Acct Hw Chap 4 Solutions

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CHAPTER 4
Balance Sheet
ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC)
Topics 1. Disclosure principles, uses of the balance sheet, financial flexibility. Classification of items in the balance sheet and other financial statements. Preparation of balance sheet; issues of format, terminology, and valuation. Subsequent events. Questions 1, 2, 3, 5, 6, 7, 10, 18, 21, 24, 25 11, 12, 13, 14, 15, 16, 18, 19 4, 7, 8, 9, 16, 17, 20, 23, 26 22 1 Brief Exercises Exercises Problems

2.

1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11

1, 2, 3, 6, 7, 8, 9, 10 4, 5, 6, 7, 11, 12 13, 14 1, 2, 3, 4, 5 6

3.

4.

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4-1

ASSIGNMENT CLASSIFICATION TABLE (BY LEARNING OBJECTIVE)
Learning Objectives 1. 2. 3. 4. Explain the uses and limitations of a balance sheet. Identify the major classifications of the balance sheet. Prepare a classified balance sheet using the report and account formats. Determine which balance sheet information requires supplemental disclosure. Describe the major disclosure techniques for the balance sheet. 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11 1, 2, 3, 4, 6, 8, 9 1, 2, 3, 4, 5, 6, 7, 9, 10, 11, 12 7, 10, 13, 14 Brief Exercises Exercises Problems 7 1, 2 1, 2, 3, 4, 5, 6, 7 3, 4, 6, 7

5.

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ASSIGNMENT CHARACTERISTICS TABLE
Item E4-1 E4-2 E4-3 E4-4 E4-5 E4-6 E4-7 E4-8 E4-9 E4-10 E4-11 E4-12 E4-13 E4-14 P4-1 P4-2 P4-3 P4-4 P4-5 P4-6 P4-7 Description Balance sheet classifications. Classification of balance sheet accounts. Classification of balance sheet accounts. Preparation of a classified balance sheet. Preparation of a corrected balance sheet. Corrections of a balance sheet. Current assets section of the balance sheet. Current vs. long-term liabilities. Current assets and current liabilities. Current liabilities. Balance sheet preparation. Preparation of a balance sheet. Post-balance-sheet events. Post-balance-sheet events. Preparation of a classified balance sheet—periodic inventory. Balance sheet preparation. Balance sheet adjustment and preparation. Preparation of a corrected balance sheet. Balance sheet adjustment and preparation. Corrected balance sheet—subsequent events. Post-balance-sheet events. Level of Difficulty Simple Simple Simple Simple Simple Moderate Moderate Moderate Moderate Moderate Moderate Moderate Moderate Moderate Moderate Moderate Moderate Complex Complex Difficult Moderate Time (minutes) 15–20 10–15 15–20 30–35 30–35 30–35 15–20 10–15 30–35 15–20 25–30 30–35 10–15 15–20 30–35 35–40 40–45 40–45 40–50 40–50 20–25

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ANSWERS TO QUESTIONS
1. The balance sheet provides information about the nature and amounts of investments in enterprise resources, obligations to enterprise creditors, and the owners’ equity in net enterprise resources. That information not only complements information about the components of income, but also contributes to financial reporting by providing a basis for (1) computing rates of return, (2) evaluating the capital structure of the enterprise, and (3) assessing the liquidity and financial flexibility of the enterprise. 2. Solvency refers to the ability of an enterprise to pay its debts as they mature. For example, when a company carries a high level of long-term debt relative to assets, it has lower solvency. Information on long-term obligations, such as long-term debt and notes payable, in comparison to total assets and stockholders’ equity can be used to assess resources that will be needed to meet these fixed obligations (such as interest and principal payments). 3. Financial flexibility is the ability of an enterprise to take effective actions to alter the amounts and timing of cash flows so it can respond to unexpected needs and opportunities. An enterprise with a high degree of financial flexibility is better able to survive bad times, to recover from unexpected setbacks, and to take advantage of profitable and unexpected investment opportunities....
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