Q1E - Intermediate Accounting (Kieso)

Question

Question: E5-1 (L02,3) (Balance Sheet Classifications) Presented below are a number of balance sheet accounts of Deep Blue Something, Inc.

(a) Debt Investments.	(h)Interest Payable.
(b) Treasury Stock.	(i) Deficit.
(c) Common Stock.	(j) Equity Investments(ownership stake of less than 20%).
(d) Dividends Payable.	(k) Income Taxes Payable.
(e) Accumulated Depreciation—Equipment.	(l) Unearned Subscriptionsrevenue.
(f) Construction in Process.	(m) Work in Process.
(g) Petty Cash.	(n) Salaries and WagesPayable.

Instructions For each of the accounts above, indicate the proper balance sheet classification. In the case of borderline items, indicate the additional information that would be required to determine the proper classification

Step-by-Step Solution

Answer

Answer

The asset classification is based on the time period they are held.

Step 1: Definition of Petty Cash

The business entity keeping some cash in hand for paying small daily expenses is known as petty cash. It includes employee reimbursement and refreshment expenses

Step 2: Classified balance sheet

Particular	Amount $
Assets
Current Assets:
Petty cash
Work in Process
Debt Investments
Total current assets
Non-current assets:
Construction in process
Total non-current assets
Total assets
Liabilities:
Current liabilities
Interest Payable
Dividends Payable
Income Taxes Payable
Unearned Subscriptions revenue
Salaries and Wages Payable
Deficit
Total current liabilities
Non-current liabilities
Total liabilities
Equity
Common Stock
Total equity
Total liabilities and equity

Step 3: Contra Items

Accumulated depreciation – equipment and treasury stock are contra account. Accumulated depreciation –equipment will be deducted from the value of the equipment.

Treasury stock: Treasury stock will be deducted from the shareholder’s equity.

Step 4: Borderline items

Equity investment is a borderline item because its classification depends upon the period the equities are held.