
Requirement 1:
This financial statement reports a company’s resources (assets) and claims of creditors (liabilities) and
Financial disclosure:
Financial disclosure is an important tool which discloses the financial statements of an entity to its investors for investment decision making.
To determine: classified balance sheet and identifying items that would require additional disclosure.
Requirement 1:

Explanation of Solution
Classified balance sheet:
“A balance sheet with classification of assets and liabilities based on their current and noncurrent status and grouped under separate headings and sub-headings for its enhanced usefulness is known as classified balance sheet”.
Following is the classified balance sheet of Corporation VE on December 31, 2016
Corporation VE | ||
Balance Sheet | ||
At December 31, 2016 | ||
Assets | Amount | Amount |
Current assets: | ||
Cash and cash equivalents(1) | $117,000 | |
Marketable securities(2) | $132,000 | |
$115,000 |
||
Loans to employees | $40,000 | |
Interest receivable | $12,000 | |
Note receivable—current portion | $50,000 | |
Inventories | $215,000 | |
Prepaid expenses | $16,000 | |
Total current assets | $697,000 | |
Investments: | ||
Marketable securities | $35,000 | |
Note receivable | $200,000 | |
Total investments | $235,000 | |
Property, plant, and equipment: | ||
Land | $280,000 | |
Buildings | $1,550,000 | |
Machinery and equipment | $637,000 | |
$2,467,000 | ||
Less: |
-$620,000 | |
Less: Accumulated depreciation-equipment | -$210,000 | |
Net property, plant, and equipment | $1,637,000 | |
Intangible assets: | ||
Patent | $152,000 | |
Franchise | $40,000 | |
Total intangible assets | $192,000 | |
Total assets | $2,761,000 | |
Liabilities and Shareholders' Equity | Amount | Amount |
Current liabilities: | ||
Accounts payable | $189,000 | |
Dividends payable | $10,000 | |
Interest payable | $16,000 | |
Taxes payable | $40,000 | |
Deferred revenue(4) | $48,000 | |
Total current liabilities | $303,000 | |
Long-term liabilities: | ||
Notes payable | $300,000 | |
Deferred revenue(4) | $12,000 | |
Total long-term liabilities | $312,000 | |
Total liabilities =$ | $615,000 | |
Shareholders’ equity: | ||
Common stock, no par value; 1,000,000 shares authorized; 500,000 shares issued and outstanding |
$2,000,000 |
|
$146,000 | ||
Total shareholders’ equity | $2,146,000 | |
Total liabilities and shareholder equity | $2,761,000 |
Working notes:
1. Calculate cash and cash equivalents.
2. Calculate the amount of short-term investment.
3. Calculate the amount of notes receivable, net of allowance for uncollectible accounts.
4. Calculate the amount of deferred revenue
Requirement 2:
The following are the items that would require additional disclosure on the face of balance sheet
Requirement 2:

Explanation of Solution
Allowance for uncollectible accounts – It should be disclosed on the face of the balance sheet.
Property, plant, and equipment – The original cost of each category of property, plant, and equipment assets along with accumulated
The following are the items that would require the additional disclosure in a disclosure note:
Cash equivalents – The items consider being cash equivalent should be disclosed in a note.
Investments – The information about the types of investments and the accounting method used to value the investments should be disclosed in a note.
Inventories – The method used for inventories should be disclosed in accounting policies note. Also, the information about the breakout of inventory into raw materials, work-in process, and finished goods are disclosed in a note.
Depreciation – The method used to calculate depreciation should be disclosed in the accounting policies note.
Long-term liabilities – The information about various debt instruments, their payment terms, interest rates, and collateral pledged as security for the debt should be disclosed in a note.
Hence, the total assets and the total liabilities and share holders’ equity agrees to the amount of $2,761,000
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Chapter 3 Solutions
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