Concept explainers
• LO3–2, LO3–3
The following is the ending balances of accounts at June 30, 2018 for Excell Company.
Account Title | Debits | Credits |
Cash | $ 83,000 | |
Short-term investments | 65,000 | |
280,000 | ||
Prepaid expenses (for the next 12 months) | 32,000 | |
Land | 75,000 | |
Buildings | 320,000 | |
$ 160,000 | ||
Equipment | 265,000 | |
Accumulated depreciation—equipment | 120,000 | |
Accounts payable | 173,000 | |
Accrued expenses | 45,000 | |
Notes payable | 100,000 | |
Mortgage payable | 250,000 | |
Common stock | 100,000 | |
172,000 | ||
Totals | $1,120,000 | $1,120,000 |
Additional Information:
1. The short-term investments account includes $18,000 in U.S. treasury bills purchased in May. The bills mature in July.
2. The accounts receivable account consists of the following:
a. Amounts owed by customers | $225,000 |
b. Allowance for uncollectible accounts—trade customers | (15,000) |
c. Nontrade note receivable (due in three years) | 65,000 |
d. Interest receivable on note (due in four months) | 5,000 |
Total | $280,000 |
3. The notes payable account consists of two notes of $50,000 each. One note is due on September 30, 2018, and the other is due on November 30, 2019.
4. The mortgage payable is payable in semiannual installments of $5,000 each plus interest. The next payment is due on October 31, 2018. Interest has been properly accrued and is included in accrued expenses.
5. Five hundred thousand shares of no par common stock are authorized, of which 200,000 shares have been issued and are outstanding.
6. The land account includes $50,000 representing the cost of the land on which the company’s office building resides. The remaining $25,000 is the cost of land that the company is holding for investment purposes.
Required:
Prepare a classified balance sheet for the Excell Company at June 30, 2018.
Balance sheet:
Balance sheet is the statement which is prepared to report the financial position of the business. The balance sheet contains the various assets, liabilities and shareholders' equities of the business as on a given date.
To Prepare: A classified balance sheet for the company E at June 30, 2018.
Explanation of Solution
Classified balance sheet:
Classified balance sheet is the financial statement of a company which shows the grouping of similar assets and liabilities under subheadings.
Prepare a classified balance sheet for the company E at June 30, 2018 is as follows:
COMPANY E | ||
Balance Sheet | ||
At June 30, 2018 | ||
Particulars | Amount($) | Amount($) |
Assets | ||
Current assets: | ||
Cash and cash equivalents(1) | 101,000 | |
Short-term investments (2) | 47,000 | |
Accounts receivable (3) | 210,000 | |
Interest receivable | 5,000 | |
Prepaid expenses | 32,000 | |
Total current assets | 395,000 | |
Investments: | ||
Note receivable | 65,000 | |
Land held for sale(6) | 25,000 | 90,000 |
Property, plant, and equipment: | ||
Land(5) | 50,000 | |
Buildings | 320,000 | |
Equipment | 265,000 | |
635,000 | ||
Less: Accumulated depreciation-buildings | (160,000 | |
Less: Accumulated depreciation-equipment | (120,000) | |
Net property, plant, and equipment | 355,000 | |
Total assets | 840,000 | |
Liabilities and Shareholders' Equity | ||
Current liabilities: | ||
Accounts payable | 173,000 | |
Accrued expenses | 45,000 | |
Note payable | 50,000 | |
Current maturities of long-term debt | 10,000 | |
Total current liabilities | 278,000 | |
Long-term liabilities: | ||
Note payable | 50,000 | |
Mortgage payable(4) | 240,000 | |
Total long-term liabilities | 290,000 | |
Total liabilities | 568,000 | |
Shareholders’ equity: | ||
Common stock | 100,000 | |
Retained earnings | 172,000 | |
Total shareholders’ equity | 272,000 | |
Total liabilities and shareholders’ equity | 840,000 |
Table (1)
Explanation:
Cash and cash equivalents:
Cash and cash equivalents are the highly liquid investments with the maturity period of less than three months from the date of purchase. It includes money market funds, treasury bills and commercial papers.
Working note:
Calculate cash and cash equivalents:
Calculate the amount of short-term investment:
Calculate the amount of notes receivable, net of allowance for uncollectible accounts.
Calculate the amount of mortgage payable.
Calculate the land value:
Total cost of land is given as $75000 in the trial balance. In total cost, $50,000(5) is considered as the property because where office buildings are resided. Remaining $25,000(6) of land is being held by the company for sale so it is considered as the investment.
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