Q17E - Horngren'S Financial And Managerial Accounting

Question

For each account listed, identify the category that it would appear on a classified balance sheet. Use the following categories: Current Assets; Long-term Investments; Property, Plant, and Equipment; Intangible Assets; Current Liabilities; Long-term Liabilities; and Stockholders’ Equity. If the item does not belong on the classified balance sheet, put an X. a. Land (used in operations) b. Accumulated Depreciation—Equipment c. Common Stock d. Service Revenue e. Investment in Starbucks Corporation (to be held long-term) f. Accounts Receivable g. Equipment h. Buildings i. Notes Payable (due in 10 years) j. Unearned Revenue k. Cash l. Accounts Payable m. Prepaid Rent n. Dividends o. Land (held for investment purposes) p. Depreciation Expense.

Step-by-Step Solution

Answer

Account	Category
a	Property, Plant, and Equipment
b	Property, Plant, and Equipment
c	Stockholders’ Equity
d	X
e	Long-term Investments
f	Current Assets
g	Property, Plant, and Equipment
h	Property, Plant, and Equipment
i	Long-term Liabilities
j	Current Liabilities
k	Current Assets
l	Current Liabilities
m	Current Assets
n	X
o	Long-term Investments;
p	X

Step 1: Explanation on Current Assets

Current assets can be converted into cash within a year or an operating cycle. It includes accounts receivable, cash, and prepaid rent.

Step 2: Explanation on Property, Plant and Equipment

Property, plant, and equipment are the assets used in the business's operations. It includes Land (used in operations), Accumulated Depreciation—Equipment, Equipment, and Building. 

Step 3: Explanation on Long Term investments

Long-term investments are assets held for long-term investment purposes. It includes investments in Starbucks Corporation (to be held long-term) and Land(held for investment purposes). 

Step 4: Explanation on Current Liabilities

Current liabilities are the obligations required to be paid within a year or within an operating cycle. It includes unearned revenue and accounts payable.

Step 5: Explanation on Long Term Liabilities

Long term liabilities are the obligations which are not required to be paid within a year or within an operating cycle. It includes notes payable due in 10 years.

Step 6: Explanation on Stockholders’ Equity

Stockholders’ equity represents the claims of the stockholders on the assets of the business. It includes common stock.

Step 7: Explanation on items not reported in the balance sheet

Temporary accounts are the accounts related to revenues and expenses. These accounts are reported in the income statements. Service revenue, depreciation expense, dividends are not reported in the balance sheet.