EX 10-22 Balance sheet presentation

List the errors you find in the following partial balance sheet:


Contours Company Balance Sheet December 31, 2012 Assets
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $350,000
Replacement Cost
Accumulated Depreciation
Book Value
Property, plant, and equipment: Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $100,000 $   25,000 $   75,000 
Buildings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 256,000 90,000 166,000 
Factory equipment  . . . . . . . . . . . . . . . . . . . . . . . . . . 297,000 110,000 187,000 
Office equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,000 48,000 24,000 
Patents  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,000 — 48,000 
Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,000 7,000     20,000 
Total property, plant, and equipment . . . . . . . . $800,000 $280,000 $520,000

Answer:
1. Fixed assets should be reported at cost and not replacement cost.
2. Land does not depreciate.
3. Patents and goodwill are intangible assets that should be listed in a separate section following the Fixed Assets section. Patents should be reported at their net book values (cost less amortization to date). Goodwill should not be amortized, but should be only written down upon impairment.

Popular posts from this blog

PR 9-2A Aging of receivables; estimating allowance for doubtful accounts

Image
Angler’s Dream Company supplies flies and fishing gear to sporting goods stores and outfitters throughout the western United States. The accounts receivable clerk for Angler’s Dream prepared the following partially completed aging of receivables schedule as of the end of business on December 31, 2011: The following accounts were unintentionally omitted from the aging schedule: Customer                                            Due Date                        Balance  Antelope Sports & Flies                June 21, 2011                      $ 3,000  Big Hole Flies                               Aug. 30, 2011         ...
Read more

PR 10-5A Transactions for fixed assets, including sale

The following transactions, adjusting entries, and closing entries were completed by D. Hurd Furniture Co. during a three-year period. All are related to the use of delivery equipment. The double-declining-balance method of depreciation is used. 2010 Jan.  9. Purchased a used delivery truck for $30,000, paying cash. Mar. 17. Paid garage $400 for miscellaneous repairs to the truck. Dec. 31. Recorded depreciation on the truck for the year. The estimated useful life of the truck is four years, with a residual value of $6,000 for the truck. 2011 Jan.   2. Purchased a new truck for $48,000, paying cash. Aug   1. Sold the used truck for $12,500. (Record depreciation to date in 2011 for the truck.) Sept. 23. Paid garage $325 for miscellaneous repairs to the truck. Dec. 31. Record depreciation for the new truck. It has an estimated residual value of $11,000 and an estimated life of fi ve years. 2012 July    1. Purchased a new truck for $52,000, paying cash. Oct.   ...
Read more

PR 9-1A Entries related to uncollectible accounts

Image
The following transactions were completed by Axiom Management Company during the current fiscal year ended December 31: Feb.  17. Received 25% of the $30,000 balance owed by Gillespie Co., a bankrupt business, and wrote off the remainder as uncollectible. Apr.  11. Reinstated the account of Colleen Bertram, which had been written off in the preceding year as uncollectible. Journalized the receipt of $4,250 cash in full payment of Colleen’s account. July  6. Wrote off the $9,000 balance owed by Covered Wagon Co., which has no assets. Nov. 20. Reinstated the account of Dugan Co., which had been written off in the preceding year as uncollectible. Journalized the receipt of $5,900 cash in full payment of the account. Dec. 31. Wrote off the following accounts as uncollectible (compound entry): Kipp Co., $3,000; Moore Co., $4,000; Butte Distributors, $8,000; Parker Towers, $6,700.          31. Based on an analysis of the $1,200,000 of accounts receivabl...
Read more