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

Major Co.'s adjusted trial balance at December 31,2014,includes the following account balances: What amount should Major report as total stockholders' equity in its December 31,2014,balance sheet?

The following information is provided for Rodriguez Enterprises.(Amounts in $1,000's) Required: Compute the ratios listed below for years 2013 and 2014 and determine which year had the most favorable ratios.Show supporting computations. a. Current ratio b. Quick ratio c. Debt ratio d. Asset mix

A general principle of disclosure is that material related-party transactions should be disclosed.As the auditor of the Clarence Company,you have noted the following transactions entered into by Clarence during the past fiscal year: I.Clarence borrowed $1,000,000 from the Southwest Bank issuing a noninterest-bearing note. II.Clarence borrowed $2,000,000 from BH Savings at a rate significantly above the market rate prevailing at that time for such a borrowing. III.Clarence borrowed $500,000 from First Bank with no scheduled terms for how or when funds will be repaid. Assuming all of the above transactions are material,which transaction or transactions above most likely would be a related party transaction requiring disclosure in Clarence's financial statements?

Which of the following statements regarding assets is NOT true?

You have just joined the public accounting firm of Johnson,Boyd,and Winters upon graduating from the University of High Numbers.You are assigned to the audit of the Wild Notes Company,a manufacturer of electronic musical instruments.Part of your responsibility on the audit will be the examination of the property,plant,and equipment of the client. Required: Use your knowledge of financial statements plus your experience in your principles of accounting course to develop a list of questions regarding property,plant,and equipment you feel you should answer as an independent auditor in order to ensure that the statements provide relevant and reliable information to the users of Wild Notes Company's financial statements.

Sonar Company prepared a draft of its 2014 balance sheet.The draft statement reported total assets of $437,500.Included in this total assets figure were the following items: At which amount should Sonar' total assets be correctly reported in the December 31,2014,balance sheet?

The December 31,2014,balance sheet of Giorgio Inc.,reported total assets of $1,050,000 and total liabilities of $680,000.The following information relates to the year 2015: •Madden Inc.issued an additional 5,000 shares of common stock at $25 per share on July 1,2015. •Madden Inc.paid dividends totaling $80,000. •Net income for 2015 was $110,000. •No other changes occurred in stockholders' equity during 2015. The stockholders' equity section of the December 31,2015,balance sheet would report a balance of

Audition and Co.,CPAs,has just been retained by the Sullivan Company to audit Sullivan's financial statement for the last fiscal year.Sullivan Company shows substantial amounts of inventory on its balance sheet. Alex Rodriguez has just joined the staff of Audition and Co.and has been assigned to assist in the audit of Sullivan's inventory. Required: Identify the major issues regarding the inventory of Sullivan Company that Alex needs to consider in determining if Sullivan has properly accounted for and reported its inventory.

Accrued revenues would normally appear on the balance sheet as

See Laramie Corporation information above.The amount reported on Laramie Corporation's December 31,2015,balance sheet as stockholders' equity was

Which item describes whether the following accounts would be included in the calculation of the acid-test (quick)ratio?

Investment securities held for the purpose of retiring bonds should be classified on a balance sheet as

The following balance sheet was prepared by the accountant for Lawnwood Farms Corp.: Additional information: (a)Cash is held in a checking account and a savings account with balances of $69,450 and $202,050,respectively.The cash in the savings account will be used to support operations in the event of a crop failure. (b)A loan to the president for $180,000 that is to be repaid in quarterly installments of $15,000 is included in "Accounts receivable." Other accounts receivable are considered to be 95 percent collectible. (c) (d)"Land,buildings,and equipment" includes 5 tractors that were purchased near the end of the year for $360,000 (shown net of a $300,000,5-year loan used to buy the tractors).The balance of the account consists of land that was purchased for $1,200,000 and buildings that were purchased for $255,000 (shown net of depreciation of $63,000). (e)Included in "Accounts payable" are $105,000 of advances from customers for delivery of goods in August of the next year. (f)The company has 90,000 shares of $5 par common stock issued and outstanding.The common stock was originally sold for $7 per share,and the premium was included in "Retained earnings." (g)After reading a U.S.Meteorological Service report,the president believes that next year will be a bad crop year due to freak hailstorms and estimates the company will lose about $360,000.An appropriation of Retained Earnings has been made for this amount. Using the balance sheet and the additional information,prepare a properly classified and corrected balance sheet.

Hondo Co.has total debt of $252,000 and stockholders' equity of $420,000.Hondo is seeking capital to fund an expansion.Hondo is planning to issue an additional $180,000 in common stock,and is negotiating with a bank to borrow additional funds.The bank requires a maximum debt ratio of .75.What is the maximum additional amount Hondo will be able to borrow after the common stock is issued?