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Chapter 3 The Balance Sheet and Financial Disclosures

EXERCISES

1. b Note receivable, due in 2 years 10. a Inventories2. a Accounts receivable 11. d _ Goodwill3. -c _ Accumulated depreciation 12. Accrued salaries payable!. c __ "and, in use 13. _ Accrued ta#es payable$. __ Note payable, due in 10 mont%s 1!. a &repaid insurance'. Interest payable 1$. % _ (ommon stoc) *. a Note receivable, due in ' mont%s 1'. c +uipment

. a (as% euivalents 1*. _ nearned revenue/. b Investment in A( (orp., lon-term 1. _ arranties payable

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Alternate Eercise an! "ro#lem $ol%tions 3-1

Exercise 3-1

Exercise 3-2

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1. epreciation met%od A2. Inormation on related party transactions

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3-2 Interme!iate Acco%ntin&, '(e

CURTIS CR!R"TI#alance 4%eet

At ecember 31, 2013

"ssetsC%rrent assets)

(as% and cas% euivalents................................... 5 *0,0006ar)etable securities .......................................... 1$,000Accounts receivable ............................................ 110,000Interest receivable ............................................... 2,000Inventories .......................................................... 120,000&repaid insurance ................................................ 3,000

7otal current assets ........................................ 320,000

In*estments)Note receivable .................................................. $0,000

"ropert+, plant, an! e%ipment)6ac%inery and euipment................................... 5230,000"ess8 Accumulated depreciation ......................... 9111,000 :

Net property, plant, and euipment ............... 11/,0007otal assets ................................................. 5!/,000

$ia%ilities and Shareholders& E'uit(

C%rrent lia#ilities)Accounts payable ............................................... 5 !$,000aes payable .................................................... 10,000Interest payable .................................................. 3,000

7otal current liabilities ................................... $,000

on&-term lia#ilities)onds payable .................................................... 100,000

$harehol!ers e%it+)

(ommon stoc) .................................................... 5200,000;etained earnins ............................................... 131,000

7otal s%are%olders< euity .............................. 331,0007otal liabilities and s%are%olders< euity 5!/,000

Exercise 3-3

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3. 6et%od o accountin or acuisitions A!. (omposition and details o lon-term debt $. Inventory met%od A'. asis o revenue reconition A*. 6a=or damae to a plant acility occurrin ater year-end . (omposition o accrued liabilities

1. (urrent ratio >51$0 ? !00 ? $00@ 5'00 B 1.*$

2. Acid-test ratio >51$0 ? !00@ 5'00 B ./23. ebt to euity ratio >5'00 ? $00@ >51,000 ? 1$0@ B ./'!. 7imes interest earned ratio >52'0 ? 30 ? 200@ 530 B 1'.3 times

Current "cid-test De%t to

"ction Ratio Ratio E'uit( Ratio

1. Issuance o common stoc) or cas% I I 2. &urc%ase o inventory on account I I3. ;eceipt o cas% rom a customer on account N N N!. +#piration o prepaid rent N I$. &ayment o a cas% dividend I'. &urc%ase o euipment wit% a '-mont% note I*. &urc%ase o lon-term investment or cas% N. 4ale o euipment or cas% 9no ain or loss: I I N

/. rite-o o obsolete inventory N I10. ecision to reinance on a lon-term basis

currently-maturin debt I I N

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Alternate Eercise an! "ro#lem $ol%tions 3-3

Exercise 3-)

Exercise 3-*

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!RB$E+S

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3-/ Interme!iate Acco%ntin&, '(e

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Alternate Eercise an! "ro#lem $ol%tions 3-

!ro%le, 3-1"$EX"#DRI" EX!$R"TI# CR!R"TI#alance 4%eet

At ecember 31, 2013

"ssets

C%rrent assets)(as% and cas% euivalents ...................................................... 5 '2,0004%ort-term investments ........................................................... 130,000Accounts receivable, net o allowance or

uncollectible accounts o 51$,000 ..................................... 1$$,000Interest receivable ................................................................... 3,000Inventories .............................................................................. 200,0004upplies .................................................................................. 3,000

7otal current assets .......................................................... $$3,000

In*estments)

"and %eld or sale ................................................................... 5 20,000Note receivable ....................................................................... $0,000

7otal investments ............................................................. *0,000

"ropert+, plant, an! e%ipment)

"and ....................................................................................... 0,000uildins ................................................................................ $00,0006ac%inery .............................................................................. 2$0,000

30,000"ess8 Accumulated depreciation .............................................. 9230,000:

Net property, plant, and euipment ............................. ..... '00,000

Intan&i#les)Goodwill ................................................................................. 3',000

7otal assets ...................................................................... 51,2$/,000

$ia%ilities and Shareholders& E'uit(

C%rrent lia#ilities)Accounts payable ................................................................... 5 12$,000Interest payable ...................................................................... !0,000onds payable ........................................................................ 200,000

7otal current liabilities ..................................................... 3'$,000

on&-term lia#ilities)onds payable ........................................................................ 300,000

$harehol!ers e%it+)(ommon stoc), no par valueC 1,000,000 s%ares aut%oriDedC $00,000 s%ares issued and outstandin ............. $00,000;etained earnins ................................................................... /!,000

7otal s%are%olders< euity ................................................. $/!,0007otal liabilities and s%are%olders< euity ....................... 51,2$/,000

!ro%le, 3-2

TI$$"+ CEESE C+!"#.alance 4%eet

At ecember 31, 2013

"ssetsC%rrent assets)

(as% and cas% euivalents...............................................................................................

5 1/0,000

Investment in stoc)s...............................................................................................

!0,000

Accounts receivable...............................................................................................

300,000

Inventories...............................................................................................

23$,000

&repaid e#penses...............................................................................................

1$,000

7otal current assets.........................................................................................

*0,000

In*estments)Investment in bonds...............................................................................................

2'0,000

"ropert+, plant, an! e%ipment)

"and...............................................................................................

5 /$0,000

uildins...............................................................................................

1,200,000

+uipment...............................................................................................

/00,000

3,0$0,000"ess8 Accumulated depreciation...............................................................................................

9'00,000:

Net property, plant, and euipment.........................................................................................

2,!$0,000

Intan&i#les)&atent...............................................................................................

0,000

Goodwill...............................................................................................

220,000

7otal intanibles.........................................................................................

300,000

7otal assets......................................................................................

53,*/0,000

$ia%ilities and Shareholders& E'uit(C%rrent lia#ilities)

Accounts payable ................................................................. 5 2'0,000Interest payable .................................................................... 20,000Et%er accrued liabilities ........................................................ '0,000Notes payable ....................................................................... 10,000

7otal current liabilities ................................................... $20,000

on&-term lia#ilities)Notes payable ....................................................................... 100,000onds payable ...................................................................... 1,000,000

7otal lon-term liabilities ............................................. 1,100,000

$harehol!ers e%it+)(ommon stoc), no par valueC 2,000,000 s%ares

aut%oriDedC 1,000,000 s%ares issued and outstandin.......... 1,$00,000;etained earnins ................................................................. '*0,000