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ACG-2021 Lecture Notes - Lecture 20: Promissory Note, Accounts Payable, Current Liability

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School
FSU
Department
Accounting
Course
ACG-2021
Professor
Paterson

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Document Summary

Balance sheet provides a snapshot of a company"s nancial position at a given point in time. Classi ed balance sheet improves users" understanding of a company"s nancial position by grouping together similar assets and similar liabilities using standard classi cations . Whether the company has enough assets to pay its debts as they come due. The claims of short- and long-term creditors on the company"s total assets. Operating cycle- is the average time required to go from cash to cash in producing revenue (to purchase inventory, sell it, then collect cash from customers). 2. investments in stocks and bonds of other corporations that are held for more than one year long-term assets such as land or buildings that a company is not currently using in its operating activities: long-term notes receivable. Property, plant, and equipment - assets with with relatively long useful lives that are currently used in operating the business. Includes land, buildings, equipment, delivery vehicles, and furniture.

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Related Questions

Cougar Plastics Company has been operating for three years. At December 31 of last year, the accounting records reflected the following:

Cash $ 28,000 Accounts payable $ 20,000
Investments (short-term) 2,000 Accrued liabilities payable 3,400
Accounts receivable 3,200 Notes payable (short-term) 6,200
Inventory 29,000 Notes payable (long-term) 45,000
Notes receivable (long-term) 2,500 Common stock 10,600
Equipment 51,000 Additional paid-in capital 95,400
Factory building 104,000 Retained earnings 43,600
Intangibles 4,500


During the current year, the company had the following summarized activities:

Purchased short-term investments for $7,300 cash.

Lent $5,400 to a supplier who signed a two-year note.

Purchased equipment that cost $25,000; paid $4,300 cash and signed a one-year note for the balance.

Hired a new president at the end of the year. The contract was for $84,000 per year plus options to purchase company stock at a set price based on company performance.

Issued an additional 2,500 shares of $0.50 par value common stock for $16,000 cash.

Borrowed $11,000 cash from a local bank, payable in three months.

Purchased a patent (an intangible asset) for $1,600 cash.

Built an addition to the factory for $25,000; paid $8,700 in cash and signed a three-year note for the balance.

Returned defective equipment to the manufacturer, receiving a cash refund of $1,800.

5. Prepare a classified balance sheet at December 31 of the current year.

COUGAR PLASTICS COMPANY
Balance Sheet
Assets Liabilities
0
0
0
Stockholders' Equity
0 0
$0 $0

Uhura Company has decided to expand its operations. Thebookkeeper recently completed the balance sheet presented below inorder to obtain additional funds for expansion.

UHURA COMPANY
BALANCE SHEET
FOR THE YEAR ENDED 2014

Current assets
Cash $232,650
Accounts receivable (net) 342,650
Inventory (lower-of-average-cost-or-market) 403,650
Equity investments (trading)-at cost (fair value$123,310) 143,310
Property, plant, and equipment
Buildings (net) 573,310
Equipment (net) 163,310
Land held for future use 178,310
Intangible assets
Goodwill 82,650
Cash surrender value of life insurance 92,650
Prepaid expenses 14,650
Current liabilities
Accounts payable 138,310
Notes payable (due next year) 127,650
Pension obligation 85,310
Rent payable 51,650
Premium on bonds payable 55,650
Long-term liabilities
Bonds payable 503,310
Stockholders’ equity
Common stock, $1.00 par, authorized 400,000 shares,issued 292,650 292,650
Additional paid-in capital 162,650
Retained earnings ?


Prepare a revised balance sheet given the available information.Assume that the accumulated depreciation balance for the buildingsis $162,650 and for the equipment, $107,650. The allowance fordoubtful accounts has a balance of $19,650. The pension obligationis considered a long-term liability.

The comparative statements of financial position of Mikos Inc. as at December 31, 2017 and 2018, and its statement of earnings for the year ended December 31, 2018, are presented below:

MIKOS INC.
Comparative Statements of Financial Position
December 31
2018 2017
Assets
Cash $ 10,600 $ 18,600
Short-term investments 72,200 40,800
Accounts receivable 76,000 32,400
Inventories, at cost 57,200 41,600
Prepaid expenses 5,600 9,200
Land 51,400 78,000
Property, plant, and equipment, net 286,400 187,000
Intangible assets 25,600 31,200
$ 585,000 $ 438,800
Liabilities and Shareholders’ Equity
Accounts payable $ 18,600 $ 43,200
Income tax payable 9,200 2,600
Accrued liabilities 11,600 -0-
Long-term notes payable 126,000 182,000
Contributed capital 232,000 68,000
Retained earnings 187,600 143,000
$ 585,000 $ 438,800
MIKOS INC.
Statement of Earnings
For the Year Ended December 31, 2018
Sales $ 898,000
Cost of sales $ 446,000
Amortization expense—intangible assets 5,600
Depreciation expense—property, plant, and equipment 34,600
Operating expenses 237,000
Interest expense 13,600 736,800
Earnings before income taxes 161,200
Income tax expense 48,360
Net earnings $ 112,840
Additional information is as follows:
a. Land was sold for cash at its carrying amount.
b. The short-term investments will mature in February 2019.
c. Cash dividends were declared and paid in 2018.
d. New equipment with a cost of $167,600 was purchased for cash, and old equipment was sold at its carrying amount.
e. Long-term notes of $18,000 were paid in cash, and notes of $38,000 were converted to shares.
1. Prepare a statement of cash flows for Mikos Inc. for the year ended December 31, 2018 by using the indirect method. (Negative answers should be indicated by a minus sign.)