Question

Cone Corporation is in the process of preparing its December 31, 2021, balance sheet. There are some questions as to the proper classification of the following items: $52,000 in cash restricted in a savings account to pay bonds payable. The bonds mature in 2025. Prepaid rent of $26,000, covering the period January 1, 2022, through December 31, 2023. Notes payable of $204,000. The notes are payable in annual installments of $22,000 each, with the first installment payable on March 1, 2022. Accrued interest payable of $14,000 related to the notes payable. Investment in equity securities of other corporations, $84,000. Cone intends to sell one-half of the securities in 2022. Required: Prepare the asset and liability sections of a classified balance sheet to show how each of the above items should be reported.

Answer 1

Answer:

Cone Corporation

Current Assets:

Marketable securities $42,000

Long-term Assets:

Restricted Cash $52,000

Prepaid rent $26,000

Investment in equity securities $42,000

Current Liabilities:

Notes payable $22,000

Accrued Interest $14,000

Long-term Liabilities:

Notes payable $182,000

Explanation:

a) Data and Calculations:

1. Restricted Cash for bonds payable which mature in 2025 = $52,000 (Long-term asset)

2. Prepaid rent of $26,000 for 2022 to 2023 (long-term asset)

3. Notes Payable: Current liability = $22,000 Long-term liability = $182,000 ($204,000 - $22,000)

4. Accrued interest payable = $14,000 (current liability)

5. Investment in equity securities of $42,000 (long-term asset) Marketable Securities $42,000 (current asset)