Balance Sheet and Statement of Cash Flows
5 – 21
83. For Randolph Company, the following information is available:
Capitalized leases $560,000
Copyrights 240,000
Long-term receivables 210,000
In Randolph’s balance sheet, intangible assets should be reported at
a. $240,000.
b. $210,000.
c. $800,000.
d. $770,000.
Reporting, IFRS: None
84. Olmsted Company has the following items: common stock, $950,000; treasury stock,
$105,000; deferred income taxes, $125,000 and retained earnings, $454,000. What total
amount should Olmsted Company report as stockholders’ equity?
a. $1,174,000.
b. $1,299,000.
c. $1,424,000.
d. $1,549,000.
85. Presented below are data for Antwerp Corp.
2020 2021
Assets, January 1 $4,200 $5,040
Liabilities, January 1 2,520 ?
Stockholders’ Equity, Jan. 1 ? ?
Dividends 840 630
Common Stock 756 672
Stockholders’ Equity, Dec. 31 ? ?
Net Income 840 672
Stockholders’ Equity at January 1, 2020 is
a. $1,056.
b. $1,140.
c. $1,680.
d. $2,436.
Test Bank for Intermediate Accounting, Seventeenth Edition
5 – 22
86. Presented below are data for Bandkok Corp.
2020 2021
Assets, January 1 $8,850 $9,720
Liabilities, January 1 4,860 ?
Stockholders’ Equity, Jan. 1 ? ?
Dividends 1,620 1,215
Common Stock 1,458 1,296
Stockholders’ Equity, Dec. 31 ? ?
Net Income 1,920 1,296
Stockholders’ Equity at January 1, 2021 is
a. $5,748.
b. $3,990.
c. $4,290.
d. $5,910.
87. Presented below are data for Caracas Corp.
2017 2018
Assets, January 1 $6,840 ?
Liabilities, January 1 ? $4,104
Stockholders’ Equity, Jan. 1 ? $4,125
Dividends 855 969
Common Stock 912 975
Stockholders’ Equity, Dec. 31 ? 3,399
Net Income 1,026 ?
Net income for 2021 is
a. $726 income.
b. $726 loss.
c. $243 loss.
d. $243 income.
88. Lohmeyer Corporation reports:
Cash provided by operating activities $320,000
Cash used by investing activities 110,000
Cash provided by financing activities 140,000
Beginning cash balance 90,000
What is Lohmeyer’s ending cash balance?
a. $410,000.
b. $440,000.
c. $570,000.
d. $660,000.
Balance Sheet and Statement of Cash Flows
5 – 23
89. Keisler Corporation reports:
Cash provided by operating activities $280,000
Cash used by investing activities 110,000
Cash provided by financing activities 140,000
Beginning cash balance 90,000
What is Keisler’s ending cash balance?
a. $370,000.
b. $400,000.
c. $530,000.
d. $620,000.
90. During 2020 the DLD Company had a net income of $85,000. In addition, selected
accounts showed the following changes:
Accounts Receivable $3,000 increase
Accounts Payable 1,000 increase
Buildings 4,000 decrease
Depreciation Expense 1,500 increase
Bonds Payable 8,000 increase
What was the amount of cash provided by operating activities?
a. $84,500
b. $85,000
c. $86,500
d. $94,500
91. Harding Corporation reports the following information:
Net income $530,000
Depreciation expense 140,000
Increase in accounts receivable 60,000
Harding should report cash provided by operating activities of
a. $330,000.
b. $450,000.
c. $610,000.
d. $730,000.
92. Sauder Corporation reports the following information:
Net income $380,000
Depreciation expense 70,000
Increase in accounts receivable 30,000
Sauder should report cash provided by operating activities of
a. $280,000.
b. $340,000.
c. $420,000.
d. $480,000.
Test Bank for Intermediate Accounting, Seventeenth Edition
5 – 24
93. Packard Corporation reports the following information:
Net cash provided by operating activities $335,000
Average current liabilities 150,000
Average long-term liabilities 100,000
Dividends declared 60,000
Capital expenditures 110,000
Payments of debt 35,000
Packard’s cash debt coverage is
a. 1.34.
b. 2.23.
c. 3.35.
d. 3.05.
