Case 7-1: The following financial statement was prepared by employees of your client, Linus Construction Company.
Linus Construction Company Statement of Financial Position December 31, 2017 | ||||
Current Assets: | ||||
Cash | $ 182,200 | |||
Accounts receivable (less allowance of $14,000 for doubtful accounts) | 220,700 | |||
Materials, supplies, labor, and overhead charged to construction | 2,026,000 | |||
Materials and supplies not charged to construction | 288,000 | |||
Deposits made to secure performance of contracts | 360,000 | $3,076,900 | ||
Less Current Liabilities: | ||||
Accounts payable to subcontractors | $ 141,100 | |||
Payable for materials and supplies | 65,300 | |||
Accrued payroll | 8,260 | |||
Accrued interest on mortgage note | 12,000 | |||
Estimated taxes payable | 66,000 | 292,660 | ||
Net working capital | $2,784,240 | |||
Property, Plant, and Equipment (at cost): | ||||
Cost | Depreciation | Value | ||
Land and equipment | $ 983,300 | $310,000 | $ 673,300 | |
Machinery and equipment | 905,000 | 338,000 | 567,000 | |
Payments made on leased equipment | 230,700 | 230,699 | 1 | |
$2,119,000 | $878,699 | $1,240,301 | ||
Deferred Charges: | ||||
Prepaid taxes and other expenses | 11,700 | |||
Points charged on mortgage note | 10,800 | 1,262,801 | ||
Total net working capital and noncurrent assets | $4,047,041 | |||
Less Deferred Liabilities: | ||||
Mortgage note payable | 300,000 | |||
Unearned revenue on work in progress | 1,898,000 | 2,198,000 | ||
Total net assets | $1,84,0411 | |||
Stockholders’ Equity: | ||||
6% preferred stock at par value | $400,000 | |||
Common stock at par value | 800,000 | |||
Paid‐in surplus | 210,000 | |||
Retained earnings | 483,641 | |||
Treasury stock at cost (370) shares) | (44,000) | |||
Total stockholders’ equity | $1,849,041 |
The statement is not accompanied by footnotes, but you have discovered the following:
Required:
a. While there remains multiple weaknesses in the given Financial Statement, we can state, for one, re the Net Assets not matching with the Stockholders' equity. Apart from the mistakes and irregularities, it points to the fact that the Statement is incomplete and incorrect. There are more and/or different amounts than are stated on the fact of the Statement.
b. Another weakness that we can point out is re the 'Prepaid Taxes and Other Expenses' being classified under Deferred Charges outside of Working Capital. This is typically a Current Asset item and should form a part of the Working Capital. Prepaid Taxes are of the current nature as they remain adjustable against the current period tax liability.
c. The major weaknesses are ---
-- Balance Sheet not matching, as discussed in a above. This clearly indicates missing and/or incorrect information presented
-- Incorrect classification of items in Current Assets. This creates a wrong idea of Working capital.
Case 7-1: The following financial statement was prepared by employees of your client, Linus Construction Company....
Please help with finding the right account titles!
Brief Exercise 21A-7 Your answer is partially correct. Try again. Windsor Corporation recorded a right-of-use asset for S240 300 as a result of a finance lease on December 31, 2016. Windsor's incremental borrowing rate is 13%, and the implicit rate of the lessor was not known at the commencement of the lease. Windsor made the first lease payment of $41,440 on on December 31, 2016. The lease requires 9 annual payments. The...
On January 1, 2017, Sheffield Company contracts to lease
equipment for 5 years, agreeing to make a payment of $109,913 at
the beginning of each year, starting January 1, 2017. The leased
equipment is to be capitalized at $466,000. The asset is to be
amortized on a double-declining-balance basis, and the obligation
is to be reduced on an effective-interest basis. Sheffield’s
incremental borrowing rate is 6%, and the implicit rate in the
lease is 9%, which is known by Sheffield....
7. The following invoices are being entered into the account- ing system. Using the chart of accounts in Figure 2-1, determine the changes to the balance sheet, income statement, job cost ledger, and equipment ledger as the result of entering each of the following invoices: a. A $5,000 invoice for concrete charged to job cost code 302.01.32300M b. A $12,350 invoice from a subcontractor for plumb- ing charged to job cost code 309.02.22100S. Ten percent retention is withheld from the...
