Ch 5-In Class Ex
E5-10 (Current Assets Section of Statement of Financial Position)
(LO 4, 5, 6 )
Selected accounts follow of Aramis Limited at December 31, 2014:
Finished Goods Inventory 52,000 $ Cost of Goods Sold $
...
Ch 5-In Class Ex
E5-10 (Current Assets Section of Statement of Financial Position)
(LO 4, 5, 6 )
Selected accounts follow of Aramis Limited at December 31, 2014:
Finished Goods Inventory 52,000 $ Cost of Goods Sold $2,100,000
Unearned Revenue 90,000 Notes Receivable 40,000
Bank Overdraft 8,000 Accounts Receivable 161,000
Equipment 253,000 Raw Materials 187,000
Work-in-Process Inventory 34,000 Supplies Expense 60,000
Cash, R.M. Bank 50,000 Allowance for Doubtful
Accounts
12,000
FV-NI Investments 31,000 Intangible Assets—Trade
Names
18,000
Interest Payable 36,000 Contributed Surplus 88,000
Restricted Cash (for Plant
Expansion)
50,000 Common Shares 22,000
The following additional information is available:
1. Inventory is valued at lower of cost and net realizable value using FIFO.
2. Equipment is recorded at cost. Accumulated depreciation, calculated on a
straight-line basis, is $50,600.
3. The fair value—net income investments have a fair value of $29,000.
4. The notes receivable are due April 30, 2015, with interest receivable every
April 30. The notes bear interest at 6%. (Hint: Accrue interest due on
December 31, 2014.)
5. The allowance for doubtful accounts applies to the accounts receivable.
Accounts receivable of $50,000 are pledged as collateral on a bank loan.
6. Intangible Assets—Trade Names are recorded net of accumulated
amortization of $14,000.
Instructions
(a) Prepare the current assets section of Aramis Limited's statement of financial
position as at December 31, 2014, with appropriate disclosures.
(b) Outline the other ways or methods that can be used to disclose the details that
are required for the financial statement elements in part (a).
Solution to EXERCISE 5-10
(a)
Current assets
Cash $ 92,000*
Less cash restricted for plant expansion (50,000) $42,000
FV - NI investments 29,000
Accounts receivable (of which $50,000 is
pledged as collateral on a bank loan)
161,00
0
Less allowance for doubtful accounts (12,000) 149,000
Notes receivable 40,000
Interest receivable ** 1,600
Inventory at lower of FIFO cost and
net realizable value
Finished goods 52,000
Work-in-process 34,000
Raw materials 187,000 273,000
Total current assets $534,600
*An acceptable alternative is to report cash at $42,000 and report
the cash restricted for plant expansion in the non-current
investments section of the statement of financial position.
($50,000 + $50,000 – $8,000)
** [($40,000 X 6%) X 8/12]
EXERCISE 5-10 (Continued)
(b) An alternative to the presentation of the details (for
example of the three categories of inventory) as shown
above is to provide disclosure in a table within the notes to
the financial statements. This provides a more condensed
format of the statement of financial position. This allows
easier comparisons of balances, especially when
presented on a comparative basis. References to the notes
containing the detail would be added to the captions
appearing on the face of the statement of financial position
as a cross-reference.
A second possible alternative to the presentation of
information is parenthetical disclosure on the face of the
statement of financial position. Although not a required
disclosure, the balance of accounts receivable could be
presented: “net of allowance for doubtful accounts of
$12,000.”
E5-11 (Preparation of Statement of Financial Position)
(LO 4, 8 )
Zezulka Corporation's statement of financial position at the end of 2013 included
the following items:
Current assets $1,105,000 Current liabilities $1,020,000
Land 30,000 Bonds payable 1,100,000
Building 1,120,000 Common shares 180,000
Equipment 320,000 Retained
earnings
174,000
Accumulated depreciation—
building
(130,000) Total $2,474,000
Accumulated depreciation—
equipment
(11,000)
Intangible assets—patents 40,000
Total $2,474,000
The following information is available for 2014:
1. Net income was $391,000.
2. Equipment (cost of $20,000 and accumulated depreciation of $8,000) was sold
for $10,000.
3. Depreciation expense was $4,000 on the building and $9,000 on equipment.
4. Patent amortization expense was $3,000.
5. Current assets other than cash increased by $229,000. Current liabilities
increased by $213,000.
6. An addition to the building was completed at a cost of $31,000.
7. A fair value—OCI investment in shares was purchased for $20,500 at the end
of the year.
8. Bonds payable of $75,000 were issued.
9. Cash dividends of $180,000 were declared and paid. Dividends paid are treated
as financing activities.
Instructions
(a) Prepare a statement of financial position as at December 31, 2014.
(Hint: You may need to adjust the December 31, 2014 amount of current
assets to ensure it balances.)
(b) Prepare a statement of cash flows for the year ended December 31, 2014.
Solution to EXERCISE 5-11
(a)
Zezulka Corporation
Statement of Financial Position
December 31, 2014
Assets
Current assets $1,580,500a
FV – OCI Investments 20,500
Property, plant, and equipment
Land $ 30,000
Building ($1,120,000 + $31,000)
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