94. Packard Corporation reports the following information:
Net cash provided by operating activities $335,000
Average current liabilities 150,000
Average long-term liabilities 100,000
Dividends paid 60,000
Capital expenditures 110,000
Payments of debt 35,000
Packard’s free cash flow is
a. $130,000.
b. $165,000.
c. $225,000.
d. $275,000.
95. Huge Cart Inc. gives you the following information pertaining to the year 2020.
Net sales $850,000
Cost of goods sold 500,000
Current assets 500,000
Current liabilities 250,000
Average total assets 1,000,000
Total liabilities 550,000
Net income 150,000
The asset turnover ratio of Huge Cart Inc. is
a. 0.50
b. 0.15
c. 0.85
d. 1.18
Balance Sheet and Statement of Cash Flows
5 – 25
96. Huge Cart Inc. gives you the following information pertaining to the year 2020.
Net sales $850,000
Cost of goods sold 500,000
Current assets 500,000
Current liabilities 250,000
Average total assets 1,000,000
Total liabilities 550,000
Net income 150,000
The rate of return on assets Huge Cart Inc. is:
a. 85.0%.
b. 30.0%.
c. 17.6%.
d. 15.0%.
Multiple Choice Answers—Computational
Test Bank for Intermediate Accounting, Seventeenth Edition
5 – 26
MULTIPLE CHOICE—CPA Adapted
97. Stine Corp.’s trial balance reflected the following account balances at December 31, 2020:
Accounts receivable (net) $38,000
Trading securities 12,000
Accumulated depreciation on equipment and furniture 30,000
Cash 32,000
Inventory 60,000
Equipment 50,000
Patent 8,000
Prepaid expenses 4,000
Land held for future business site 36,000
In Stine’s December 31, 2020 balance sheet, the current assets total is
a. $180,000.
b. $164,000.
c. $154,000.
d. $146,000.
Use the following information for questions 98 through 100.
The following trial balance of Reese Corp. at December 31, 2020 has been properly adjusted.
Reese Corp.
Trial Balance
December 31, 2020
Dr. Cr.
Cash $ 875,000
Accounts receivable (net) 2,695,000
Inventory 2,085,000
Property, plant, and equipment (net) 8,269,000
Accounts payable and accrued liabilities $ 1,761,000
Income taxes payable 654,000
Deferred income tax liability 85,000
Common stock 2,350,000
Additional paid-in capital 3,680,000
Retained earnings, 1/1/20 3,490,000
Net sales and other revenues 13,560,000
Costs and expenses 11,180,000
Income tax expense 476,000
$25,580,000 $25,580,000
Other financial data for the year ended December 31, 2020:
• Included in accounts receivable is $1,200,000 due from a customer and payable in quarterly
installments of $150,000. The last payment is due December 29, 2022.
• During the year, estimated tax payments of $525,000 were charged to income tax expense.
The current and future tax rate on all types of income is 30%.
In Reese’s December 31, 2020 balance sheet,
98. The current assets total is
Balance Sheet and Statement of Cash Flows
5 – 27
a. $6,180,000.
b. $5,655,000.
c. $5,505,000.
d. $5,055,000.
99. The current liabilities total is
a. $1,910,000.
b. $1,975,000.
c. $2,415,000.
d. $2,500,000.
100. The ending retained earnings balance is
a. $3,490,000.
b. $5,309,000.
c. $5,394,000.
d. $5,870,000.
101. On January 4, 2020, Kiley Co. leased a building to Dodd Corp. for a ten-year term at an
annual rental of $200,000. At inception of the lease, Kiley received $800,000 covering the
first two years’ rent of $400,000 and a security deposit of $400,000. This deposit will not
be returned to Dodd upon expiration of the lease but will be applied to payment of rent for
the last two years of the lease. What portion of the $800,000 should be shown as a
current and long-term liability in Kiley’s December 31, 2020 balance sheet?
