Question

Indicate the most preferred balance sheet classification of each item in Group B by inserting the appropriate letter from Group A in the space provided.(8Marks)

Group A Group B

1 Cash fund for plant expansion A. Current assets.
2 Preferred stock B. Property, plant, and equipment
3 Franchise C. Long-term investments
4 Accrued interest on customers’ notes D. Intangible assets
5 Dividend payable in cash E. Other assets
6 Accumulated depreciation F. Current liabilities
7 Discount on bonds payable G. Long-term liabilities
8 Patent H. Capital stock
I. Unappropriated retained earnings
J. Footnote disclosure
K. Not shown on balance sheet

Answer 1

Cash fund for plant expansion - A. Current assets.

Preferred stock - H. Capital stock.

Franchise - D. Intangible assets.

Accrued interest on customers’ notes - A. Current assets.

Dividend payable in cash - F. Current liabilities.

Accumulated depreciation - B. Property, plant, and equipment.

Discount on bonds payable - K. Not shown on balance sheet.

Patent - D. Intangible assets.