flows. For example, by showing the specific inflows and outflows from operating
activities, investing activities, and financing activities, the user has a better understanding
of the liquidity and financial flexibility of the enterprise. Similarly, these reports are useful
in providing feedback about the flow of enterprise resources. This information should help
users make more accurate predictions of future cash flow. In addition, some individuals
have expressed concern about the quality of the earnings because the measurement of
the income depends on a number of accruals and estimates which may be somewhat
subjective. As a result, the higher the ratio of cash provided by operating activities to net
income, the more comfort some users have in the reliability of the earnings. In this
problem the ratio of cash provided by operating activities to net income is 60% ($19,200 ÷
$32,000).