Current Liability Long-term Liability
a. $0 $800,000
b. $200,000 $400,000
c. $400,000 $400,000
d. $400,000 $200,000
102. In a statement of cash flows, receipts from sales of property, plant, and equipment and
other productive assets should generally be classified as cash inflows from
a. operating activities.
b. financing activities.
c. investing activities.
d. selling activities.
103. In a statement of cash flows, interest payments to lenders and other creditors should be
classified as cash outflows for
a. operating activities.
Test Bank for Intermediate Accounting, Seventeenth Edition
5 – 28
b. borrowing activities.
c. lending activities.
d. financing activities.
104. In a statement of cash flows, proceeds from issuing equity instruments should be
classified as cash inflows from
a. lending activities.
b. operating activities.
c. investing activities.
d. financing activities.
105. In a statement of cash flows, payments to acquire debt instruments of other entities (other
than cash equivalents) should be classified as cash outflows for
a. operating activities.
b. investing activities.
c. financing activities.
d. lending activities.
106. Which of the following facts concerning fixed assets should be included in the summary of
significant accounting policies?
Depreciation Method Composition
a. No Yes
b. Yes Yes
c. Yes No
d. No No
Balance Sheet and Statement of Cash Flows
5 – 29
DERIVATIONS — Computational
No. Answer Derivation
DERIVATIONS — CPA Adapted
No. Answer Derivation
Test Bank for Intermediate Accounting, Seventeenth Edition
5 – 30
BRIEF EXERCISES
BE. 5–107—Definitions.
Provide clear, concise answers for the following.
1. What are assets?
2. What are liabilities?
3. What is equity?
4. What are current liabilities?
5. Explain what working capital is and how it is computed.
6. What are intangible assets?
7. What are current assets?
Balance Sheet and Statement of Cash Flows
5 – 31
BE. 5–108—Terminology.
In the space provided at right, write the word or phrase that is defined or indicated.
1. Obligations expected to be liquidated 1. __________________________________
through use of current assets.
2. Statement showing financial condition at a 2. __________________________________
point in time.
3. Events that depend upon future outcomes. 3. __________________________________
4. Probable future sacrifices of economic 4. __________________________________
benefits.
5. Resources expected to be converted to 5. __________________________________
cash in one year or the operating cycle,
whichever is longer.
6. Resources of a durable nature used in 6. __________________________________
operations.
7. Economic rights or competitive advantages 7. __________________________________
which lack physical substance.
8. Probable future economic benefits. 8. __________________________________
9. Residual interest in the net assets of an 9. __________________________________
entity.
BE. 5-109—Current assets.
Define current assets without using the word “asset.”
Test Bank for Intermediate Accounting, Seventeenth Edition
5 – 32
EXERCISES
Ex. 5-110—Account classification.
ASSETS LIABILITIES AND CAPITAL
a. Current assets f. Current liabilities
b. Investments g. Long-term liabilities
c. Plant and equipment h. Preferred stock
d. Intangibles i. Common stock
e. Other assets j. Additional paid-in capital
k. Retained earnings
l. Items excluded from balance sheet
Using the letters above, classify the following accounts according to the preferred and ordinary
balance sheet presentation.
____ 1. Bond sinking fund
____ 2. Common stock dividend distributable
____ 3. Appropriation for plant expansion
____ 4. Bank overdraft
____ 5. Bonds payable (due 2023)
____ 6. Premium on common stock
____ 7. Securities owned by another company which are collateral for that company’s note
____ 8. Equity investments (trading)
____ 9. Inventory
____ 10. Discount on bonds payable
____ 11. Patents
____ 12. Unearned rent revenue
Balance Sheet and Statement of Cash Flows
5 – 33
Ex. 5–111—Valuation of Balance Sheet Items.
Use the code letters listed below (a – l) to indicate, for each balance sheet item (1 – 13) listed
below the usual valuation reported on the balance sheet.
