Financial Accounting Ch.2

Topics: Generally Accepted Accounting Principles, Balance sheet, Income statement Pages: 9 (1403 words) Published: February 12, 2015

E2-1, 2,5,7; P2-2A, 4A

E2-1. The following are the major balance sheet classifications:

Current assets (CA
Long-term investments (LTI)
Property, plant and equipment (PPE)
Intangible assets (IA)
Current liabilities (CL)
Long-term liabilities (LTL)
Stockholders’ equity (SE)

Classify each of the following financial statement items taken from Mordica Corporation’s balance sheet.

CL Accounts payable
CA Accounts receivable
PPE Accounts depreciation-equipment
PPE Buildings
CA Cash
CL Interest payable
IA Goodwill
CL Income taxes payable
CL Inventory
CA Stock investments (to be sold in 7 months)
PPE Land (in use)
LTL Mortgage payable
CA Supplies
PPE Equipment
CA Prepaid rent

E2-2. Classify each of the following financial statement items based upon the major balance sheet classifications listed in E2-1.

CA Prepaid advertising
PPE Equipment
IA Trademarks
CL Salaries and wages payable
CL Income taxes payable
SE Retained earnings
CA Accounts receivable
LTI Land (held for future use)
IA Patents
LTL Bonds payable
SE Common stock
PPE Accumulated depreciation
CL Unearned sales revenue
CA Inventory

E2-5. These items are taken from the financial statements of Donavan Co. at December 31, 2014. Buildings $105,800
Accounts receivable 12,600
Prepaid insurance 3,200
Cash 11,840
Equipment 82,400
Land 61,200
Insurance expense 780
Depreciation expense 5,300
Interest expense 2,600
Common stock 60,000 Retained earnings (January 1, 2014) 40,000
Accumulated depreciation-buildings 45,600
Accounts payable 9,500 Notes payable 93,600 Accumulated depreciation-equipment 18,720
Interest payable 3,600 Service revenue 14,700

Prepare a classified balance sheet. Assume that $13,600 of the note payable will be paid in 2015.

Donavon Co.
Balance Sheet
December 31, 2014


Current Assets



Accounts receivable


Prepaid insurance


Total current assets

Property, plant, equipment







Less: Accumulated depreciation-buildings

Less: Accumulated depreciation-equipment
Total assets


Liabilities and Stockholders' Equity

Current liabilities

Notes payable


Accounts payable


Interest payable


Total current liabilities

Long-term liabilities

Notes payable

Total liabilities

Stockholders' equity

Common stock


Retained earnings


Total stockholders' equity

Total liabilities and stockholders' equity


E2-7 Suppose the following information is available for Callaway Golf Company for the years 2014 and 2013. (Dollars are in thousands, except share information.)
Net sales $1,117,204 $1,124,591
Net income (loss)66,17654,587
Total assets 855,338 838,078

Share information
Shares outstanding at year-end 64,507,000 66,282,000 Preferred dividends -0--0-

There were 73,139,000 shares outstanding at the end of 2012.

a) What was the company’s earnings per share for each year?

EPS= net income – preferred dividends
Average # of...
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