Question

Adobe Systems Incorporated reported the following accounts and amounts (in millions) in its financial statements for the year ended November 30, 2013.
Accounts Payable$720
Accounts Receivable 610
Accumulated Amortization 450
Accumulated Depreciation 790
Allowance for Doubtful Accounts 10
Cash and Cash Equivalents 830
Equipment 4,955
Income Taxes Payable 10
Notes Payable (long-term) 1,500
Notes Payable (short-term) 15
Notes Receivable (long-term) 210
Prepaid Rent 270
Retained Earnings 6,930
Service Revenue 450
Short-term Investments 2,340
Software 605
Unearned Revenue 780

Prepare the journal entries.

Answer 1

Solution:

In classified balance sheet, assets are represented first. Arrangement starts with most liquid to most long term nature of the asset. First you have to start with current assets. It includes all assets that will change its composition within a year. In this group most liquid one is cash in hand. Then will come short term investments. It can be converted into cash within a very short period. Next will be accounts receivable. It will be net figure after deducting non collectible portion. then you can consider all prepaid expenses. These expenses are related with next period and paid in advance. Finally you can consider inventory. It can be sold and converted into cash. But the process is not so easy. If it is sold then production can get disbursed. So practically it is difficult to sale.

Considering above sequencing of current assets, the group of current assets in classified balance sheet is shown below:

 Accounts details                                  Amount             Amount

Current assets:

Cash and cash equivalent                                               $830

Short term Investment                                                 $2,340

Accounts receivables                                 $610  

Less: Allowance for doubtful debts              $10  

Account receivables net of uncollectibles                       $600

Prepaid rent                                                                   $270

Total current assets                                                      $4,050