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EXERCISE 5.5 (30–35 minutes)
BRUNO SPA
Statement of Financial Position
December 31, 2019
Assets
Non-current assets
Long-term investments
Land held for future use ........................
€ 175,000
Property, plant, and equipment
Intangible assets
Goodwill ..................................................
80,000
Current assets
Inventory, at lower of average
cost or net realizable value .................
401,000
EXERCISE 5.5 (Continued)
Equity and Liabilities
Equity
Share capital—ordinary, €1 par,
authorized 400,000 shares, issued
Non-current liabilities
Bonds payable ........................................
553,000
Current liabilities
Notes payable (due next year) ...............
125,000
EXERCISE 5.6 (30–35 minutes)
LIBA LTD
Statement of Financial Position
July 31, 2019
Assets
Non-current assets
Long-term investments
Bond sinking fund .............................................
¥ 12,000
Intangible assets
Patents ...............................................................
21,000
Total non-current assets ................................
¥117,000
Current assets
Inventory ............................................................
65,300*
EXERCISE 5.6 (Continued)
Equity and Liabilities
Equity ................................................................
¥155,500
Non–current liabilities ................................
¥75,000
Current liabilities
EXERCISE 5.7 (15–20 minutes)
Current assets
Inventories at lower-of-cost (determined
using FIFO) or net-realizable-value
Finished goods ...................................................
€ 52,000
Work in process .................................................
34,000
*An acceptable alternative is to report cash at €42,000 and simply report
the cash restricted for plant expansion in the investments section.
EXERCISE 5.8 (10–15 minutes)
1. Dividends payable of $1,900,000 will be reported as a current liability
[(1,000,000 – 50,000) X $2.00].
2. Bonds payable of $25,000,000 and interest payable of $2,000,000
3. Customer advances of $17,000,000 will be reported as a current liability
EXERCISE 5.9 (30–35 minutes)
(a) JIN LIU LTD
Statement of Financial Position (Partial)
December 31, 2019
Current assets
Inventory ...................................................
¥161,000*
*
Inventory ...............................................................
¥171,000
Less: Inventory received on consignment ........
10,000
Adjusted inventory ...............................................
¥161,000
***
Cash balance ........................................................
¥ 40,000
Add: Cash disbursement after discount
(¥35,000 X 98%) .........................................
34,300
74,300
EXERCISE 5.9 (Continued)
Current liabilities
Notes payable ...................................................
¥ 55,000*
*
Notes payable balance
¥ 67,000
**
Accounts payable balance
¥ 61,000
(b)
Adjustment to retained earnings balance:
Add: January sales discounts
EXERCISE 5.10 (15–20 minutes)
(a) A current liability of $150,000 should be recorded.
(b) A current liability for accrued interest of $6,000 ($900,000 X 8% X 1/12)
(c) Although bad debt expense of $200,000 should be debited and the
(d) A current liability of $80,000 (40,000 shares x $2) should be reported.
The liability is recorded on the date of declaration.
EXERCISE 5.11 (25–30 minutes)
ABBEY PLC
Statement of Financial Position
December 31, 2019
Assets
Non-current assets
Property, plant, and equipment
Equipment .............................................................
£48,000
Less: Accumulated depreciation—equipment ..
9,000
Equity and Liabilities
Equity
Share capital—ordinary ................................
£10,000
Retained earnings (£20,000 – £2,500**) ................
17,500
Total equity .....................................................
£27,500
EXERCISE 5.12 (30–35 minutes)
VIVALDI SPA
Statement of Financial Position
December 31, 2019
Assets
Non-current assets
Long-term investments
Property, plant, and equipment
Land .......................................................
260,000
Intangible assets
Franchises .............................................
160,000
Patents ..................................................
195,000
355,000
Total non-current assets ................
2,419,000
Current assets
Inventories ............................................
597,000
EXERCISE 5.12 (Continued)
Equity and Liabilities
Equity
Share capital—ordinary (€5 par) ......................
€1,000,000
Non-current liabilities
Bonds payable ..................................................
€1,000,000
Current liabilities
Short-term notes payable ................................
90,000
EXERCISE 5.12 (Continued)
*Computation of Retained Earnings:
Sales Revenue ........................................................
€7,900,000
Investment revenue ................................................
63,000
Beginning retained earnings ..................................
€ 78,000
Net income ..............................................................
52,000
Ending retained earnings .......................................
€ 130,000
Or ending retained earnings can be computed as follows:
EXERCISE 5.13 (15–20 minutes)
(a)
4.
(f)
1.
(k)
1.
EXERCISE 5.14 (25–35 minutes)
LOPEZ INC.
Statement of Cash Flows
For the Year Ended December 31, 2019
Cash flows from operating activities
Net income ............................................................
$34,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Cash flows from financing activities
Issuance of ordinary shares ................................
20,000
Payment of cash dividends ................................
(13,000)
EXERCISE 5.15 (25–35 minutes)
(a) YOON LTD
Statement of Cash Flows
For the Year Ended December 31, 2019
Cash flows from operating activities
Net income .............................................................
W160,000
Adjustments to reconcile net income
Cash flows from investing activities
Sale of investments
[(W74,000 – W52,000) – W7,000] ........................
15,000
Purchase of equipment (W298,000 – W240,000) .......
(58,000)
Net cash used by investing activities ...................
(43,000)
(b) Free Cash Flow Analysis
Net cash provided by operating activities ..................
W172,000
EXERCISE 5.16 (25–35 minutes)
(a) OROZCO AG
Statement of Cash Flows
For the Year Ended December 31, 2019
Cash flows from operating activities
Net income ..............................................................
€105,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Purchase of equipment ........... (€270,000 – €200,000)
(70,000)
Net cash used by investing activities ...................
(31,000)
Cash flows from financing activities
Payment of cash dividends ...................................
(40,000)
Net increase in cash .....................................................
41,000
EXERCISE 5.16 (Continued)
(b) Current cash debt coverage =
Cash debt coverage =
Free Cash Flow Analysis
Net cash provided by operating activities ..........................
€112,000
Less: Purchase of equipment ............................................
(70,000)
EXERCISE 5.17 (30–35 minutes)
(a) CHEKOV CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 2019
Cash flows from operating activities
Net income ...............................................................
$55,000
Adjustments to reconcile net income
Cash flows from investing activities
Sale of equipment ....................................................
9,000
Addition to building .................................................
(27,000)
Investment in debt securities ..................................
(16,000)
Net cash used by investing activities .....................
(34,000)
Total current assets—end of period
$301,500
[from part (b)]
Total current assets—beginning of period
(235,000)
EXERCISE 5.17 (Continued)
(b) CHEKOV CORPORATION
Statement of Financial Position
December 31, 2019
Assets
Non-current assets
Long-term investments .............................
$ 16,000
Property, plant, and equipment
Land ..........................................................
$30,000
Intangible assets
Patents ($40,000 – $2,500) ........................
37,500
EXERCISE 5.17 (Continued)
Equity and Liabilities
Equity
Share capital—ordinary ..........................................
$180,000
Non-current liabilities
Bonds payable ($100,000 + $50,000) ......................
150,000
b
The amount determined for current assets could be computed last and then is a “plug”
figure. That is, total liabilities and equity is computed because information is available
to determine this amount. Because the total assets amount is the same as total
liabilities and equity amount, the amount of total assets can be determined.