____ 1. Common stock ____ 8. Long-term bonds payable
____ 2. Prepaid insurance ____ 9. Land (in use)
____ 3. Natural resources ____ 10. Land (future plant site)
____ 4. Property, plant, and equipment ____ 11. Patents
____ 5. Accounts receivable ____ 12. Equity investments (trading)
____ 6. Copyrights ____ 13. Accounts payable
____ 7. Inventory
a. Par value
b. Current cost of replacement
c. Amount payable when due, less unamortized discount or plus unamortized premium
d. Amount payable when due
e. Market value at balance sheet date
f. Net realizable value
g. Lower of cost or market
h. Original cost less accumulated amortization
i. Original cost less accumulated depletion
j. Original cost less accumulated depreciation
k. Historical cost
l. Unexpired or unconsumed cost
Test Bank for Intermediate Accounting, Seventeenth Edition
5 – 34
Ex. 5-112—Balance sheet classifications.
Typical balance sheet classifications are as follows.
a. Current Assets g. Long-Term Liabilities
b. Investments h. Capital Stock
c. Plant Assets i. Additional Paid-In Capital
d. Intangible Assets j. Retained Earnings
e. Other Assets k. Notes to Financial Statements
f. Current Liabilities l. Not Reported on Balance Sheet
Indicate by use of the above letters how each of the following items would be classified on a
balance sheet prepared at December 31, 2020. If a contra account, or any amount that is
negative or opposite the normal balance, put parentheses around the letter selected. A letter may
be used more than once or not at all.
____ 1. Accrued salaries and wages
____ 2. Rent revenues for 3 months
collected in advance
____ 3. Land used as plant site
____ 4. Equity securities classified as
trading
____ 5. Cash
____ 6. Accrued interest payable due in
30 days
____ 7. Premium on preferred stock issued
____ 8. Dividends in arrears on preferred
stock
____ 9. Petty cash fund
____ 10. Unamortized discount on bonds
payable due 2020
____ 11. Common stock at par value
____ 12. Bond indenture covenants
____ 13. Unamortized premium on bonds
payable due in 2024
____ 14. Allowance for doubtful accounts
____ 15. Accumulated depreciation—
equipment
____ 16. Natural resource—timberlands
____ 17. Deficit (no net income earned since
beginning of company)
____ 18. Goodwill
____ 19. 90 day notes payable
____ 20. Investment in bonds of another
company; will be held to 2023
maturity
____ 21. Land held for speculation
____ 22. Death of company president
____ 23. Current maturity of bonds payable
____ 24. Investment in subsidiary; no plans
to sell in near future
____ 25. Accounts payable
____ 26. Preferred stock ($10 par)
____ 27. Prepaid rent
____ 28. Copyright
____ 29. Accumulated amortization, patents
____ 30. Earnings not distributed to
stockholders
Balance Sheet and Statement of Cash Flows
5 – 35
Ex. 5-113—Balance sheet classifications.
The various classifications listed below have been used in the past by Maris Company on its
balance sheet. It asks your professional opinion concerning the appropriate classification of each
of the items 1-14 below.
a. Current Assets f. Current Liabilities
b. Investments g. Long-Term Liabilities
c. Plant and Equipment h. Common Stock and Paid-in Capital in Excess of Par
d. Intangible Assets i. Retained Earnings
e. Other Assets
Indicate by letter how each of the following items should be classified. If an item need not be
reported on the balance sheet, use the letter “X.” A letter may be used more than once or not at
all. If an item can be classified in more than one category, choose the category most favored by
the authors of your textbook.
____ 1. Employees’ payroll deductions.
____ 2. Cash in sinking fund.
____ 3. Rent revenue collected in advance.
____ 4. Equipment retired from use and held for sale.
____ 5. Patents.
____ 6. Payroll cash fund.
____ 7. Goods held on consignment.
____ 8. Accrued revenue on short-term investments.
____ 9. Advances to salespersons.
____ 10. Premium on bonds payable due two years from date.
____ 11. Bank overdraft.
____ 12. Salaries which company budget shows will be paid to employees within the next year.
____ 13. Work in process.
____ 14. Appropriation for bonded indebtedness.
Test Bank for Intermediate Accounting, Seventeenth Edition
5 – 36
Solution 5-113
Ex. 5-114—Balance sheet classifications.
