Q2E
Question
Question: E5-2 (L02,3) (Classification of Balance Sheet Accounts) Presented below are the captions of Faulk Company’s balance sheet.
(a) Current assets | (f) Current liabilities |
(b) Investments | (g) Noncurrent liabilities |
(c) Property, plant, and equipment | (h) Capital stock |
(d) Intangible assets | (i) Additional paid-in capital |
(e) Other assets | (j) Retained earnings |
Instructions
Indicate by letter where each of the following items would be classified.
1. Preferred stock | 11. Cash surrender value of life insurance |
2. Goodwill | 12. Note payable |
3. Salaries and wages payable | 13. Supplies |
4. Account payable | 14. Common stock |
5. Building | 15. Land |
6. Equity investment (trading) | 16. Bond sinking fund |
7. Current maturity of long-term debt | 17. Inventory |
8. Premium on bond payable | 18. Prepaid insurance |
9. Allowance for doubtful accounts | 19. Bond payable |
10. Accounts receivable | 20. Income tax payable |
Step-by-Step Solution
VerifiedAnswer
The classified balance sheet reports all the assets and liabilities based on their liquidity.
The business entity’s resources that do not have a physical existence but benefit the business entity are known as intangible assets. They include goodwill and patent.
Line item | Classification |
1. Preferred stock | (h) Capital stock |
2. Goodwill | (d) Intangible assets |
3. Salaries and wages payable | (f) Current liabilities |
4. Account payable | (f) Current liabilities |
5. Building | (c) Property, plant, and equipment |
6. Equity Investment (trading) | (a) Current assets |
7. Current maturity of long-term debt | (f) Current liabilities |
8. Premium on bond payable | (g) Noncurrent liabilities |
9. Allowance for doubtful accounts | (a) Current assets |
10. Accounts receivable | (a) Current assets |
11. Cash surrender value of life insurance | (e) Other assets |
12. Note payable (due next year) | (f) Current liabilities |
13. Supplies | (a) Current assets |
14. Common stock | (h) Capital stock |
15. Land | (c) Property, plant, and equipment |
16. Bond sinking fund | (e) Other assets |
17. Inventory | (a) Current assets |
18. Prepaid insurance | (a) Current assets |
19. Bond payable | (g) Noncurrent liabilities |
20. Income tax payable | (f) Current liabilities |