Exam 3: The Balance Sheet and Notes to the Financial Statements

Which of the following is an appropriate computation for return on investment?

Which of the following generally is considered a limitation of the balance sheet?

The operating cycle

Which of the following statements best describes a subsequent event?

Account balances and supplemental information for the Alain Corporation as of December 31,2015,are given below: (a)$300,000 of 12% bonds were sold on November 1,2015,at par. (b)40,000 shares of $30 par value common stock were sold for $1,560,000. (c)All the equipment was purchased on January 2,2014.The depreciation rate is 10 percent per year. (d)5 percent of accounts receivable are expected to be uncollectible. (e)A two-year insurance policy was purchased on May 1,2015,for $7,200. (f)Accrued interest on $150,000 of short-term notes receivable from customers was $5,100 at December 31,2015. (g)$120,000 was borrowed from the bank on a 5-year,10% note payable dated July 1,2015.The loan is to be repaid in 10 semiannual payments of $12,000 plus interest,with the first payment due January 1,2016. Prepare a properly classified balance sheet in report form for Alain Corporation as of December 31,2015.

Bowman Company reported assets totaling $870,000 as of December 31,2014.The following information relates to those assets: (a)Tristan Labs,a rival company,recently offered to give a $100,000 signing bonus to the head of Bowman's fabrication department if she would leave Bowman and join Breakstone.She declined.Bowman has consequently recorded a long-term asset,"Employees Under Contract," for $100,000. (b)Bowman purchased a patent from a small research firm for $75,000.Subsequent research has shown that the patented technology doesn't work as well as originally thought and the technology actually has no economic use.Bowman reports the patent at its amortized cost of $60,000. (c)An independent appraiser recently set Bowman's market value at $500,000.This exceeded the book value of equity by $120,000.Accordingly,Bowman recorded Goodwill totaling $120,000. (d)Near the end of the year,Bowman paid $30,000 for the exclusive right to market electronic equipment to be imported from abroad.Bowman reported this as a $30,000 "Intangible Asset." (e)When Bowman started business three years ago,it was required to deposit $5,000 with the local electric utility.The deposit is refundable if Bowman cancels its electric service.Bowman earns no interest on the deposit.The deposit is recorded as an "Other Long-Term Asset." After considering the items above,what should be the total of Bowman's reported assets?

Treasury stock should be reported

Which of the following items is usually classified as a noncurrent asset?

Barron Co.'s current ratio is 2:1.Which of the following transactions would normally increase Barney's current ratio?

How should a contingent liability be reported in the financial statements when it is "reasonably possible" the company will have to pay the liability at a future date?

An operating cycle

As a member of the audit staff of Redman & Co.,CPAs,you have been assigned to the audit of a new client,Auburn Corporation.Upon arriving at the client's offices,the controller provides you with copies of the company's annual financial statements.You quickly observe that the balance of accounts receivable has increased materially over the amount reported on the prior year's balance sheet.Your inquiry of the controller produces the following response: "This year we have included several other items with our trade receivables.All of these items represent receivables and include: (a)Advances made to officers and employees, (b)Advances to our subsidiary company,and (c)A refund from the Internal Revenue Service resulting from the favorable resolution of a disputed tax matter. I have included a description of the tax item in the note to the financial statements.Since the other two items represent internal matters,I saw no reason to disclose them or present them as separate items on the balance sheet." Do you concur with the controller's treatment of these items? Explain.

The following totals are taken from the December 31,2014,balance sheet of Roanoke Company: Additional information: (a)A building costing $100,000 was purchased by taking out a $100,000 mortgage.Since the building serves as collateral on the mortgage loan,both have been excluded from the financial statements. (b)Cash in the amount of $45,000 is in a restricted fund for the purchase of equipment.This cash has been included in Current Assets. (c)Long-term liabilities include a bank loan of $80,000.Of this loan,$15,000 must be repaid within the coming year. (d)Investment securities totaling $27,000 are included in Current Assets.These securities represent stock purchases made as a long-term equity investment in a major supplier. After making any necessary changes,what are the totals for Roanoke's long-term assets and long-term liabilities?

In order for a liability to exist,

The accounts and balances shown below were gathered from Pastel Corporation's trial balance on December 31, 2014. All adjusting entries have been made. -See information for Pastel Corporation above.The amount that should be reported as current liabilities on Pastel Corporation's balance sheet is

Songbird Corporation's trial balance included the following account balances at December 31,2014: What amount should be included in the current liability section of Songbird's December 31,2014,balance sheet?

Which of the following characteristics may result in the classification of a liability as current?

Which of the following is NOT a long-term investment?

Wolfe Co.was incorporated on July 1,2014,with $200,000 from the issuance of stock and borrowed funds of $30,000.During the first year of operations,net income was $10,000.On December 15,Wolfe paid an $800 cash dividend.No additional activities affected owners' equity in 2014.At December 31,2014,Wolfe's liabilities had increased to $37,600.In Wolfe's December 31,2014,balance sheet,total assets should be reported at

In a consolidated balance sheet,the minority interest is reported