Question

Cone Corporation is in the process of preparing its December 31, 2018, balance sheet. There are some questions as to the proper classification of the following items:
a. $70,000 in cash restricted in a savings account to pay bonds payable. The bonds mature in 2022.
b. Prepaid rent of $44,000, covering the period January 1, 2019, through December 31, 2020.
c. Note payable of $240,000. The note is payable in annual installments of $40,000 each, with the first installment payable on March 1, 2019.
d. Accrued interest payable of $32,000 related to the note payable.
e. Investment in marketable securities of other corporations, $120,000.
f. Cone intends to sell one-half of the securities in 2019.

Required:
Prepare a partial classified balance sheet to show how each of the above items should be reported.

Answer 1

Answer:

Cone Corporation

Partial Balance Sheet

As of December 31, 2018

Assets:

Current Assets:

Prepaid Rent  $22,000

Investment in marketable securities $60,000

Long-term Assets:

Prepaid Rent (long-term) $22,000

Restricted Funds for Bonds   $70,000

Investment in marketable securities $60,000

Liabilities:

Current liabilities:

Notes Payable     $40,000

Accrued Interest Payable $32,000

Long-term Liabilities:

Notes Payable     $200,000

Explanation:

Cone's assets and liabilities are re-classified according to whether they are short-term or long-term in order to present more accurately the elements of the financial statements.