P 3-2
P 3-2 The following information was obtained from the accounts of Lukes, Inc., as of
December 31, 2012. It is presented in scrambled order.
Common stock, no par value, 10,000 shares
authorized, 5,724 shares issued $ 3,180
Retained earnings 129,950
Deferred income tax liability (long term) 24,000
Long-term debt 99,870
Accounts payable 35,000
Buildings 75,000
Machinery and equipment 300,000
Land 11,000
Accumulated depreciation 200,000
Cash 3,000
Receivables, less allowance of $3,000 58,000
Accrued income taxes 3,000
Inventory 54,000
Other accrued expenses 8,000
Current portion of long-term debt 7,000
Prepaid expenses 2,000
Other assets (long term) 7,000
Required Prepare a classified balance sheet in report form. For assets, use the classifications
of current assets, plant and equipment, and other assets. For liabilities, use the classifications
of current liabilities and long-term liabilities.
P 3-3 The following information was obtained from the accounts of Alleg, Inc., as of December
31, 2012. It is presented in scrambled order.
Common stock, authorized 21,000 shares at $1
par value, issued 10,000 shares $ 10,000
Additional paid-in capital 38,000
Cash 13,000
Marketable securities 17,000
Accounts receivable 26,000
Accounts payable 15,000
Current maturities of long-term debt 11,000
Mortgages payable 80,000
Bonds payable 70,000
Inventory 30,000
Land and buildings 57,000
Machinery and equipment 125,000
Goodwill 8,000
Patents 10,000
Other assets 50,000
Deferred income taxes (long-term liability) 18,000
Retained earnings 33,000
Accumulated depreciation 61,000
Required Prepare a classified balance sheet in report form. For assets, use the classifications of current assets, plant and equipment, intangibles, and other assets. For liabilities, use the
classifications of current liabilities and long-term liabilities.
P 3-11
An item of equipment acquired on January 1 at a cost of $100,000 has an estimated
life of 10 years.
Required Assuming that the equipment will have a salvage value of $10,000, determine the
depreciation for each of the first three years by the:
a. Straight-line method
b. Declining-balance method
c. Sum-of-the-years’-digits method
P3-14 Answer the following multiple-choice questions:
a. Which of the following accounts would not appear on a conventional balance sheet?
1. Accounts receivable
2. Accounts payable
3. Patents
4. Gain from sale of land
5. Common stock
b. Current assets typically include all but which of the following assets?
1. Cash restricted for the retirement of bonds
2. Unrestricted cash
3. Marketable securities
4. Receivables
5. Inventories
c. The Current Liabilities section of the balance sheet should include
1. Land.
2. Cash surrender value of life insurance.
3. Accounts payable.
4. Bonds payable.
5. Preferred stock.
d. Inventories are the balance of goods on hand. In a manufacturing firm, they include all
but which of the following?
1. Raw materials
2. Work in process
3. Finished goods
4. Supplies
5. Construction in process e. Which of the following accounts would not usually be classified as a current liability?
1. Accounts payable
2. Wages payable
3. Unearned rent income
4. Bonds payable
5. Taxes payable
f. For the issuing firm, redeemable preferred stock should be classified where for analysis
purposes?
1. Marketable security
2. Long-term investment
3. Intangible
4. Liabilities
5. Shareholders’ equity
g.Which of the following accounts would not be classified as an intangible?
1. Goodwill
2. Patent
3. Accounts receivable
4. Trademarks
5. Franchises
h. Which of the following is not true relating to intangibles?
1. Research and development usually represents a significant intangible on the
financial statements.
2. Goodwill arises from the acquisition of a business for a sum greater than the
physical asset value.
3. Purchased goodwill is not amortized but is subject to annual impairment reviews.
4. The global treatment of goodwill varies significantly.
5. Intangibles are usually amortized over their useful lives or legal lives,whichever is shorter.
i. Growth Company had total assets of $100,000 and total liabilities of $60,000. What is
the balance of the stockholders’ equity?
1. $0
2. $40,000
3. $60,000
4. $100,000
5. None of the above.
j. The Current Assets section of the balance sheet should include
1. Inventory.
2. Taxes payable.
3. Land.
4. Patents.
5. Bonds payable.
k. Which of the following is not a typical current liability? 1. Accounts payable
2. Wages payable
3. Interest payable
4. Pension liabilities
5. Taxes payable
l. Which of the following is a current liability?
1. Unearned rent income
2. Prepaid interest
3. Land
4. Common stock
5. None of the above.
m. Treasury stock is best classified as a
1. Current liability.
2. Current asset.
3. Reduction of stockholders’ equity.
4. Contra asset.
5. Contra liability.
n. Considering IFRSs, which of the following statements would be considered false?
1. IFRSs do not require a standard format for the balance sheet.
2. With IFRSs, usually nonconcurring assets are presented first, followed by current assets.
3. Under IFRS for liabilities and owners’ equity, capital and listed reserves are usually
listed first, then noncurrent liabilities, and then current liabilities last.

 

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