In Accounting
Classify each of the following financial statement items taken from Ming Corporation's balance sheet. Stockholders' Equity Accounts payable Property, Plant, and Equipment Accounts receivable Stockholders' Equity Accumulated depreciation equipment Intangible Assets Buildings Current Assets Cash Intangible Assets Interest payable Current Assets Goodwill Intangible Assets Income taxes payable Intangible Assets Inventory Current Liabilities Stock investments (to be sold in 7 months) Long-term Liabilities Land (in use) Long-term Investments Mortgage payable Current Liabilities Supplies Property, Plant, and Equipment Equipment Long-term...
Exercise 2-1 Classiíy each of the following financial statement items taken from Ming Corporation's balance sheet. Accounts payable Accounts receivable Accumulated depreciation-equipment Buildings Cash Interest payable Goodwill Income taxes payable Inventory Stock investments (to be sold in 7 months) Land (in use) Mortgage payable Supplies to search V Accumulated depreciation-equipment VBuildings Cash Interest payable v Goodwill Income taxes payable Inventory Stock investments (to be sold in 7 months) Land (in use) Mortgage payable Supplies Equipment Prepaid rent to search 40
Below are the completed financial statement columns of the
worksheet for Suncor Company.
Suncor Company
Work Sheet
For the Year Ended December 31, 2017
During 2017, Suncor’s shareholders invested $26,880 in exchange
for common shares. Accumulated other comprehensive income had a
balance of $0 on January 1, 2017.
Prepare a statement of comprehensive income.
SUNCOR CORP.
Choice of accounts to use:
Accounts Payable
Accounts Receivable
Accrued Liabilities
Accumulated Amortization - Patent
Accumulated Depreciation - Buildings
Accumulated Depreciation - Equipment
Accumulated...
Question 3 (35 marks) The following information as at the year-end date is extracted from the Freddy Corporation's financial statements: Cash Accounts receivable Allowance for doubtful accounts Inventory Prepaid expenses Land Buildings Buildings - Accumulated depreciation Machinery Machinery- Accumulated depreciation Leased equipment Leased equipment - Accumulated depreciation 2019 (5) 95,000 92,000 (4.500) 155,000 7,500 90.000 287,000 (32,000) 50,000 (30,000) 28,594 (9.531) 729.063 December 31 2018 ($) 27,000 80,000 (3.100) 175.000 6,800 60,000 244,000 (13,000) 60,000 (25,000) 611.700 84,000 63.000 Accounts...
The following items are taken from the financial statements of Crane Company at December 31, 2022. Land Accounts receivable Supplies Cash Equipment Buildings Land improvements Notes receivable (due in 2023) Accumulated depreciation-land improvements Common stock Retained earnings (December 31, 2022) Accumulated depreciation-buildings Accounts payable Mortgage payable Accumulated depreciation-equipment Interest payable Income taxes payable Patents Investments in stock (long-term) Debt investments (short-term) $195,800 21,400 10,400 11,850 83,800 262,000 45,900 5,400 13,200 80,000 500,000 33,600 9,600 86,450 18,900 3,100 15,100 47,100 71,600...
Generalized Statement 1. Based on the financial stalements for Jackson Enterprises (income statement, statement of owner's equity, and balance sheet) shown below, prepare the following financial ratios. All sales are credit sales. The Accounts Receivable balance on January 1, 20- was $21,600. Assume 365 days per year. If required, round your answers to two decimal places. For return on owner's equity, enter as a percent but do not include percent sign. Round average number of days answers to one decimal...
E5.2 (LO 3) (Classification of Statement of Financial Position Accounts) The classifications on Chesapeake Limited's statement of financial position are as follows: 1. Current assets 2. Long-term investments 3. Property, plant, and equipment 4. Intangible assets 5. Other assets 6. Current liabilities 7. Long-term debt 8. Capital shares 9. Contributed surplus 10. Retained earnings 11. Accumulated other comprehensive income ect proble ~ CHAPTER 1 X M ebook intermediat X Cover Page X Operations Manag te%20Accounting,%20Volume%201.12th%20Canadian%20Edition%20.pdf Instructions Indicate by number where...