The various classifications listed below have been used in the past by Hale Company on its
balance sheet.
a. Current Assets e. Current Liabilities
b. Investments f. Long-term Liabilities
c. Plant and Equipment g. Common Stock and Paid-in Capital in Excess of Par
d. Intangible Assets h. Retained Earnings
Instructions
Indicate by letter how each of the items below should be classified at December 31, 2020. If an
item is not reported on the December 31, 2020 balance sheet, use the letter “X” for your answer.
If the item is a contra account within the particular classification, place parentheses around the
letter. A letter may be used more than once or not at all.
Sample question and answer:
(a) Allowance for doubtful accounts.
____ 1. Customers’ accounts with credit balances.
____ 2. Bond sinking fund.
____ 3. Salaries which the company’s cash budget shows will be paid to employees in 2021.
____ 4. Accumulated depreciation—equipment.
____ 5. Appropriation for plant expansion.
____ 6. Amortization of patents for 2020.
____ 7. On December 31, 2020, Hale signed a purchase commitment to buy all of its raw
materials from Delta Company for the next 2 years.
____ 8. Discount on bonds payable due March 31, 2023.
____ 9. Launching of Hale’s Internet retailing division in February, 2021.
____ 10. Cash dividends declared on December 15, 2020 payable to stockholders on January
15, 2021.
Balance Sheet and Statement of Cash Flows
5 – 37
Solution 5-114
Ex. 5-115—Balance sheet computations.
The following accounts appeared on the trail balance of Elbert Company at December 31, 2020.
Notes Payable (short-term)
$192,000
Accounts Receivable
$518,400
Accumulated Depreciation – Bldg.
783,000
Prepaid Insurance
56,250
Supplies
37,800
Salaries and Wages Payable
34,200
Common Stock
1,125,000
Debt Investments (long-term)
281,400
Unappropriated Retained Earnings
318,000
Cash
170,250
Inventory
1,580,250
Bonds Payable Due 1/1/2028
1,200,000
Land
465,000
Allowance for Doubtful Accts.
7,800
Trading Securities
73,200
Copyrights
192,900
Interest Payable
5,700
Notes Receivable (due in 6 months)
138,000
Buildings
1,926,000
Income Taxes Payable
156,000
Accounts Payable
409,950
Preferred Stock
750,000
Additional Paid-in Capital
163,800
Appropriated Retained Earnings
294,000
Instructions
Compute each of the following:
1. Total current assets
2. Total property, plant, and equipment
3. Total assets
4. Total current liabilities
5. Total stockholders’ equity
Solution 5-115
Test Bank for Intermediate Accounting, Seventeenth Edition
5 – 38
Ex. 5-116—Balance sheet computations.
(Balance Sheet) Presented below is the trial balance of Hightower Corporation at December 31,
2020.
Debit
Credit
Cash
295,000
Sales Revenue
$12,150,000
Debt Investments (trading) (at cost, $218,000)
230,000
Cost of Goods Sold
7,200,000
Debt Investments (long-term)
448,000
Equity Investments (long-term)
416,000
Notes Payable (short-term)
135,000
Accounts Payable
682,000
Selling Expenses
3,000,000
Investment Revenue
95,000
Land
390,000
Buildings
1,560,000
Dividends Payable
204,000
Accrued Liabilities
144,000
Accounts Receivable
652,000
Accumulated Depreciation–Buildings
228,000
Allowance for Doubtful Accounts
38,000
Administrative Expenses
1,350,000
Interest Expense
317,000
Inventory
895,000
Gain
120,000
Notes Payable (long-term)
1,350,000
Equipment
900,000
Bonds Payable
1,500,000
Accumulated Depreciation–Equipment
90,000
Franchises
240,000
Common Stock ($5 par)
1,500,000
Treasury Stock
287,000
Patents
293,000
Retained Earnings
117,000
Paid-in Capital in Excess of Par
120,000
Totals
$18,473,000
$18,473,000
Instructions
Compute each of the following:
1. Total current assets
2. Total property, plant, and equipment
3. Total assets
4. Total liabilities
5. Total stockholders’ equity