Preparing a Current Asset Section along with Note Disclosures The following selected balances are from the post-closing trial balance of WKO Inc. as of December 31, 2020. Cash $120,000 Equipment $128,000 Investments 156,800 Accumulated depreciation 24,000 Accounts receivable 120,000 Franchise, net 24,000 Inventory 128,000 Customer deposits received in advance 6,400 Note receivable 160,000 Accounts payable 104,000 Additional information Included in the cash balance is $40,000 of cash restricted for 18 months due to a debt agreement. Included in investments is $44,800 of short-term investments at fair value and the remaining is long-term, also recognized at fair value. 4% of the accounts receivable balance of $120,000 is estimated to be uncollectible. Inventory is valued at the lower of cost or market. The cost value is determined using the average cost method. The note receivable of $160,000 is due in 21 months. The interest rate is 5% and the note originated on September 30, 2020. Interest is paid quarterly with the first payment due January 1, 2021. a. Prepare the current asset section of the classified balance sheet for WKO Inc. on December 31, 2020. Note: Do not use negative signs in your answers. Current Asset Section December 31, 2020 Cash Answer Short-term investments Answer Accounts receivable Answer Less: Allowance for doubtful accounts Answer Answer Inventory Answer Interest receivable Answer Total current assets Answer b. Prepare a list of four notes, regarding all assets, to be included in the significant accounting policy note accompanying the financial statements of WKO Inc. on December 31, 2020. Note: Select your answers in alphabetical order using the first word provided in the note.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Preparing a Current Asset Section along with Note Disclosures

The following selected balances are from the post-closing trial balance of WKO Inc. as of December 31, 2020.

Cash	$120,000	Equipment	$128,000
Investments	156,800	Accumulated depreciation	24,000
Accounts receivable	120,000	Franchise, net	24,000
Inventory	128,000	Customer deposits received in advance	6,400
Note receivable	160,000	Accounts payable	104,000

Additional information

Included in the cash balance is $40,000 of cash restricted for 18 months due to a debt agreement.
Included in investments is $44,800 of short-term investments at fair value and the remaining is long-term, also recognized at fair value.
4% of the accounts receivable balance of $120,000 is estimated to be uncollectible.
Inventory is valued at the lower of cost or market. The cost value is determined using the average cost method.
The note receivable of $160,000 is due in 21 months. The interest rate is 5% and the note originated on September 30, 2020. Interest is paid quarterly with the first payment due January 1, 2021.

a. Prepare the current asset section of the classified balance sheet for WKO Inc. on December 31, 2020.

Note: Do not use negative signs in your answers.

Current Asset Section December 31, 2020
Cash		Answer
Short-term investments		Answer
Accounts receivable	Answer
Less: Allowance for doubtful accounts	Answer	Answer
Inventory		Answer
Interest receivable		Answer
Total current assets		Answer

b. Prepare a list of four notes, regarding all assets, to be included in the significant accounting policy note accompanying the financial statements of WKO Inc. on December 31, 2020.

Note: Select your answers in alphabetical order using the first word provided in the note.

Answer

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