EXERCISE

EXERCISE 5-2

1. (c) 11. (c)

2. (a) (3) 12. (e)
3. (e) 13. (b)
4. (e) 14. (c)
5 (a) (2) 15. (a) (2)
6. (b) 16. (a) (1)
7. (e) 17. (b)
8. (a) (3) 18. (b)
9. (b) 19. (d)
10. (b) 20. (e)

EXERCISE 5-4

GULISTAN INC.
Statement of Financial Position
December 31

Assets
Non-current assets
Long-term investments
Long-term investment in
preference shares ......................................... $XXX
Land held for future plant site....................... XXX
Cash restricted for plant expansion............ XXX
Total long-term investments ............ $XXX

Property, plant, and equipment

Buildings .............................................................. XXX
Less: Accum. depreciation—buildings ........................... XXX XXX

Intangible assets
Copyrights ........................................................... XXX

Current assets
Inventories
Finished goods................................... $XXX
Work in process ................................... XXX
Raw materials....................................... XXX XXX
Accounts receivable........................................ XXX
Less: Allowance for doubtful accounts..................... XXX XXX
Notes receivable ................................................ XXX
Receivables—officers ...................................... XXX
Cash ....................................................................... XXX
Less: Cash restricted for plant expansion ..................XXX XXX
Total current assets ............................ XXX
Total assets............................................ $XXX

Equity and Liabilities

Equity
Share capital—ordinary ..................................... XXX
Share premium—ordinary shares ..................... XXX
Retained earnings XXX
Less: Treasury shares, at cost ......................... (XXX)
Total shareholders’ equity ..................... XXX
Total equity and liabilities ...................... $XXX

Non-current liabilities
 Bonds payable, due in four years...................... $XXX
Long-term note payable....................................... XXX
Total non-current liabilities.................... $XXX

Current liabilities
Notes payable, short-term.................................... XXX
Accrued salaries payable .................................... XXX
Unearned subscriptions revenue ...................... .XXX
Unearned rent revenue......................................... XXX
Total current liabilities............................. …XXX XXX
Total liabilities ............................................ XXX

EXERCISE 5-7

Current assets
Inventories at lower-of-cost (determined
using FIFO) or net-realizable-value
Finished goods...........................................€ 52,000
Work-in-process........................................... 34,000
Raw materials .............................................. 187,000 €273,000

Accounts receivable (of which €50,000 is

pledged as collateral on a bank loan) ............. 161,000
Less: Allowance for doubtful accounts............ 12,000 149,000
Interest receivable [(€40,000 X 6%) X 8/12] ....... 1,600
Trading securities at fair value
(cost, €31,000) ......................................................... 29,000
Cash ........................................................................ 92,000*
Less: Cash restricted for plant expansion....... (50,000) 42,000
Total current assets................................. €494,600

EXERCISE 5-8

1. Dividends payable of $1,900,000 will be reported as a current liability

[(1,000,000 – 50,000) X $2.00].

2. Bonds payable of $25,000,000 and interest payable of $2,000,000

($100,000,000 X 8% X 3/12) will be reported as a current liability. Bonds
payable of $75,000,000 will be reported as a non-current liability.

3. Customer advances of $17,000,000 will be reported as a current liability

($12,000,000 + $30,000,000 – $25,000,000).